A major report on how to improve the housing supply in large urban areas of British Columbia includes a recommendation to remove the homeowner’s subsidy in the province, as well as a proposal to examine s’ the nation-wide capital gains exemption on principal residences must be ended. Within hours, however, the report’s most controversial recommendations were rejected by the two governments that had paid for it.
In a sign of what politicians see as an untouchable third rail in housing policy, British Columbia Finance Minister Selina Robinson said less than an hour after the report was released on Thursday that her government was not considering no revision to the Homeowner Grant, which distributes nearly $ 1 billion in tax breaks to residential property owners.
“We are not interested in making changes,” she told the BC legislature after Liberal finance critic Mike Bernier asked her about the recommendation. .
Federal Finance Minister Chrystia Freeland issued a press release almost immediately after the report was released, saying that “our government has made it clear that we are not considering imposing a capital gains tax on residences. main ”.
This does not surprise the leader of the housing expert panel, former NDP Deputy Prime Minister Joy MacPhail.
“We expected controversy,” said Ms. MacPhail, who led the panel which included people from private development, banking, the non-profit housing industry and high-tech companies. “We decided early on as a panel that if we weren’t bold we had to go home. “
Ms MacPhail said she believed the idea of phasing out the homeowner subsidy should at least be debated. The nearly $ 1 billion it is offering in property tax refunds to residents whose homes are worth less than $ 1.625 million this year – “a huge expense given to people already better off in the province” – could be used for social housing, she said.
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The panel’s report also suggests that Ottawa should at least review the capital gains tax exemption people get when they sell their primary residence. This exemption is estimated to cost the federal government approximately $ 11 billion per year in lost revenue.
The idea of changing Canada’s capital gains exemption for primary residences is a topic that began to be discussed among economists and political analysts after decades of no-go.
But Bernier said he was shocked by the report’s recommendations on this issue and the homeowner subsidy.
“There should be no penalty for those lucky enough to already be in the housing market. “
The report recommended 21 other less controversial measures, some of which, Robinson and Freeland said, were worth considering.
Among them: a tax credit for tenants if exemption from capital gains is not possible; more demands for cities to report and show how they are meeting the need for affordable housing; and a new fund to help nonprofits buy older apartment buildings on the private market that might otherwise be bought by investors.
The expert group was formed in September 2019, with both levels of government agreeing to pay for the study.
“In almost every measure, the ability of British Columbians to rent or buy homes that meet their needs at affordable costs has deteriorated over the past decades, with little or no sign of a reversal,” says the opening paragraph of the report.
The report focused on five key areas for improvement. The first is planning that “proactively encourages housing”. Then comes the reform of real estate development costs, the expansion of the supply of non-profit housing, the improvement of coordination between all levels of government and the standardization of land between tenants and owners.
The report says cities in British Columbia will have to meet deadlines to approve new developments, and the time-consuming and unpredictable practice of negotiating builders’ contributions to community amenities should end.
While there has been a lot of debate in Vancouver about housing, especially the role of foreign investors in driving up prices, the report focused on supply because that was the panel’s mandate, Ms MacPhail said.
The report says the country needs to return to the kind of social housing investment it had in the 1990s, when one in 10 apartments or houses built was subsidized by federal money.
Ms. MacPhail noted that recent reports indicate that Canada has not kept up with the demand for housing. A Scotiabank report said Canada, with 424 dwellings per 1,000 population, has the fewest dwellings of any G7 country.
The panel report has repeatedly stated that more constructions of all kinds are needed.
“Persistent growth in house prices and rents, combined with consistently low rental vacancy rates indicate … supply remains below what is needed to moderate prices and improve affordability,” the report said. “When housing is scarce, middle-income households compete more directly with low-income households for rental housing, which in turn affects the chances of low-income households to be adequately or poorly housed. all.
Central 1 Credit Union chief economist Brian Yu said the report largely summarizes what policy experts, economists and housing advocates believe is necessary.
“Housing supply is a problem throughout the province, although it is more acute in larger urban areas,” he said.
“Demand-side policies have had mixed success in the market, with the impacts being largely temporary before prices rise higher, reflecting the low interest rate environment and various demand factors related to the market. demographics and population growth.
“I agree that the focus on long-term supply should be on increasing the housing stock. “
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