
British Columbia to target foreign real estate buyers with new tax - ilamont
http://www.theglobeandmail.com/news/british-columbia/bc-to-target-foreign-real-estate-buyers-with-new-tax/article31096550/
======
kareemm
I live in Vancouver and have been following this closely. This proposal is
disappointing. The better solution imho is to tax based on where the owners
file their taxes[1], not based on whether the buyer is a citizen or permanent
resident.

Reasons: citizenship is for sale through the Quebec Immigrant Investor
Program[2] so if you're wealthy, you can effectively bypass this tax. If you
can't, using a relative as a proxy buyer will let you bypass the tax.

And preventing non-permanent residents from buying means any immigrants who
come to Canada but aren't PRs will pay this tax. These seem like the exact
kind of people you don't want to disincentivize from buying - people who are
willing to take a risk to come to Vancouver, but aren't rich enough to just
buy their way in.

Taxing people based on where they file their taxes makes a lot more sense to
me - if you're paying taxes in Canada, you're not using Vancouver housing
strictly as an asset class which is what should be discouraged in order to
have a healthy, diverse city of people who own where they live.

1-
[http://www.theprovince.com/business/proposed+could+high+cost...](http://www.theprovince.com/business/proposed+could+high+cost+housing+residents/11659651/story.html)

2- [http://www.immigration-quebec.gouv.qc.ca/en/immigrate-
settle...](http://www.immigration-quebec.gouv.qc.ca/en/immigrate-
settle/businesspeople/applying-business-immigrant/three-programs/investors/)

~~~
Tiktaalik
This policy affects foreign persons, but the issue is really foreign capital.
As you say this does nothing regarding the issue of persons buying citizenship
via the QIIP and coming over to BC, which is what the vast majority of people
using the QIIP do.

I have no idea what the process would be, but a real step forward would be to
for the Federal government to work to end the QIIP, though I recognize this
would probably open a can of worms and raise a bunch of new issues with
Quebec.

~~~
kareemm
> I have no idea what the process would be, but a real step forward would be
> to for the Federal government to work to end the QIIP, though I recognize
> this would probably open a can of worms and raise a bunch of new issues with
> Quebec.

According to Ian Young the Feds can end the QIIP[1]:

 _Although Quebec is in charge of choosing its immigrants, Federal authorities
actually issue their certificates of permanent residency, and decide the speed
at which to do so. According to Vancouver immigration lawyer Richard Kurland,
there is no doubt that “the feds have the legal right, pure and simple, to
cancel the program”. “This is not about a constitutional or legal barrier.
There is neither,” he said._

1 - [http://www.scmp.com/news/world/united-states-
canada/article/...](http://www.scmp.com/news/world/united-states-
canada/article/1983336/one-point-plan-tackle-vancouvers-housing)

~~~
redthrowaway
They have the legal right, but it would be politically awkward, and I'm not
sure Trudeau is looking to annoy his base in Quebec to serve the interests of
British Columbians, who have never been a part of the LPC's base and only
recently elected more than a couple Liberal MPs.

Similarly, it's well within the Federal Govt's rights to mandate free trade
within Canada, but they only had the political willpower to suggest provinces
work together to reduce barriers.

~~~
allengeorge
Any idea why that is? I've often wondered why they don't just mandate it - I
don't see the massive political fallout from mandating free trade in goods and
services _within_ Canada...

~~~
redthrowaway
Because all of the protectionism in Canada is in support of local interests:
dairy farmers, brewers, etc. Remove the trade barriers, and the crappy ones
will die. That's a much bigger deal politically than the win from efficient
firms doing better and prices going down.

The federal government just has no real incentive, short of it actually being
in the nation's best interest, to force internal free trade. They would have
to expend significant political capital to do so.

------
hoodoof
Now the government gets its cut, and comes to rely on the revenue, and works
hard to ensure there are on ongoing streams of foreign buyers and revenue.

When governments tax foreign buyers all it does is entrench the foreign
buyers.

Be it gambling or foreign buyers, governments always become addicted to
revenue and the origin of the tax is forgotten.

Future government: "We're short on money! We need more gambling and more
foreign buyers!"

~~~
dforrestwilson
Here in the U.S. people exploit an immigration loophole:

[http://www.ibtimes.com/eb-5-investor-visa-demand-booming-
dom...](http://www.ibtimes.com/eb-5-investor-visa-demand-booming-dominated-
chinese-plying-cash-us-real-estate-1851706)

I believe Canada has seen something similar?

I'm very conflicted on this. I want the best people to come into my country,
but I don't believe that being wealthy in an undemocratic country where
corruption is more acceptable should qualify you for admission outright.

~~~
hkmurakami
They had this until a few years ago, but Canada ended the program with a
prodigiously long waiting line.

Predictably, there was an uproar in China.

>The Canadian Immigrant Investor Program was created by the federal government
of Canada to promote the immigration of business people and their families. It
enabled qualified investors to obtain permanent resident status in Canada.
Under the program, successful applicants and their families received permanent
and unconditional Canadian residential visas and were then eligible to obtain
Canadian citizenship. With the passing of Bill C-31 on June 19, 2014, the
program was terminated and undecided applications were cancelled.[1]

[https://en.wikipedia.org/wiki/Canadian_Immigrant_Investor_Pr...](https://en.wikipedia.org/wiki/Canadian_Immigrant_Investor_Program)

~~~
aianus
The program still exists in Quebec which is how they keep getting in.

------
liber8
Everyone looks at this ass-backwards. Foreign buyers who park their money in
unoccupied real estate are not a problem. These are essentially ideal owners
from the city's perspective and what every city council should be courting:
people who pay ridiculous tax rates yet use essentially no city services.

The problem is the lack of housing supply. Get rid of the ridiculous
regulations, allow more stock to be built, and revel in all the free foreign
money that's being showered on your city.

Yes, more housing stock is going to change the "charm" of your little haven.
Guess what? Cities change. All of your precious cities are nothing like they
were 50 years ago. That's how life goes. Every alternative you have results in
a change to the status quo: (1) do nothing and watch all the artists and
misfits (then the middle class) get priced out of the city, (2) impose even
more regulations to try to keep rents affordable (which is never a solution,
see San Francisco), or (3) build more housing.

Only one of these solutions makes any sense. But, no surprise, it's always
easier to blame the foreigners than it is to risk your political capital.

~~~
wvenable
I disagree that they are ideal owners. They provide absolutely no other income
or commerce to the city and it's actually becoming an issue.

[http://crescentmovingandstorage.com/problem-vacant-homes-
van...](http://crescentmovingandstorage.com/problem-vacant-homes-vancouver/)

There may be a problem with supply but how are vacant properties a good use of
the supply that already exists? What's the point of a city full of empty sky
rises?

~~~
auganov
If it's enough of a problem to cause systemic decline of the city the property
prices will have to drop. I just can't see how they would keep on buying and
buying till nobody lives there anymore. Granted it is possible, but if they
are in fact that crazy then you can still argue it's better to pocket the
money and go build another city?

Somebody else mentioned supply is being added at a decent rate. So perhaps
there just isn't really a problem?

~~~
wvenable
This has been going on for well over a decade and it's accelerating. There are
lots of vacant properties and new properties are purchased instantly for above
asking.

Supply is being added at a decent rate for the population of the city but not
everyone purchasing property lives in the city.

------
oroup
I believe this should be an "unoccupancy" tax instead, where owners are taxed
if the home is unoccupied:

* increases the supply of available housing

* includes all the properties that have already been purchased for speculation and hits every year

* substitutes an occupancy check (using data like utility utilization or direct observation) rather than a test of foreignness which is too easy to game.

* doesn't dissuade foreign investors but facilitates the creation of safe rental infrastructure serving them.

~~~
cperciva
_unoccupancy_

How do you propose to measure that? If someone commutes to a work camp outside
Fort Mac and is only physically present in Vancouver for two weeks each month,
do they pay the tax? What if someone spends 4 months every winter in Florida?
How about someone who gets hit by a truck and spends six months in a hospital?
Or an elderly couple who move into a care home because the husband has
dementia, but want to keep the house they lived in for 50 years because the
wife (who is still in good health) might move back there after the husband
dies?

~~~
mahyarm
I think it's to prevent the unoccupied house bank account. You could make an
exemption for your official registered home address.

That way if you own more than one house, the unoccupancy tax creates an
incentive to put the locked up supply on the rental market, but would sidestep
the complexity you just stated.

~~~
icebraining
_You could make an exemption for your official registered home address._

How does that work against foreign investors? How can you prevent them from
having an official registered home address in both countries?

~~~
mahyarm
That is a residency problem that immigration and canadian income tax has
systems to deal with that. And if they somehow get around all of those
controls, it would only apply to one house, so it would limit the financial
scope of it.

------
JanSolo
Too little, too late. If a foreign buyer can afford a $2m house, they can
afford the $300k of extra tax.

Also, many of the properties bought by immigrants are actually owned by
syndicates who are based in Canada and therefore do not have to pay the tax.

~~~
jethro_tell
Perhaps, but it makes it a bad investment. Or less of an investment at any
rate.

~~~
selectodude
They're not investing. They're getting their money out of China. A loss is
still a gain for them.

~~~
thomas11
So why does it need to be Vancouver where prices are already very high? Why
not buy in another city that's more reasonable?

~~~
emptybits
Vancouverite here. I applaud this as a reasonable question.

I understand why _immigrating_ to Vancouver from China makes sense. It has
great climate, is postcard attractive, easy China-YVR flights, has a dominant
Chinese culture already with lots of Mandarin spoken and Chinese
writing/advertisements, and it's generally very welcoming and embracing of
Chinese.

But for the _investor_ only, who doesn't plan to live here ... it's a little
harder to understand "why only Vancouver?" Some insight ... Vancouver has
become very familiar to Chinese investors, so it's a known and well-researched
entity to Chinese. Ask a friend, "where should I move my money?" and
"Vancouver!" is a respectable answer. There is also now a large marketing
machine that straddles China and Vancouver, whereby new and old Vancouver real
estate deals are (sometimes exclusively) marketed directly to China. Systems
like this (right or wrong) take time to develop and now have momentum. In
short ... familiarity, habit, and support systems.

Also, if an investor (or, often, their children) wants to spend any time at
all living in their investment ... Vancouver tips the scales for the reasons
in the first paragraph.

~~~
hackerboos
Because Vancouver's real estate is appreciating faster than nearly every other
city in North America [1].

Not only are you washing money, you are likely going to see huge returns on
your investment.

23% in a year would pay for this tax with a tidy profit at the end.

[1] - [http://www.cbc.ca/news/canada/british-columbia/new-
figures-s...](http://www.cbc.ca/news/canada/british-columbia/new-figures-show-
massive-growth-in-metro-vancouver-real-estate-prices-1.3524888)

------
maerF0x0
People often forget that foreign realestate investment is often a way to
offshore money to keep it away from _local_ (to the investor) governments.
Keeping $2M away from the PRC is probably worth $300k if you fear it will be
entirely taken away from you.

The main thing this accomplishes is: 1\. It allows the current administration
to claim they're doing something. 2\. It gives funds to the current
administration that can be used for things like politician pay raises,
additional government worker benefits, and maybe, just maybe, some roads too.

~~~
vkou
At this point, some government worker benefits would be welcome. BC Teachers
have been losing wages to inflation for the past decade and a half. (The
raises are lower than the cost of living increases.)

~~~
da989
There also aren't enough teaching jobs to go around.

If there are more teachers than teaching jobs, teaching wages are still too
high.

~~~
vkou
There 'aren't enough teaching jobs to go around' because the government has
increased class sizes, dumped special needs students in with the general
student body, and has closed down a large number of schools.

More work, less pay, worse public outcomes. Neo-liberalism in a nutshell. Mind
you, BC is still much better off then many US states in this respect. Mind
you, as it is not a petrostate, BC also needs a functioning education system
more than some of its neighbours.

I don't expect that teachers will see any of this money, of course. It'll
probably go towards worthless crown corporations like ICBC.

------
c-smile
As a consequence of all this: it is hard to find software developers (are they
still middle class?) to work in offices in Vancouver core.

The only reasonable option to live for devs is in 1.5-2 hours away of driving
and public transit. 2-3 hours per day wasted in traffic just to get to and
back from the office is too much. Half of the time spent in traffic are
considered (or should) as working hours - thus increased salary demand as de
facto there are not 8 but 9-10 working hours per day.

Big software houses shall consider moving R&D offices outside of Vancouver
(core) I think.

~~~
yazaddaruvala
I grew up in Vancouver, went to high-school there, whet to UBC there. My
family is in Vancouver. The majority of my friends are in Vancouver. I own
real-estate in Vancouver. I eventually want to move back to Vancouver. I can
safely say I love Vancouver. However, I currently live in Seattle.

> "it is hard to find software developers ... to work in ... Vancouver"

Plain and simply, even though software developers make some of the highest
salaries in Vancouver, the salaries are relatively abysmal. It would be an
effective 50% pay cut for me to move to Vancouver.

The housing crisis is a problem, but its not one that effects the lack of
talent in Vancouver. Vancouver's almost only tech talent problem is the lack
of competitive salaries.

~~~
maerF0x0
I saw a posting the other day for a Senior backend Golang developer - $60k. I
laughed so hard. I made about that much straight out of school.

~~~
briandear
I saw a senior Rails contract job in Toronto that was paying $40 per hour and
a mid-level Rails Dev at $15 per hour. I find that rather hilarious as well.

------
serge2k
> The tax will apply to buyers who are not Canadian citizens or permanent
> residents, as well as corporations that are either not registered in Canada
> or controlled by foreigners.

Aren't we still letting people just buy permanent residence?

~~~
potatolicious
Yeah but they actually have to live in Canada - the loopholes around buying
permanent residence as an insurance policy and then just never living in
Canada were closed a long time ago.

So if someone wants to full-hog move to Canada and buy a home in Vancouver, I
feel like that's not the kind of activity we necessarily want to discourage.

~~~
eigenvector
Canada does not have exit immigration controls, so PR residence fraud is still
an issue. An agreement with the US to share data on people leaving Canada via
the US has been announced and re-announced, but hasn't been implemented yet.
Which is all to say that if you land in Canada, drive over the border and then
fly abroad, the immigration bureaucracy still has no idea you've ever left.

~~~
mahyarm
You would need a new passport for that to work, and it increases barriers to
doing so.

In any large scale endeavor it's often about decreasing the number, changing
the balanace vs. reducing it to zero. And it's often a ratchet, adding a law
here and there to get to a result.

------
shostack
Any thinking around the expected impact from locals who bought despite the
prices? Sounds like they could be royally screwed if prices plummet as a
result.

~~~
EnFinlay
I think the logic is that if you're a local, the primary purpose of the
residence is for living, not speculation. If prices drop your illiquid asset #
drops, but you still have a place to live and you're going to pay less
property tax. Of course, people could end up underwater, but that's all
dependent on how crazy a mortgage they were able to get (I think there is less
craziness here than there was in the run up to 2008 amurica).

Yes, some people will get screwed. Hopefully this will result in less locals
being screwed than if nothing was done.

~~~
throwaway1979
Given that current prices were completely out of whack, and that the govt kept
warning that something will be done ... people who bought at the peak deserve
what they got. I've been sitting on the fence (since the math didn't make
sense) for years. All we got for being prudent was annual moves and seeing
other people's homes paying them more than a 1%er's yearly salary. I welcome
this move by BC. Ontario needs this stat for the GTA. We also need to tax the
gains from home sales. The situation has gotten so bad, young people are
leaving in disgust.

~~~
PlaidGinger
I just bought a 450K house in Victoria _knowing_ I'll take a haircut. The
problem with timing the market is it simply hasn't crashed and I'm out of time
- it's time to start a family.

~~~
mahyarm
You didn't need to purchase a house to do that. You can rent houses in
victoria. Buying a house doesn't mean you'll keep it if economic bad times
hit.

------
vadym909
just like Silicon Valley. Locals save and save but when they get ready to buy,
the prices have gone up due to all cash offers from Mainland China whose
buyers are buying sight unseen for god knows what reasons.

The only solution may be to require such foreign buyers to publish their real
names instead of some shell Hong Kong or Cayman Island companies. If the buyer
is a corrupt official using bribe money or a crooked businessman hiding black
money, making this information public to the PRC Govt/ people, could get them
investigated. This should dissuade people using ill gotten gains to inflate
house prices here causing a speculation bubble. If they are legitimate, then
there should be nothing to fear.

~~~
briandear
Really you want the Canadian government to act as an agent of the PRC? That's
about as bad as the FATCA injustice foisted upon Americans overseas by
Democrats. That is a horrible idea. "If they are legitimate, then there should
be nothing to fear.." That's the same logic used by supporters of NSA domestic
spying.

Only the guilty should care about privacy right? Innocent people have no need
for it because they aren't doing anything wrong?

------
jpollock
I would expect this to run afoul of any investor-state dispute resolution
agreements that Canada has signed with other countries (NAFTA, Canada/China
have an ISDS as well) - since it is a stamp-duty rather than an import duty.

Typically those agreements require that investors be treated as locals once
the asset is purchased.

Edit - Since this is typically aimed at Chinese buyers instead of Americans,
here's the link to the agreement Canada and China have:
[http://www.international.gc.ca/trade-agreements-accords-
comm...](http://www.international.gc.ca/trade-agreements-accords-
commerciaux/agr-acc/fipa-apie/china-text-chine.aspx?lang=eng)

Important Text:

1\. Each Contracting Party shall accord to investors of the other Contracting
Party treatment no less favourable than that it accords, in like
circumstances, to its own investors with respect to the expansion, management,
conduct, operation and sale or other disposition of investments in its
territory.

------
Geekette
This seems more a gesture than putting a foot down. I expected the tax to be
higher (15% may not deter overseas buyers already willing to overpay) and
accompanied by comprehensive residency verification system with additional tax
on non-inhabitated homes.

------
dade_
Government policy is a blunt instrument. Whatever the outcome of this post-
fact political pandering, it won't be the desired outcome. Vancouver has a
long history of speculation by the locals as much as anyone else. Mortgage
debt is completely out of control, but people see it as safe or good debt.
This could very well trigger a devastating collapse in market value and scare
foreign investors from BC altogether, but I live at the other end of the
country, so I mostly can just kick back and watch the fallout.

------
PlaidGinger
I find it really strange to find this on HN's aggregator. This tax is neither
novel, technical, nor an actual solution. There are cities that have solved
the speculation problem with social housing and/or planning - Vancouver (and
San Fran's) only problem is a lack of will.

------
kazinator
The property transfer tax is fucking stealing. End of story.

They hit old people with this shit who have no income but sell their house to
go live somewhere else. Oh, that will be 20 grand please. Why? Just because!

Shame on this parasitic province.

British Columbia fleeces anyone who comes here; that's why we locals say that
BC stands for "Bring Cash".

------
antonius
Take away Vancouver and Toronto, and the price of a house in Canada is nowhere
near the asking prices currently in those two cities.

Wealthy foreign inflation on Canadian real estate is quite evident.

~~~
aianus
Take away Toronto and Vancouver and you have nothing but farmland and
university towns. Not really evident of anything.

Fwiw Toronto is quite affordable still; you can live like a king in a brand
new condo with curtain glass walls overlooking the city for under US$500k.

~~~
throwaway1979
How does 500K USD seen affordable? Also, try raising two kids in that condo.

~~~
mahyarm
Have a large condo with 3-5 rooms. Maybe they would share a bedroom!

~~~
wavefunction
Bathroom - 1 room

Parent bedroom - 1 room

Kitchen - 1 room

Living room - 1 room

Kid bedroom - 1 room

.....

Sounds lovely, for 500k USD...

------
hbosvismylife
Don't fuck with the free market.

I know the intentions are good, but this will just create 100 loopholes and
complexity up the ass. Fail.

~~~
vkou
You obviously don't live in Vancouver. The free market has completely failed
the city. The median Vancouver house now sells for 1.4 million CAD, while the
median family income is $76,000 CAD.

These prices are not sustainable at local salaries. This isn't Silicon Valley,
where a large part of the population is raking in cash hand over fist. This is
a playground for the foreign rich.

Supply and demand only works when supply isn't fixed.

~~~
davidw
Why is the supply fixed when there is a _huge_ incentive to add to it?

~~~
querulous
the supply in question is single family homes, particularly detached homes

vancouver is bordered to the north by mountains, the south by the us border
and the west by the ocean. there's already suburban sprawl 2+ hours to the
east. there is simply no room for more single family housing

there is a large amount of agricultural land, but it's part of a strategic
reserve as it's some of the most productive agricultural land in canada and
developing it is extremely controversial

~~~
davidw
So... build up? That's more expensive, tech wise, than single family detached
homes, but at least it adds to the supply and constrains prices to some
degree.

You don't have to do skyscrapers, you can do 3/4 stories like most European
cities.

Not everyone can live in a single-family detached home with a big yard in a
place with constrained land supply.

~~~
wvenable
Condos are being built constantly -- and most of them sell out before they go
on the market. The condos are all designed to be investment properties because
that is where the money is to be made. Unfortunately they aren't that great to
live in.

I live near an absolutely massive condo development currently under
construction. People actually slept in tents in line to purchase one (and I
don't know how successful that was). It's complete insanity and saying "build
up" or "build more" lacks understanding of the market, the geography, the
culture, and the foreign investment.

~~~
uola
This whole thread is pretty bizarre. The proposed solution of making the city
denser by building up is literally called Vancouverism.

[https://www.google.com/search?tbm=bks&q=Vancouverism](https://www.google.com/search?tbm=bks&q=Vancouverism)

