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B.C. forecasts a new flipping tax will generate $11 million in its first year, rising to $43 million the following year, with all revenue going “directly to building homes in B.C.”
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A new B.C. tax will target profits from the quick sale of residential properties, which the government says will “further crack down on speculators and those driving up the cost of housing.”
The new “B.C. home flipping tax” was unveiled Thursday in the 2024 provincial budget, along with other housing-related reforms including increased tax exemptions to benefit first-time homebuyers and the builders of new apartment buildings.
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B.C.’s former housing minister David Eby proposed a flipping tax in his 2022 campaign for the B.C. NDP leadership. Now premier, Eby’s government has included the tax in its final budget before this fall’s election, described as a measure “to discourage short‑term speculation that contributes to inflated housing costs.”
The flipping tax is expected to be introduced during this spring legislative session, and will apply starting next year to profits from the sale of residential property held for less than two years. The tax rate will vary over time: it will be 20 per cent for properties sold any time within the first year after purchase, declining over the next 365 days so that the rate is zero at the end of the second year.
The tax will apply to any properties zoned for residential use, and to any income derived from the assignment of purchase contracts, such as those for presale condos. There will be exemptions for certain life circumstances, including divorce, death, disability or illness, personal safety, insolvency, relocation for work, or involuntary job loss.
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The budget document says: “The purpose of this tax is to support housing supply, not impede it. Exemptions will be provided for those who add to the housing supply or engage in construction and real estate development.”
The government forecasts the new flipping tax will generate $11 million in its first year, rising to $43 million the following year. All revenue from the tax will “go directly to building homes in B.C.,” the budget says, similar to proceeds from the existing speculation and vacancy tax.
Despite the government’s stated goal of dramatically boosting housing supply, the province expects residential construction to slow down in the coming years.
The budget estimates 50,490 housing starts for the 2023-24 fiscal year, which Finance Minister Katrine Conroy described in her budget presentation Thursday as the highest level on record.
But housing starts are projected to decrease to 46,107 for 2024-25, a drop of about eight per cent. The projections show housing starts increasing over the following two fiscal years, but still remaining below the recent levels.
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The anticipated slowdown is due to labour constraints, as well as higher interest rates and construction costs, Conroy said.
In an effort to boost the viability of rental housing construction in this environment, the 2024 budget also includes expanded tax exemptions for apartment buildings. Starting next year, purchases of new buildings with four or more purpose-built rental homes will be exempt from the property transfer tax.
This expands on a partial tax exemption introduced last year applying to some purpose-built rental buildings. The new exemption will apply to transactions between Jan. 1, 2025 and Dec. 31, 2030.
This change is expected to produce $1 million in tax exemptions for 2024-25 and $4 million the following year.
Property transfer tax revenue is expected to grow by an average of 8.6 per cent annually over the next two years.
The 2024 budget also includes $198 million in funding for the new B.C. Builds program, which was unveiled last week and aims to use public lands and low-cost government loans to produce housing for middle-income people.
with files from Katie DeRosa
dfumano@postmedia.com
twitter.com/fumano
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