I saw this this morning in the Province. It looks like an elegant solution to a number of problems.
http://www.theprovince.com/business/proposed+could+high+cost+housing+residents/11659651/story.html
Proposed tax could cut the high cost of housing for B.C. residents
By Sam Cooper, The Province January 18, 2016
A new housing affordability proposal from a group of UBC economists would tax vacant properties and absentee real estate investors who don’t pay income tax in B.C., and pay the revenues directly to B.C. citizens.
The so-called Housing Affordability Fund — devised by Sauder School housing economist Thomas Davidoff and endorsed by a number of local economists and real estate experts, including UBC’s Tsur Somerville — would levy a 1.5 per cent annual surcharge on residential real estate.
The plan, which its authors estimate would generate over $90 million annually from vacant properties in Vancouver alone, would not tax foreign investors.
It would discover, however, how many investment properties are left vacant by investors who often find ways to avoid taxation.
The plan is surprisingly direct. Rather than having bureaucrats judge property vacancy and owner citizenship, homeowners would have to step forward to reclaim surcharge exemptions through income and tax statements.
For example, the owner of a $1 million home would pay $15,000 per year. But almost everyone who lives and works in B.C. and pays income tax could write the property surcharge off.
There would be exemptions for pensioners and other non-working homeowners. And real estate investors, whether they come from Shanghai or Saskatoon, would avoid the surcharge by renting out property and declaring the rental income.
“Nobody has to pay this tax, so almost everyone wins,” Davidoff told The Province in an interview.
“If you make money overseas and park the family in the house, you are stuck paying the tax. If you leave the place vacant, you are paying the tax, and that’s about it.”
Plan authors suggest that, since affordability problems mostly impact Metro Vancouver, municipalities with acute problems could opt into the plan and revenue cheques would be cut for the taxpayers who live in those communities, rather than rolling the plan out across B.C.
The plan would tax those who own vacation homes in Metro Vancouver.
The plans’s authors believe it’s an elegant tool to collect data on the number of empty homes in B.C., but also discourage vacant property as an unproductive form of investment that has a damaging financial impacts on B.C. communities and citizens.
The tax could encourage more home rentals and improve affordability, the authors believe, while being low enough that it would not discourage investment and drive down housing prices.
The proposal comes amid an intensifying policy debate over runaway housing prices that have disconnected from B.C. incomes, and the impact of offshore investment and speculation in Metro Vancouver property.
Under increasing pressure, Premier Christy Clark’s government has said it’s studying ways to help new homebuyers get into B.C.’s property market, but without chilling investment and reducing home prices.
Davidoff, who is from the United States and has worked on housing policy for President Barack Obama, said he believes not much can reverse B.C.’s current trend of increasingly becoming a playground for the rich and a burdensome place to live and work.
But, he said, his plan will at least level the playing field in the near term and make B.C.’s economy more efficient by redistributing tax burdens away from productive work and on to property speculation.
“The plan says. ‘Let’s tax property that’s owned by people who have money and don’t have to pay high income taxes because they’re overseas or out of the community,’ ” he said. “Let’s give the money to people who are working here and struggling with affordability.”
Davidoff said Clark’s office has floated “affordability” plans such as a homebuyer tax credit that would likely only make the problem worse by increasing demand for property and driving up prices.
He said most economists he has shared his plan with approve of it, and NDP leader John Horgan and NDP Point Grey MLA David Eby “love it.”
In an interview, Eby said he likes the Housing Affordability Fund because it would gather data on empty homes and absentee investment while simultaneously addressing the issue.
“This is not an empty academic tool,” Eby said. “The tax is invisible to those who live and work or provide housing in the Lower Mainland, but it taxes an activity that’s a problem, which is using housing just as an investment. And this would actually be generating funds from day one.”
Davidoff said he’s a believer in foreign investment and free markets, but a government could easily tweak his plan to discourage offshore investment.
“If you really want to clamp down on foreign ownership, all you have to do is dial up the tax rate,” he said.
The authors estimated Vancouver’s current housing vacancy rate at 7.5 per cent for condominium units and two per cent for other types of housing.
scooper@theprovince.com
© Copyright (c) The Province
http://www.theprovince.com/business/proposed+could+high+cost+housing+residents/11659651/story.html
Proposed tax could cut the high cost of housing for B.C. residents
By Sam Cooper, The Province January 18, 2016
A new housing affordability proposal from a group of UBC economists would tax vacant properties and absentee real estate investors who don’t pay income tax in B.C., and pay the revenues directly to B.C. citizens.
The so-called Housing Affordability Fund — devised by Sauder School housing economist Thomas Davidoff and endorsed by a number of local economists and real estate experts, including UBC’s Tsur Somerville — would levy a 1.5 per cent annual surcharge on residential real estate.
The plan, which its authors estimate would generate over $90 million annually from vacant properties in Vancouver alone, would not tax foreign investors.
It would discover, however, how many investment properties are left vacant by investors who often find ways to avoid taxation.
The plan is surprisingly direct. Rather than having bureaucrats judge property vacancy and owner citizenship, homeowners would have to step forward to reclaim surcharge exemptions through income and tax statements.
For example, the owner of a $1 million home would pay $15,000 per year. But almost everyone who lives and works in B.C. and pays income tax could write the property surcharge off.
There would be exemptions for pensioners and other non-working homeowners. And real estate investors, whether they come from Shanghai or Saskatoon, would avoid the surcharge by renting out property and declaring the rental income.
“Nobody has to pay this tax, so almost everyone wins,” Davidoff told The Province in an interview.
“If you make money overseas and park the family in the house, you are stuck paying the tax. If you leave the place vacant, you are paying the tax, and that’s about it.”
Plan authors suggest that, since affordability problems mostly impact Metro Vancouver, municipalities with acute problems could opt into the plan and revenue cheques would be cut for the taxpayers who live in those communities, rather than rolling the plan out across B.C.
The plan would tax those who own vacation homes in Metro Vancouver.
The plans’s authors believe it’s an elegant tool to collect data on the number of empty homes in B.C., but also discourage vacant property as an unproductive form of investment that has a damaging financial impacts on B.C. communities and citizens.
The tax could encourage more home rentals and improve affordability, the authors believe, while being low enough that it would not discourage investment and drive down housing prices.
The proposal comes amid an intensifying policy debate over runaway housing prices that have disconnected from B.C. incomes, and the impact of offshore investment and speculation in Metro Vancouver property.
Under increasing pressure, Premier Christy Clark’s government has said it’s studying ways to help new homebuyers get into B.C.’s property market, but without chilling investment and reducing home prices.
Davidoff, who is from the United States and has worked on housing policy for President Barack Obama, said he believes not much can reverse B.C.’s current trend of increasingly becoming a playground for the rich and a burdensome place to live and work.
But, he said, his plan will at least level the playing field in the near term and make B.C.’s economy more efficient by redistributing tax burdens away from productive work and on to property speculation.
“The plan says. ‘Let’s tax property that’s owned by people who have money and don’t have to pay high income taxes because they’re overseas or out of the community,’ ” he said. “Let’s give the money to people who are working here and struggling with affordability.”
Davidoff said Clark’s office has floated “affordability” plans such as a homebuyer tax credit that would likely only make the problem worse by increasing demand for property and driving up prices.
He said most economists he has shared his plan with approve of it, and NDP leader John Horgan and NDP Point Grey MLA David Eby “love it.”
In an interview, Eby said he likes the Housing Affordability Fund because it would gather data on empty homes and absentee investment while simultaneously addressing the issue.
“This is not an empty academic tool,” Eby said. “The tax is invisible to those who live and work or provide housing in the Lower Mainland, but it taxes an activity that’s a problem, which is using housing just as an investment. And this would actually be generating funds from day one.”
Davidoff said he’s a believer in foreign investment and free markets, but a government could easily tweak his plan to discourage offshore investment.
“If you really want to clamp down on foreign ownership, all you have to do is dial up the tax rate,” he said.
The authors estimated Vancouver’s current housing vacancy rate at 7.5 per cent for condominium units and two per cent for other types of housing.
scooper@theprovince.com
© Copyright (c) The Province
