Dear Neighbour:
Thanks for writing to me about housing issues. There has been big news on the housing front. This is a brief update for you about how things are going, and what kind of progress we’ve made.
It was just a few months ago that BC’s Minister of Finance accused me, and BC NDP leader John Horgan, of making up the issue of vacant investment homes in Metro Vancouver. He told me I was proposing “building a wall” for daring to suggest that we tax absentee speculators in our housing market.
Now I’m writing from Victoria because he and the Premier have called the legislature back into an “emergency” summer session to shock everyone by introducing a new tax aimed at people they call “foreign nationals” buying in the real estate market.
What a difference a few polls can make.
While my colleagues and I will back the tax as better than nothing, and a thankful change from the pointless debates we’ve had in the past about whether there is even an issue at all, I’ve spoken out strongly, as has our leader John Horgan, against the idea of taxing international people. We instead need to tax international money by using the income tax system to identify that money.
The problems with the government taxing people based on their citizenship status, instead of using the income tax system to identify their “tax citizenship”, become apparent quickly.
For example, if UBC recruits a star professor from overseas to come work here, he or she will often keep his or her citizenship and work under a work permit. As a reward for bringing their expertise to our province and paying taxes here, she or he will have to pay an extra 15% premium to buy a home, discouraging them from doing so, and therefore discouraging them from deciding to stay in British Columbia long term.
UBC and SFU have already had recruitment challenges due to high housing prices – this will make things worse for them and so many employers hoping to attract skilled workers to our economy from around the world.
As another example, under this proposed new tax a Canadian or permanent resident could set up a BC company, 100% capitalized with international money. That firm could buy homes with international money without paying this new tax, so long as the voting shares in the firm are controlled by a Canadian.
With a similar citizenship approach, Australia has also struggled with individuals and companies acting as fronts for international buyers for their measures which restrict non-citizens from buying in the housing market.
Problems like this are why we love the tax proposal out of the UBC Sauder School of Business - the Housing Affordability Plan that links income tax data to real estate transaction data to identify international money and tax it - and why we put it into a private members’ bill here and tried to get it passed.
Linking income tax data with real estate transactions has the added bonus of revealing money laundering in our housing market, something the Federal Government’s anti-money laundering agency said Metro Vancouver was particularly at risk for.
On a positive note, this new tax proposal represents a total philosophical reversal for our current provincial government, due in large part to the pressure that you have helped bring through attending our housing forum, sending postcards from our office, and making housing affordability the #1 issue in Metro Vancouver.
Thank you for all you’ve done to force the government to the table.
Unfortunately, we’re still a long way from where we need to be. Instead of BC measuring income tax data and linking it with real estate transaction data to determine how someone with a poverty level income buys a million dollar home, we’re measuring what people’s citizenship status is, and what country they come from.
What a mistake. And, unfortunately, one BC has made before.
That’s why our proposal is supported by 40 economists from UBC and SFU. And the government’s proposal… isn’t.
Since I last wrote you, the Bank of Canada, the Bank of Montreal, and CIBC senior economists have cautioned about, or called for taxes on international money in Vancouver’s housing market, citing destabilizing effects that threaten not just our local economy, but the Canadian economy as a whole. The proposal put forward by the provincial government only taxes transactions involving so-called “foreign nationals” from August 3rd, forward. All of the money already in our housing market goes completely untaxed.
Beyond our tax proposal on the international money already in the housing market, the Official Opposition has proposed that the Province establish a task force of police, crown, and corporate and real estate tax experts and auditors to crack down on money laundering and tax evasion in our housing market.
This task force is based on growing concerns of a total lack of resources for money laundering enforcement, resulting from three significant cases in the last six months involving accidental discovery of sophisticated money laundering rings or large value real estate transactions funded by fraud or crime in the Lower Mainland.
You can read about the BC securities commission investigating a local Ponzi scheme and accidentally finding a real estate agent assisting with money laundering here. You can read about a businessman who frauded a bank in China and bought local real estate here, undetected until the Chinese bank tracked him down and sued him in Vancouver. And you can read about a Lower Mainland remittance firm that specializes in routinely bringing in money for corrupt officials from China into BC, discovered by police when a fake kidnapping plot went awry, here.
The common link between all of these files is that this money laundering was discovered accidentally, not through any type of anti-money laundering initiative in BC. None of these cases would have been caught by any of the data measures proposed by the Provincial Government, or their new tax.
As a final update, last week I held a press conference with data scientist and Math PhD Jens von Bergmann. Dr. von Bergmann has analyzed census data (controlled for age excluding retirees and renters) and found Metro Vancouver has a disproportionate number of people with poverty-level incomes for tax purposes buying homes, including million dollar homes. You can read his report here.
His most recent data comes from the 2011 census, and he’s calling for more up-to-date numbers, which the provincial government already has through provincial income tax and our land title and assessment system. They just refuse to link the two data sets.
Metro Vancouver has a new economic reality, and our tax system should reflect it so we can fund our schools, hospitals, and justice system, and so we can hopefully get some control in a housing market that is completely out of control when local wages are compared with home prices.
You can read more about the BC Housing Affordability Fund proposal that we support at this link.
Our office is busy planning a workshop for those of you interested in learning more from experts about what is happening in our housing market. We’re planning on a September or October date. Please make sure you stay subscribed to this list if you’d like to hear about it first!
Visit our website to read recent housing-related media coverage at: http://davidebymla.ca/news_category/housing/
Thanks for your continuing support on this issue, which is critically important to the future of our region. If you have any feedback, please write to me. While our office is receiving an overwhelming amount of correspondence on this issue, I try to read everything that’s sent, and respond when I can.
PS. Here is my latest speech about the government’s proposed new tax and real estate-related initiatives.
Yours truly,
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David Eby
MLA, Vancouver Point Grey
Official Opposition Housing Spokesperson
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