When Rick Smith’s son decided to move from Yukon to Victoria for college he bought him a condominium to avoid high rents, but a new provincial tax means the property may turn out to be more of a financial burden than anticipated.
“Our contribution to his future is to put a roof over his head during his studies,” Smith said Wednesday. “This bloody tax is pushing us against the wall.”
Finance Minister Carole James released details of what the government is calling a speculation tax on Monday that predominantly affects properties owned by non-B.C. residents.
James said the tax is intended to improve housing affordability in areas where the need is most acute, while exempting rural cabins and vacation homes.
Areas covered by the tax include Metro Vancouver, Kelowna, West Kelowna, Nanaimo-Lantzville, Abbotsford, Chilliwack, Mission and the Capital Regional District around Victoria on southern Vancouver Island, excluding the Gulf Islands and Juan de Fuca.
Canadians living outside B.C. who own a property in these areas will be subject to a one per cent tax based on the assessed value, while foreign owners will pay two per cent. Owners of properties living outside the province can avoid the tax by renting them out.
Smith bought the condo last October with the intention that his son Kristian would live there for at least five years while studying at Camosun College.
He said many northern students pursue studies in other provinces, and his son preferred the bachelor of business administration program in B.C.
But the one per cent tax will add about $400 per month to the $2,300 he is already spending on the mortgage and condo fees.
“That is a real stretch for us,” he said.
Smith said they’ll likely have to sell, but that will be a financial hit too because of the transfer tax and penalties for breaking his fixed mortgage agreement.
Selling would also put his son back into the expensive and competitive rental market.
Smith said he’s already suggested his son consider switching to another college in a more affordable city such as Calgary, Edmonton or Winnipeg.
“I think his preference, unless he can’t afford it, is to stay in B.C. … He’s really keen on putting his roots down there,” he said, adding it’s ironic if the tax intended to improve affordability for young professionals is the trigger that forces his son to leave.
Related: Pressure on Carole James to ease B.C. speculation tax
The Smiths aren’t alone in grappling with the implications of the tax.
Bryant Stooks and his family say they will likely have to give up the beloved summer home on Vancouver Island they’ve had for more than two decades.
Stooks is retired and lives full time in Phoenix, Ariz., but spends four to five months at his North Saanich home every year. He bought the property not as a financial investment but because while visiting the area on vacation with his wife, ”we just fell in love with it.”
Related: Real estate agents brace for speculation tax impact
He said communities stand to lose if people like himself, who couldn’t afford a tax hike, have to leave.
“We spend money on food, restaurants, entertainment, we bring up friends. There is a large contribution to the Canadian economy,” he said.
They participate in the local community, too, supporting fundraisers for the local hospital and community centre.
A tax of two per cent on the house’s assessed value could cost Stooks up to $60,000 annually, he said, meaning he’d have no choice but to sell.
“Although I love it, it’s my second home, I just can’t afford to pay that every year.”
Stooks said his situation isn’t unique and he knows of a number of families in the Phoenix area that live part time in B.C. to escape the summer heat — the opposite of Canadian snowbirds.
While he said it’s understandable the government is trying to curb speculation to cool the soaring housing market, long-term residents shouldn’t be penalized.
Stooks isn’t putting the house on the market yet, holding out hope that the government may reconsider.
Selling it could pose a challenge as well, he said, since buyers from outside B.C. could also be subject to the tax.
Related: ‘Not well thought out:’ Arizona family slams B.C. speculation tax
Bill Veenof, chairman of the Regional District of Nanaimo, said he raised concerns with the finance minister about the effect the tax could have on property values for local owners and on future development.
“It creates a taxation-based, unlevel playing field,” he said about the tax only applying to select areas.
“Developers look to many funding sources, and one of those sources is money from away. If that dries up, that money will likely go to our neighbouring regional districts and we’ll see a downturn of development opportunities.”
Veenof said he was pleased the government heard his concerns and left the regional district out of the tax, but added with Nanaimo and Lantzville are subject to the tax, debate will continue.
“We’ll have to see how it works out, but it’s potentially challenging,” he said.
Linda Givetash, The Canadian Press
