Equity loss cause for alarm Posted by Stepup Admin on May 22, 2019 Today, at an event hosted by STEPUP, I released analysis that shows nearly $90 billion of estimated losses in homeowner equity across Metro Vancouver, largely driven by new federal and provincial government policies and taxes on homes. This report is cause for alarm. Our analysis uses sales data to determine an estimated loss of homeowner equity over the past year. It uses assessed values as a base to illustrate an estimate of total residential value prior to the downward market movement indicated by the actual sales transactions reported by the real estate boards of Greater Vancouver and the Fraser Valley. Across the region, the grand total is a whopping $89.2 billion in lost equity. Percentage decreases range from a 4.76-per-cent drop in Pitt Meadows, to a 14.76-per-cent decrease in West Vancouver — the hardest hit municipality. Per household, the equity loss is tens of thousands across the board, including $153,873 in Vancouver and $451,385 in West Vancouver. These are not just numbers on paper, nor is it a problem for a few wealthy homeowners being targeted by specific taxes. This rapid loss has a real impact on families in all Metro Vancouver communities. Almost half of those billions in losses are outside Vancouver and West Vancouver. Most of the time, home ownership is a worthy investment. Values change from year to year but generally increase over time, providing equity and hopefully some financial security for tough times and retirement. We rely on the investment in our home for financial security now and in the future. Equity can be pulled out of your home to pay for things like unexpected emergency expenses, home renovations, post-secondary education and senior care costs. For many people, diligent saving and paying down a mortgage is their retirement plan. Outside of a few sectors, guaranteed work retirement plans are a thing of the past. Once retirement and fixed income comes along, knowing that you have that equity gives you peace of mind, whether you choose to refinance, downsize or stay put with your grown children. And, of course, many seniors hope to leave a little something to their children. A senior in Delta, for example, on a fixed monthly income facing a $67,000 loss in equity in one year faces much greater uncertainty about their future. Can they stay in their home? Can they afford the prescriptions and health care that they need? And what if you haven’t been in your house for decades? Let’s think of a young family in Port Coquitlam who saved to put a 10-per-cent downpayment on a $650,000 condo in 2018. But wait! You have lost 10 per cent in equity since you bought! You are now paying interest on a loan that exceeds the home’s value, with little to no equity to access should unexpected repairs be required. Research from the B.C. Real Estate Association shows that the equity loss has a significant impact across the economy: local businesses, retail sales, workers and housing starts are affected. It makes sense, if you are suddenly facing economic uncertainty, you are going to immediately tighten your budget. Tough choices have to be made. Real estate markets are complex and no single policy change can be attributed to the loss being felt by homeowners in Metro Vancouver. However, real estate, like most investment types, is impacted by perceived risk. Recent provincial government taxes on housing as well as the new federal stress test rules on mortgages have acted to create uncertainty and perceived risk in the local market, which has stalled new development and reduced many household’s ability to access funds for discretionary spending. This will have a broader negative impact on the economy that has yet to be felt. The risk is just too great, and a serious threat to our economic well-being. Paul Sullivan is a senior partner at Burgess Cawley Sullivan and Associates, one of the largest commercial real estate appraisal and property tax consulting groups in Canada. This article appeared in the Vancouver Sun on May 21, 2019.
24-05-2019
B.C.’s NDP Tax Regime
B.C. takes three more bold steps to fix the housing crisis The Province of British Columbia is continuing to take bold action to address both housing demand and supply by cracking down on tax evasion on pre-sale condo assignments, giving local governments the power to protect and encourage the building of rentals, and requiring communities to assess their housing needs. “For too long, people who resell condos before they have been built have been inflating real estate prices, without necessarily paying taxes on their gains,” said Carole James, Minister of Finance. “We are making it fairer for people who want to buy a condo, by making sure those who flip pre-sale condos are paying their fair share.” If approved by the legislature, these changes to the Real Estate Development Marketing Act will require real estate developers to collect and report information on pre-sale condo assignments to ensure people are paying the appropriate taxes when these contracts are assigned. Developers must include terms in their contracts to inform buyers of the new collection and reporting requirements. The information will be reported to the provincial administrator designated under the Property Transfer Tax Act. Two pieces of legislation have also been introduced, with the aim of helping local governments protect and encourage the building of affordable rental housing, and to respond to the housing needs of their communities. “Local governments are on the front lines of the housing crisis, so they’re well positioned to guide the right types of housing to meet the needs of their residents,” said Selina Robinson, Minister of Municipal Affairs and Housing. “There is a shortage of rental homes in British Columbia. The steps we are taking today will both help local governments track the needs of their communities, and give them a powerful tool to deliver homes people can afford in the communities where they work, go to school and raise their families.” If approved by the legislature, changes to the Local Government Act and Vancouver Charter in Bill 23 will: Give local governments the authority to limit tenure to rental through the use of a new rental zoning tool. For example, undeveloped land that is zoned for rental would need to be developed with rental projects. The amount of rental housing that needs to be developed on that land will be at the discretion of the local government. Allow local governments to ensure existing rentals cannot be redeveloped for another use. For example, if an existing rental building is being considered for redevelopment, and a local government has zoned the building as rental, the new building must be rental to the extent determined by the local government. Where applied, enable developers to know in advance that the permitted tenure will be rental, and if applicable, what portion of a development is required to be rental. For example, local governments may require that 40% of the units in new multi-family residential buildings in a certain zone be rental. The rental zoning authority will be optional for local governments. A second set of changes to the Local Government Act and Vancouver Charter was introduced. If approved by the legislature, Bill 18 will make it mandatory for local governments to conduct housing needs assessments that will assist with community planning. Supported by $5 million in funding over three years from the Province, municipalities will prepare housing needs data reports every five years. The new legislation responds to a request from local governments for stronger zoning tools to support growth and encourage a healthier rental stock, and will also help ensure that governments have the data needed to produce the appropriate housing solutions for each community. “Local governments have been looking for tools to protect and enhance the supply of rental homes,” said Union of BC Municipalities president Wendy Booth. “The proposed legislation will facilitate affordable rental development in B.C. communities.” “Victoria is a renter’s city and, as such, purpose-built rental housing represents a key element of the City of Victoria’s Housing Strategy,” said City of Victoria Mayor Lisa Helps. “The ability to use the power of zoning to support the maintenance, expansion and revitalization of this vital housing form offers us an important tool in meeting our affordable housing goals.” Budget 2018 committed to tackling B.C.’s housing crisis by increasing housing supply, stabilizing the market, closing information gaps and partnering with all levels of government, Indigenous peoples, non-profits, co-ops and the private sector, including the real estate sector, to create the homes that people need throughout British Columbia. The actions announced today are part of the government’s 30-point housing plan, Homes for B.C. Quick Fact: The B.C. government is investing an additional $1.1 billion over 10 years to upgrade and improve existing rental housing throughout the province. This investment will fund seismic and fire-safety upgrades and essential repairs and maintenance, making homes safer and more comfortable for residents. Learn More: The Province is also investing in new housing options for British Columbians with close to $1.9 billion over 10 years to support the construction of more than 14,000 new affordable rental homes for low- to moderate-income British Columbians:news.gov.bc.ca/releases/2018PREM0019-000664 To help make housing in overheated markets more affordable and available, the B.C. government is introducing a new speculation tax on residential property:news.gov.bc.ca/releases/2018FIN0009-000501 A new rental task force has also been established to advise government on how to improve security and fairness for renters and landlords throughout the province:news.gov.bc.ca/releases/2018PREM0015-000608 Read Homes for B.C., government’s 30-point plan to address housing affordability for British Columbians: bcbudget.gov.bc.ca/2018/homesbc/2018_Homes_For_BC.pdf The Union of British Columbia Municipalities’ housing strategy calls on all levels of government to take action to address housing affordability, including the introduction of rental zoning authority:www.ubcm.ca/assets/Whats~New/UBCM%20Housing%20Strategy.pdf For more information on how Budget 2018 supports communities in addressing B.C.’s housing needs, please see: www.bcbudget.ca
25-04-2018
B.C.’s NDP Tax Regime
New Speculation Tax InformationOn March 26, the BC Government announced that the proposed speculation tax will now focus on urban centres. Here’s a map. Exemptions remain for principal residences and long-term rentals (rented for at least six months, in increments of at least 30 days). And exemptions have been added for specific circumstances, including death and long-term medical care. The government is considering temporarily grandfathering strata units where rentals aren’t allowed, but there’s no firm decision on that, yet. The tax rate has also been adjusted. In 2018, it will be 0.5 per cent for all applicable properties. Here’s how it will apply in 2019: for British Columbians with second homes in the affected urban areas: 0.5 per cent (though, homes valued up to $400,000 will be exempt), for Canadians outside BC, 1 per cent, for non-Canadians and “satellite” families, 2 per cent. BCREA continues to ask questions and help shape the tax. More info: Ministry of Finance Tax Information Sheet: BC Speculation Tax BCREA response to March 26 announcement BCREA position and concerns
27-03-2018
B.C.’s NDP Tax Regime