Finance

Fiscal discipline and new investments support B.C. families, jobs and communities

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Finance

Fiscal discipline and new investments support B.C. families, jobs and communities

Media Contacts
Jamie Edwardson
Communications Director
Ministry of Finance
250 356-2821
Media Contacts
Jamie Edwardson
Communications Director
Ministry of Finance
250 356-2821

Backgrounders

New measures aim to improve housing affordability

Newly built homes priced up to $750,000 will be fully exempt from the property transfer tax when bought by Canadian citizens or permanent residents as a principal residence and lived-in for a full year. The measure aims to assist purchasers and help stimulate the construction of moderately priced homes. The exemption will save a purchaser up to $13,000, and provide an estimated $75 million in property transfer tax relief for new construction in 2016-17.

Partial exemptions are available for new housing valued up to $800,000. Newly constructed housing eligible for the exemption includes the first purchase of a new housing unit or a newly subdivided unit.

Those who buy land and build homes to be used as their principal residence can also apply to receive a refund of property transfer tax rather than an exemption at the time of registration, if they complete construction and move in within a year of purchase.

The program will be available to buyers regardless of how long they have lived in British Columbia, meaning those who move to B.C. to take jobs, start companies and build their lives here will also benefit. The exemption will be available to first-time buyers and previous property owners alike.

The New Housing exemption will be largely funded by increasing the property transfer tax rate to 3% on the portion of fair market value over $2 million. The 1% rate on the first $200,000 of property value and the 2% rate on the value of a property between $200,000 and $2 million continue to apply. The new higher rate is expected to raise an additional $75 million each year — the approximate cost of the New Housing exemption.

Creating new housing supply is critical to improving housing affordability in B.C.’s real estate market. Relatively high housing prices in B.C., and particularly in the Lower Mainland, are driven by increased demand that has resulted from B.C.’s economic and population growth, as well as constrained geography and a lack of available land. The New Housing exemption is expected to benefit owners of about 22,000 new homes in 2016, many of which will be constructed in the Vancouver area.

Investments in affordable housing:

Budget 2016 also includes measures to provide more affordable housing options for lower-income earners. Capital spending of $355 million over five years will support the construction or renovation of more than 2,000 affordable housing units in communities throughout the province.

The Province also continues to work in collaboration with other levels of government to support British Columbians’ ability to buy or rent at prices they can afford. Through the Community Partnership Initiatives program, BC Housing partners with municipalities, non-profit societies and other community-based organizations to create affordable housing. The program arranges construction or long-term financing for non-profit societies, connects stakeholders through partnership referrals and provides advice.

Developing better data on cost drivers:

Proposed changes to the Property Transfer Tax Act will authorize government to collect new information from owners when they register their property.

  • Purchasers will be required to identify themselves as Canadian citizens or permanent residents.
  • Individual transferees who are not Canadian citizens or permanent residents will be required to disclose their citizenship.
  • Corporations will be required to disclose their directors’ citizenship.
  • Transferees will also be required to disclose whether or not they are holding the land as bare trustees when they register and provide information on the settlor and beneficiaries of the bare trust.

Citizenship disclosure was required with land transfers until 1998. These changes will generate data that will allow government to monitor the volume of foreign investment and use of bare trusts and assess what effect, if any, they have on pricing.

Balancing supply and demand in an era of strong net in-migration from elsewhere in Canada and around the world requires a new focus on the efficient support of new housing supply at as low a cost as possible. BC Housing will conduct a study on the key factors affecting housing affordability in British Columbia, which may then contribute to policy-making across all levels of government.

Government is also exploring ways to make the components of the cost of new housing more transparent to home buyers, such as local government costs and fees. The Province urges municipal leaders and regional directors, who are responsible for planning, zoning and development regulation, to use the broader tools at their disposal to support the Province’s efforts and further the creation of new housing supply.

Housing markets in the Vancouver area have historically been expensive due to the pressures of supply and demand. The population of Greater Vancouver in particular has increased 70% since the mid-1980s, compared to 35% in the rest of Canada, and B.C. economic growth has averaged 2.6% annually since 2001, compared to 1.9% in the rest of Canada. The 20-year trend of declining mortgage rates has made it easier for buyers to carry their mortgage costs.

With increasing demand and restricted supply of single-family properties, prices for single-family homes in most areas of Greater Vancouver have increased between 45% and 70% over the past five years, while prices for multi-family homes have increased between 15% and 40%.

Any long-term mitigation of housing prices and housing affordability in the Lower Mainland must address adequate supply of affordable new construction, particularly multi-family housing.

Without an increase in housing supply, there will simply be more buyers competing in the same market, ultimately driving prices even higher. Increased densification is a tool local governments can use to promote the construction of affordably priced housing and offset the factors driving prices, such as low interest rates, economic activity, rising population due to in-migration, and in the Lower Mainland especially, a constrained geography.

Learn more:

The Newly Built Home Exemption reduces or eliminates the amount of property transfer tax you pay when you purchase a newly built home:

http://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax/understand/exemptions/newly-built-home-exemption

Information on property transfer tax: http://www2.gov.bc.ca/gov/content/taxes/property-taxes/property-transfer-tax

For questions about the New Housing Exemption or property transfer tax call 1 888 355-2700 or email pttenq@gov.bc.ca

B.C. families will see savings with new MSP premium rate structure

Changes to Medical Services Plan (MSP) premiums and enhancements to premium assistance will improve fairness and help B.C. families with the cost of living. All changes will take effect Jan. 1, 2017.

With these changes, the calculation of MSP premiums will no longer include children. Instead, the monthly rate for each household will be based only on the number of adults. For example, a household with one parent and two children will be charged the single adult rate, rather than the three-person rate they pay today — saving this family $864 per year. A single adult will pay $78 per month.

The Province will invest an additional $70 million annually to enhance premium assistance, helping more lower-income families, seniors and individuals qualify for reduced rates. Families and individuals receiving premium assistance who currently pay partial premiums will see their premiums reduced, and additional households earning above the current premium assistance threshold will qualify for assistance.

For example, a couple with two children earning up to $51,000 may qualify for assistance, and a single parent with two children earning up to $48,000 may qualify for assistance.

With these changes, an additional 335,000 people will see their premiums reduced, including 70,000 single parent families. An additional 45,000 people will no longer pay MSP premiums at all. Once the changes have been implemented, nearly two million British Columbians will pay no premiums at all.

A new calculator is now available on the government website to help British Columbians estimate whether they could qualify for premium assistance today, and also when the enhancements take effect in 2017.

MSP premiums fund only a small part of the significant investment government makes in health-care services every year. MSP premiums are forecast to raise about $2.5 billion in 2016-17, and personal income tax is forecast to raise about $8.2 billion. Total spending on health services in 2016-17 is forecast at $19.6 billion. Corporate income tax, sales tax, natural resource and other government revenues are all required to help fund the cost of health care.

B.C. families have one of the lowest overall tax burdens in Canada, including health-care premiums and payroll taxes, income taxes, consumption taxes and property taxes.

Quick Facts:

By eliminating children from MSP premiums:

  • A single parent with one child will save $58 each month, or $696 per year.
  • A single parent with two or more children will save $72 each month, or $864 per year.

As a result of enhancing premium assistance:

  • A single adult earning up to $42,000 may qualify for reduced premiums.
  • A single parent with one child earning up to $45,000 may qualify for reduced premiums.
  • A couple earning up to $45,000 may qualify for reduced premiums.
  • A single senior earning up to $45,000 may qualify for reduced premiums.
  • A single parent with two children earning up to $48,000 may qualify for reduced premiums.
  • A couple with two children earning up to $51,000 may qualify for reduced premiums.
  • A senior couple earning up to $51,000 may qualify for reduced premiums.

As a result of eliminating children from premiums and enhancing premium assistance:

  • A single parent with two children can save up to $1,224 per year.
  • A single parent with one child can save up to $1,056.
  • A couple with two children can save up to $648 per year.
  • A senior couple can save $480 per year.
  • A couple can save $480 per year.
  • A single senior can save $324 per year.
  • A single adult can save $324 per year.

Premium assistance eligibility:

Premium assistance is based on an individual’s net income for the preceding tax year as reported on line 236 of their Notice of Assessment (or for couples, their combined net income) adjusted for age, family size, disability and any reported Universal Child Care Benefit and Registered Disability Savings Plan Income. 

A new calculator is now available on the government website to help British Columbians estimate whether they could qualify for premium assistance today, and also when the enhancements take effect in 2017. For more information, visit: https://extranet.gov.bc.ca/forms/gov/health/msppa.html

Further details on when individuals can apply for the enhanced premium assistance that will be in effect starting Jan. 1, 2017, will be provided in the coming months.

Learn More:

Read about the Regular Premium Assistance program:
http://www2.gov.bc.ca/gov/content/health/health-drug-coverage/msp/bc-residents/premiums/regular-premium-assistance

Use this online calculator to find out if you could qualify for Regular Premium Assistance: https://extranet.gov.bc.ca/forms/gov/health/msppa.html

Learn more about the impact of changes to MSP premiums and enhancements to premium assistance: http://bcbudget.gov.bc.ca/2016/bfp/2016_budget_and_fiscal_plan.pdf#MSP

For questions about MSP and premium assistance, call 1 800 663-7100.

Fiscal Plan 2016-17 - 2018-19

Economic Outlook:

B.C.’s economic performance in 2015 shows slightly higher estimated growth than initially forecast, with growth in retail sales, housing starts and employment exceeding expectations. While some of that domestic momentum is expected to continue into 2016, lower than expected commodity prices and dampened external demand are weighing on exports growth.

The government forecasts the B.C. economy to grow by 2.4% in 2016, 2.3% in 2017 and 2.3% in 2018.

Downside risks to B.C.’s economic outlook include the potential for a slowdown in North American economic activity, ongoing fragility in Europe, slower than anticipated Asian demand, particularly in China, uncertainty in the outlook for the Canadian dollar and weak inflation.

Revenue Outlook:

Total government revenue is forecast at $48.1 billion in 2016-17, $49.0 billion in 2017-18, and $50.1 billion in 2018-19.

Expense Outlook:

Total expense over the three-year plan is forecast at $47.5 billion in 2016-17, $48.4 billion in 2017-18 and $49.4 billion in 2018-19.

In addition to annual 3% funding lifts for the Ministry of Health, government is increasing ministry operating budgets by $1.6 billion over the three-year fiscal plan compared to Budget 2015 amounts, including $673 million in additional support for children, families and individuals in need.

Taxpayer-supported infrastructure spending on hospitals, schools, post-secondary facilities, transit and roads will total $12 billion over the fiscal plan period.

Debt:

British Columbia’s taxpayer-supported debt-to-GDP ratio is projected to progressively decline to 16.3% by 2018-19.

Debt-to-revenue is projected to be below the Budget 2015 forecast in each year of the Budget 2016 plan, with the ratio averaging below 93% over the next three years.

Direct operating debt is forecast to decline by $6.6 billion over the course of the fiscal plan, from $9.3 billion in 2014-15 to $2.7 billion in 2018-19 — a decrease of 71%.

Taxpayer-supported interest costs continue to remain low, averaging 3.7 cents per dollar of revenue over the three-year fiscal plan.

Total taxpayer-supported debt is forecasted to be $43.2 billion in 2016-17, $44.2 billion in 2017-18 and $45.1 billion in 2018-19, reflecting a significant increase in infrastructure investment over the next three years.

The total provincial debt, which includes both taxpayer-supported and self-supported debt of Crown corporations such as BC Hydro, as well as the $350 million annual forecast allowance, is forecast to be $67.7 billion in 2016-17, $69.9 billion in 2017-18 and $71.9 billion in 2018-19.

Budget Outlook:

Budget 2016 projects surpluses of $264 million in 2016-17, $287 million in 2017-18 and $373 million in 2018-19.

The fiscal plan includes contingencies of $450 million in 2016-17, $400 million in 2017-18 and $400 million in 2018-19 to help manage unexpected costs and priority initiatives. As well, the fiscal plan includes forecast allowances of $350 million in each of 2016-17, 2017-18 and 2018-19 as a hedge against volatility, including unforeseen changes in revenue.

Learn More:

For more details on Budget 2016, visit: http://bcbudget.gov.bc.ca

For online information and services, visit the Province’s website: http://www2.gov.bc.ca

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