Legislation introduced today creates new measures to help make home ownership more affordable, establishes a fund for market housing and rental initiatives, strengthens consumer protection, and gives the City of Vancouver the tools it requested to increase rental property supply.
Bill 28, Miscellaneous Statutes (Housing Priority Initiatives) Amendment Act, 2016, was introduced in the legislature today.
“Owning a home should be accessible to middle-class families, and those who are in a position to rent should be able to find a suitable home,”Premier Christy Clark said. “These changes are about helping to make sure that British Columbians can continue to live, work and raise their families in our vibrant communities.”
An additional property transfer tax rate of 15% will apply to purchasers of residential real estate who are foreign nationals or foreign-controlled corporations. The additional tax will take effect Aug. 2, 2016, and will apply to foreign entities registering their purchase of residential property in Metro Vancouver, excluding the treaty lands of the Tsawwassen First Nation.
For mixed-use property, the additional tax would apply on the residential component of the foreign interest in a property. For example, the additional tax on the purchase of a home valued at $2 million will amount to $300,000.
“The data we started collecting earlier this summer is showing that foreign nationals invested more than $1 billion into B.C. property between June 10 and July 14, more than 86% of it in the Lower Mainland,” said Finance Minister Michael de Jong. “While investment from outside Canada is only one factor driving price increases, it represents an additional source of pressure on a market struggling to build enough new homes to keep up. This additional tax on foreign purchases will help manage foreign demand while new homes are built to meet local needs.”
Second, the government is creating a new Housing Priority Initiatives Fund for provincial housing and rental programs, which will be announced in the near future. The fund will receive an initial investment of $75 million. It will receive a portion of revenues from the property transfer tax, including revenues from the new additional tax on foreign buyers.
Third, the Province is amending the Real Estate Services Act to substantially implement the key recommendations of the independent advisory group report, and to end self-regulation of the real estate industry. Government has accepted all the recommendations in the report. These changes will increase significantly the superintendent of real estate’s authority and oversight.
The power to make the rules that apply to the conduct of licensees will rest with the new superintendent of real estate instead of with council. The new superintendent will also have the authority to direct and oversee council operations, including requiring council to investigate a particular matter, issue a notice of a disciplinary hearing, and provide reports on the operations and activities of council to the superintendent. As well, the chair, vice-chair and all other members of the council will be appointed by government.
“We need to ensure that when people are ready to make such an important investment, the proper protections and oversight are in place,” said de Jong. “Consumers must be confident their interests are held above all else.”
Fourth, amendments to the Vancouver Charter provide the legislative authority for the city to implement and administer a tax on vacant homes. The City of Vancouver will design the framework of the vacancy tax, including details like the tax rate, when it will apply and any necessary exemptions.
“The issue of housing supply and affordability is impacting British Columbians and the livability of our Province, especially the Metro Vancouver region,” said Minister Peter Fassbender. “The City of Vancouver has identified the need for a vacancy tax in order to meet rental supply issues. We are taking action by introducing legislation today that enables them to do this work.”
The Province is working on additional measures to address the complex causes of rising housing prices in Metro Vancouver, as well as other regions of the province. This work focuses on ensuring the dream of home ownership remains within the reach of the middle class, increasing housing supply, smart transit expansion, supporting first-time home buyers, strengthening consumer protection and increasing rental supply.
Learn more about the proposed changes to the property transfer tax: http://www2.gov.bc.ca/assets/download/A2960ACDB6BD443280CA34C285BAEA80
Visit to learn more about the Province's actions on housing affordability: http://gov.bc.ca/housingaffordability
Two backgrounders follow.
Stephen SmartPress Secretary Office of the Premier 778 389-6202
Jamie EdwardsonCommunications Director Ministry of Finance 250 356-2821
Effective Aug. 2, 2016, foreign nationals, taxable trustees and foreign-controlled corporations registering their purchase of residential property in Metro Vancouver will pay an additional 15% tax on the residential component of the foreign interest in a property. The tax does not apply within the treaty lands of the Tsawwassen First Nation.
The additional tax presently only applies in the Metro Vancouver, but government can prescribe in regulation other areas where the additional tax would apply. The Province continues to monitor data on foreign investment and foreign ownership in B.C.’s real estate market.
A trustee will be subject to the additional tax if the trustee is a foreign entity, or if at least one beneficiary of the trust is a foreign entity. Similarly, a corporation would be liable if it is not incorporated in Canada, or if the corporation is incorporated in Canada but is controlled by foreign entities.
The additional tax will only apply to the portion of a property’s value that is for residential use. For example, if a foreign corporation purchases a mixed-use development that combines residential space with commercial space, the additional 15% tax will apply only to the portion of the property’s value that is for residential use.
Audit measures already in place for the property transfer tax will be extended to encompass the additional tax. Additional auditors will be required and the process is underway to begin recruitment to ensure the additional tax is paid by those required to do so under the legislation.
The amendments extend the limitation period for audit and enforcement of the additional tax to six years. The existing limitation period for the regular tax is one year. The property transfer tax return form will be updated to require a Social Insurance Number from all transferees who are Canadian Citizens or permanent residents. Invalid social insurance numbers or other discrepancies on a return will lead to an audit and investigation of the transaction.
The amendments include anti-avoidance rules designed to capture transactions that are specifically structured to avoid the tax. For example, a transferee who would otherwise be taxable cannot hide behind a local trustee. The legislation is structured to look through Canadian trustees to beneficiaries of the trust as an anti-avoidance mechanism. If the trustee is foreign, the transaction is taxable even if the beneficiaries are not foreign.
Fines payable as a result of offences with respect to the additional tax are the amount of unpaid tax, with interest, plus up to $200,000 for corporations and $100,000 for individuals. The maximum liability for imprisonment, two years, remains unchanged.
The independent advisory group established by the Real Estate Council of B.C. released its report into regulation of the real estate industry on June 28, 2016. The report presented a comprehensive examination of real estate practices and raised important questions about the effectiveness of the existing regulatory framework for the industry.
The report made 28 primary recommendations to enhance governance, oversight, transparency and accountability to consumers. The Province accepted the report’s recommendations, and is taking the additional steps of ending self-regulation of the industry and dramatically increasing the superintendent of real estate’s oversight and authority.
The following amendments are proposed to the Real Estate Services Act in response to the recommendations of the independent advisory group:
- Increase maximum disciplinary and administrative penalties (recommendation #16).
- Allow for commissions from licensees and brokerages engaging in misconduct to be taken back to the Real Estate Council. (recommendation #17).
- Require all members of council to be appointed by government (expansion of recommendation #19).
- Significantly increase the superintendent’s oversight of council (recommendation #21).
- Allow owners to train and supervise licensees only if owners are themselves licensees (response to recommendation #23).
The amendments provide the superintendent of real estate with the exclusive rule-making powers that previously rested with the Real Estate Council.
The superintendent of real estate has been given explicit authority in the following areas, to address the recommendations of the IAG:
- Establish a Code of Ethics (recommendation #1).
- Prohibit licensees from offering dual agency and require licensees to provide information to unrepresented parties (recommendation #2).
- Establish standards of conduct and business practices for licensees (response to recommendations #3, #4, #9, #11).
- Establish conditions and restrictions on a licensee acquiring an interest in trade (recommendation #7, #8).
- Strengthen requirements for managing brokers to have active and direct oversight over licensees (recommendation #22).
- Require licensees to keep records and report information to Council (recommendation #24).
The recommendations respecting authority over unlicensed activity, which remains with the superintendent of real estate, and the extension of contract assignment rules to transactions not involving licensees require further analysis by government, the superintendent and the Real Estate Council of B.C. (recommendations #6, #20).
Other recommendations do not require any additional authority and plans for their implementation are underway (recommendations #5, #10, #12, #13, #14, #15, #18, #25, #26, #27, #28).