Monday, March 12, 2018

Opinion: A wealth of reasons why B.C.’s Speculation Tax misses the mark: Vancouver Courier March 12, 2018

“I seriously can’t imagine anybody in human existence I feel less sympathetic toward.”

This was just one of hundreds of Twitter responses I received this past week following my tweet expressing concern about the plight of a midwife who owned a home on Salt Spring Island and an apartment in Vancouver.
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      Initially, she was upset having to pay a one per cent Empty Home Tax on the Vancouver apartment.
      Now she would also have to pay an additional two per cent provincial Speculation Tax, even though her homes were neither empty nor speculative investments.
      As Courier readers may recall, when the provincial budget was first released, I wrote it was a good start to tackling the housing affordability crisis.
       It increased and expanded geographically the Foreign Buyers Tax and proposed to catch tax cheats by putting an end to hidden ownership of residential properties. The new Speculation Tax was going to be charged on properties left vacant by foreigners who did not pay income tax in B.C.
      An increased Property Transfer Tax (PTT) and School Tax on properties valued over $3 million would generate funds for affordable housing.
      However, at the time neither I nor other analysts appreciated the additional PTT tax would increase the cost of all housing in British Columbia since it would apply to the acquisition of most development sites.
      Similarly, we didn’t fully appreciate the impact of the additional School Tax. When I shared my calculations for various West Side properties with one seasoned real estate professional, he told me I had mistakenly added a zero. I had not.
       As for the so-called Speculation Tax, like Vancouver’s so-called Empty Home Tax, it would not only impact foreign owners of empty homes, but many B.C. residents owning a second home or cottage.
      This prompted my follow-up column in which I opined this was really a Robin Hood-styled budget, designed to take from the rich and give to the poor. On social media I suggested it may be time for another tax revolt.
      I was subsequently lambasted for my public comments. How could I be concerned about the plight of people owning two homes when so many cannot afford one?
      Fortunately, Vancouver Sun columnist Vaughn Palmer and others realized that what the finance minister told us, and what her officials were planning, were two very different things.
      The so-called Speculation Tax would have to be paid by all B.C. residents owning a second home in Metro Vancouver or a vacation property in the Gulf Islands or B.C. Interior. Some would later receive a tax credit based on the amount of provincial income tax paid.
      This was not at all a speculation tax; it was a wealth tax.
      Many of the 2018 provincial budget taxation provisions were inspired by UBC and SFU academics who argued the best way to fund affordable housing and catch foreign investors who didn’t pay taxes in B.C. was to restructure our taxation system through increased property taxes and decreased income taxes.
      Unfortunately, as was the case with Vancouver’s Empty Home Tax, neither the academics nor the provincial government fully considered the unintended consequences of their greedy tax proposals.
Last week, in a press release, the city reported the interim results of its Empty Home Tax: 8,481 Vancouver homeowners declared their properties to be empty or underutilized for much of last year or failed to make any declaration.
      This number was significantly lower than previous vacant home estimates, which had so often be seen by many as the cause of our housing affordability crisis.
In fact, we will not know to what extent foreigners are using Vancouver real estate as a safety deposit box, nor how much money the city will raise from the tax until a more detailed breakdown is provided.
      However, two things are certain. The Empty Home Tax program will not free up as many as 25,000 empty units for rent, as Mayor Gregor Robertson told a November 2017 news conference. Moreover, it will also cost many times the $2- to $2.5-million estimate reported by the mayor in November 2016.

While Vancouver refused to modify its Empty Home Tax despite the unintended consequences, let’s hope the provincial government revises its ill-considered tax programs. Otherwise there should be a tax revolt.


Six False Creek affordable housing lots still empty after three decades: Vancouver Sun front page story March 10, 2018

      While I didn't write this story, I feel partially responsible for it.
     During the recent debate about the forthcoming North-east False Creek development, much was made of the city's promise to include significant affordable housing. This prompted me to comment that this was a noble goal, but before getting too excited about these units, what about the 6 empty social housing parcels lying fallow along the North Shore of False Creek?
     I knew about these parcels because I was given a tour of them by Concord Pacific during the 2008 municipal election. Furthermore, I was involved as an expert witness in a lawsuit over them a few years ago. Following my comments, Lori Cuthbert contacted me. I happily put her in touch with Cameron Gray, who was the City's Housing Director, and while not directly involved in the acquisition of these sites, knew why they remained undeveloped.
     I told Lori that I thought it was outrageous that these sites remained undeveloped, not as a criticism of Concord Pacific, but rather of the city, province and feds who could have come up with a strategy to see these parcels developed with affordable housing, even in the absence of deep government subsidies. Enough said.

Lock-off suites can act as handy mortgage helpers: Vancouver Sun March 3, 2018

This Vancouver Westcoast Homes column was published with two different headlines: Mortgage helpers in the sky is catchy, but really applies only to suites within suites in apartments. However, lock-off suites can also be included in townhouses, so the second headline is probably more appropriate.
     But whatever you call them, I think this is an idea worthy of replication around the region and across the country. Here's the story:

     As Lower Mainland municipalities struggle to provide more affordable housing choices, they might explore the top of a nearby mountain.
     Throughout B.C., the most affordable form of housing is often the basement suite. Sometimes it is legal; more often, it is not. While it may provide rental housing in perpetuity, it can also be taken over by homeowners as their family size increases or financial situation improves.
     In areas of a city near a university, these basement suites are particularly popular with students, and can serve as ‘mortgage helpers’ for homeowners.
     It was within this context that the idea of legalized secondary suites within multi-family housing developments was conceived 16 years ago at UniverCity, the model sustainable community next to SFU on Burnaby Mountain.
     Both the university and Burnaby wanted to provide affordable housing for students within the community. So in 2002, Burnaby’s forward-looking planners and council agreed to a request from the SFU Community Trust to approve zoning changes to allow secondary suites within suites in up to 50 per cent of the apartments in multi-storey buildings and townhouses, subject to certain conditions.
the total suite size. They could have their own entry from the corridor, as well as bathroom and cooking facilities, but could not be subdivided as a strata lot or sold separately.     Small suites may often not be affordable if they must include their own parking space, so to address this, Burnaby agreed to significantly reduce the parking requirement.
     To further improve affordability, the units were designed without in-suite washers and dryers. The bylaw therefore required a minimum of 10 suites in any one building to support common laundry facilities.
     From the onset, there was uncertainty whether developers would build such an innovative form of housing. The city therefore agreed that units could be designed with only a closet with the ‘rough-in’ for the future kitchen; the appliances and cupboards did not need to be provided at initial occupancy.
The additional cost of creating the suites — as opposed to just an additional bedroom — is difficult to estimate since it depends on the building type and location. However, the rough-in includes additional wiring, fireproofing, venting, a door to the corridor door and mailbox. (We nearly forgot the mailbox!) Kitchen fixtures and appliances can be added later.
Lock-off suites were built within Novo 1 and 2, and One University Crescent
     As is the case with any innovative idea, there were unforeseen challenges. These included how best to allocate parking. At UniverCity, some purchasers of units with a secondary suite acquired an additional space; however, the majority did not. In future, where there is adequate transit and car-sharing, I would hope municipalities would not require any parking for these units.
     This concept only works if the local government does not count the secondary suite as another unit when determining allowable density or applicable development cost charges or levies. Both the municipality and Metro Vancouver were accommodating in this regard.
     When I initially proposed this idea, it was anticipated the suites would be included in three-bedroom units, possibly separated from the other bedrooms by the living/dining area. However, many Vancouver-area developers are reluctant to build three-bedroom suites because of the increased size and sales price.
     Consequently, most of the first units were in two-bedroom-and-den apartments.
Another project at UniverCity included secondary suites in ground-floor townhouse-style units with separate entries to an outside walkway.
     In future, I believe developers would be more likely to build three-bedroom apartments with separate suites if mortgage lenders would recognize their rental income when qualifying purchasers for a mortgage. Since this happens when someone buys a single-family home with a ‘mortgage helper’, it would seem to make sense for buyers of apartments and townhouses with separate suites, provided they are permitted by zoning.
     Some developers may be reluctant to build accessory suites in apartments because they prefer not to include common laundry facilities. However, as we attempt to reduce the cost of new housing, perhaps it is time to rethink whether every apartment needs to have its own washer and dryer. (After all, many of us met our life partners in apartment building laundry rooms.)
     In 2009, the City of Vancouver agreed to amend some of its zoning bylaws to allow secondary suites in apartments and townhouses in certain neighbourhoods. At first, few were built, since most developers were not aware of this zoning provision. However, city planners are now encouraging them in locations such as the Cambie Corridor, where a number of lock-off suites have been built in townhouse units.
     The need for family-sized apartments and affordable rental housing is not restricted to Vancouver or Burnaby. For this reason, North Vancouver has recently allowed secondary lock-off suites in some new townhouse developments.
     Last year I tested the concept with some West Vancouver residents, where the need for new housing choices and rental housing is becoming critical. Based on the positive response, I will shortly be presenting staff and council with plans for a new Ambleside community that includes apartments and townhouses with lock-off suites.
     Hopefully, if Vancouver, Burnaby, the city of North Vancouver and West Vancouver can all support this concept, other municipalities will soon follow and make the necessary zoning changes.
While lock-off suites can provide more affordable rental housing and a mortgage helper for a growing family, they could also be perfect for an aging parent, caregiver or teenager.
     It’s an idea whose time should come.
Michael Geller is a Vancouver-based architect, planner, developer and educator. From 1999 to 2006, he served as president and CEO of the SFU Community Trust, overseeing development of UniverCity. He is currently an adjunct professor at SFU’s Centre for Sustainable Development. He can be reached at

Monday, March 5, 2018

Opinion: Robin Hood budget designed to take from rich and give to poor Vancouver Courier February 27, 2018

On Budget Day, as evidenced by my initial posts (see below), I was supportive of many aspects of the budget proposals to catch tax cheaters and help those in need. However, a week later, I discovered that many of the measures to pay for the affordable housing were ill-considered and going after the wrong people.

Like Vancouver's so-called Empty Home Tax, it would penalize many owners of second homes, and add to the tax bill of house-rich seniors and others living in more expensive homes. In other words, it seemed like the budget would tax the so-called rich to pay for the poor. Like Robin Hood....hence this follow up column.

“To ensure information security… smartphones… will not be permitted in the briefing area and must be checked in at the media registration desk.”
It was with this understanding that I arrived at the Canada Place provincial cabinet offices for last week’s media lock-up budget briefing.
As instructed, I handed over my smartphone, but half way through reading Homes for B.C.: A 30-Point Plan for Housing Affordability in British Columbia, I wished I could have it back. There was so much to tweet about.
Earlier that morning, I had written a Courier column reviewing the NDP and Green Party election promises, government announcements and throne speech related to housing affordability.
Following the briefing, and Finance Minister Carole James’ presentation, I wrote a follow up Courier column headlined “B.C Budget: A good start to tackling housing affordability crisis.”
My concluding paragraph summarized my sentiments. “Given the severity of the problem, it is going to take a long time before we will see any significant improvement in the level of housing affordability in the Lower Mainland. However, this budget is a good start, especially for those in greatest need.”
My reasons were as follows:
  • Between $6 and $7 billion would fund delivery of 114,000 affordable homes over the next 10 years through partnerships.
  • A $378 million investment over three years would support 14,000 rental housing units for middle income seniors and families.
  • An additional 2,500 new homes with 24/7 care would be built for the homeless or those at risk of homelessness.
  • Rental assistance payments for low-income families would increase $800 a year and Shelter-Aid for Elderly Renters (SAFER) payments would increase $930.
These seemed like good initiatives.
However, as I added up the budget promises to address housing affordability and other social program costs, a question crept into my mind. How was the government going to pay for all of this?
According to the Budget and Fiscal Plan, it would crack down on tax cheaters and speculators who kept homes vacant. It would increase the foreign buyers tax from 15 per cent to 20 per cent and expand its geographic application. It would also take actions to end hidden ownership and move to stop tax evasion in pre-sale condo assignments.
There would also be a two per cent increase in the Property Transfer Tax for that portion of a new home price above $3 million and increases in the school tax rate on the value of homes over $3 million.
Again, these all seemed like good initiatives.
While I was concerned the budget did not include any real measures to improve municipal approval procedures and the delivery of new housing, I now have new concerns.
The additional Property Transfer Tax will apply not only to $3-million homes, but to most development sites, adding to the cost of all housing
It appears the Speculation Tax will mimick Vancouver’s unfair Empty Home Tax and have similar negative consequences by imposing punishing taxes on those who invest in parts of the province by keeping second homes. Imagine if all the second homes in Whistler or Saltspring Island are taxed as “speculative vacant properties.”
The impact of the school tax increase is much greater than first appreciated. West Side seniors owning properties worth more than $3 million will see their tax bill rise. Already some are complaining.
As a result, there is a growing “empathy gap” between those who cannot afford to rent or buy anything and those complaining about tax increases on their multi-million-dollar homes.
Some analysts now worry that if the culminative effect of the new taxes has the desired effect, the province will not receive the revenues needed to fund the affordable housing.
I worry how the province will fund a likely dramatic increase in deferred property and school taxes.
As children we delighted in the story of Robin Hood, who supposedly took from the rich to give to the poor. Years later, we discovered many parts of that story were fictional.
Budget 2018 also appears designed to take from the rich and give to the poor. Let’s hope it too doesn’t turn out to be fictional with little impact on B.C.’s housing affordability.

Tuesday, February 20, 2018

Budget Day Part 2: Vancouver Courier February 20, 2018

Budget 2018: How the budget addressed expectations.
     Since the NDP government was formed last May with the support of the Green Party, there has been considerable pressure on the government to address the severe housing affordability crisis affecting so many people across the province.
     The premier and housing minister have repeatedly told us that housing is their number one priority, and to wait for the 2018 budget to hear their comprehensive strategy to address both housing demand and supply.
     Today, Carole James rose in the house to present the budget. While it addresses a broad range of issues, it did indeed focus on housing affordability with a 30-point plan.
     No doubt many will say it did not go far enough. However, in my opinion, the budget does offer a broad range of specific actions and intentions, which could help improve housing affordability over time, provided there is a better balance between demand and supply.
     The following compares what was announced today with past promises and expectations.
Managing demand: BC residents have been demanding higher taxes for foreign buyers, higher speculation taxes, and a more widespread application of an Empty Home Tax like that put in place by the City of Vancouver.
     They also demanded greater transparency when it comes to who buys, owns and sells property, so that applicable taxes can be charged and collected.
     The government did not disappoint. Today’s budget includes the following measures:
          Taxing speculators: To crack down on speculators, the government will introduce an annual speculation tax, starting in B.C.'s urban areas, to tax foreign and domestic purchases. The tax will apply to property owners who don't pay income tax in BC, including those who leave units vacant. This tax appears similar to the highly publicized proposal by UBC and SFU academics.
           Increasing the Foreign Buyers Tax: To curb demand, (and generate revenues), the government is increasing the Additional Property Transfer Tax (also known as the Foreign Buyers’ Tax), from 15% to 20%. Currently this tax only applies in Metro Vancouver. However, it will be extended to the Fraser Valley, Nanaimo, and Capital and Central Okanagan Regional Districts. 
·         Taking Action to End Hidden Ownership: To counter tax fraud, the government is changing tax laws to verify the information provided on Property Transfer Tax and Income Tax forms. 
·         Moving to Stop Tax Evasion in Pre-sale Condo Assignments: To collect capital gains tax payable on pre-sale assignments, the government proposes to pass legislation requiring developers to collect and report comprehensive information about those assigning pre-sale agreements. The government will also coordinate its audit and enforcement system with the federal government. 
·         Strengthening Auditing and Enforcement Powers To address concerns about the source of funds flowing into real estate markets, the government will require additional information on beneficial ownership on the Property Transfer Tax form. It will also establish a registry of beneficial ownership in B.C. that will be publicly available and shared with law enforcement and tax auditors. 
Increasing supply: During the election campaign, the NDP promised to build 114,000 affordable, rental, non-profit, co-op and regular housing units over 10 years. However, since forming government in July, it has not provided details on how this would be accomplished.  Today’s budget contains a myriad of funding measures to increase supply, especially for those in greatest need. They include recommitting to the delivery of 114,000 affordable homes over the next 10 years through partnerships. The total cost is estimated between six and seven billion dollars.
·        34,000 units in 3 years: The province will build almost 34,000 of the 114,000 units over the next three years, including units for mixed-income social housing, new beds for students at colleges and universities, and units dedicated for people who are homeless.
·         14,000 Rental Units for the Missing Middle: Of the total number of units, the province is investing $378 million over three years in rental housing to improve housing choices for middle income seniors and families.
·         Building 2,500 new Supportive Homes for People Struggling with Homelessness: Within this total, the province is promising an additional 2,500 new homes with 24/7 support for people who are homeless or at risk of homelessness. This is in addition to the funding of 1,300 modular homes previously announced.
·         Increasing Property Transfer Tax: To generate additional funds for affordable housing, the government is increasing the Property Transfer Tax on properties valued over $3 million. Currently the tax above $2 million is 3%.  Now the tax will be increased to 5 per cent for that portion of the purchase price above $3 million.
·              Funds will also be available to assist non-profits with the renovation of existing projects.
                 A new HousingHub office at BC Housing will foster partnerships between governments, non-profits, and the private sector to build the 114,000 homes over the next ten years. 
Increased affordability for renters: During the election campaign, the NDP promised renters a $400 a year grant which would somewhat mirror the grant provided to homeowners. The budget does not include any specific reference to this grant. 
     However, it is noteworthy that during the Minister of Finance’s presentation to media in lock-up, she said that the government would review “an interesting idea” to improve the fairness of the Homeowner Grant program to provide support for renters. As some Courier readers may recall, I have long suggested this program be ended or means tested, by making the grant a taxable benefit. 
The budget does include enhanced assistance for low income renters under two programs:
  • Rental Assistance Program -- known as RAP. Low-income working families will see their average payment increase by approximately $800 per year
  • Shelter-Aid for Elderly Renters -- known as SAFER. The seniors who receive SAFER will see their average payment increase by more than $930 per year.
Broader use of Hotel Room Tax: Since affordable housing is a major challenge to attract workers in many communities that rely on the tourism sector, the government will give local governments the flexibility to use their hotel room tax revenue to build housing.
     Some of the other measures set out in the 30-point plan include:
  •     empowering strata corporations to levy increased fines to short-term rental rule-breaker
  •    ‘reaching out’ to the federal government to explore ways governments can overcome cost barriers to develop new purpose-built rental projects. These include GST payments which a developer can avoid when building a condominium project. 
  •  working closely with municipalities ‘to eliminate barriers to affordable housing and develop new tools, such as rental zoning.’
As someone who participated in the consultation program leading up to today, this budget addresses many of the concerns that have repeatedly been expressed. However, as the Minister of Finance noted, it has taken a long time to reach the affordability crisis we are in today.
     Given the severity of the problem, it is going to take a long time before we will see any significant improvement in the level of housing affordability in the Lower Mainland. However, this budget is a good start, especially for those in greatest need.
Twitter @michaelgeller

It's Budget Day Part 1: What can we expect to address housing affordability? Vancouver Courier February 20, 2018

     This morning, I was pleased to represent The Vancouver Courier at the local Budget 2018 lock-up, during which Vancouver media were given an advance copy of all the budget materials and the opportunity to seek answers from government officials. Before heading off, I decided to review some of the promises and expectations from the past 8 month, so that I might compare them with what was announced. Here is the first piece written before setting off.

Promises, promises. Reflections on what today’s budget might offer in terms of housing affordability.
     As I entered the Budget Lock-up at the provincial government cabinet offices earlier this morning, I had skating on my mind.
     Last night, figure skaters Tessa Virtue and Scott Moir stepped onto the ice for what many thought would be the last time. Expectations were very high across Canada. And they delivered; they won gold.
     At 1:30 pm today, Finance Minister Carole James will be taking to the ice, so to speak, to deliver the NDP’s first full budget in 16 years. Expectations are also incredibly high across the province, especially from those seeking more affordable housing and childcare. Will she deliver? Will she bring the gold?
     Since the NDP government was formed last May with the support of the Green Party, there has been considerable pressure for them to do a lot to address the rampant housing unaffordability affecting the lives of many people across the province.
     During the same time, the premier and housing minister Selina Robinson have told us repeatedly that housing is their number one priority, and we should wait for this budget to hear their comprehensive strategy to address both housing demand and supply.
     So, what can we expect?
Managing demand: BC residents want higher taxes for foreign buyers, or even a ban on foreign buyers; higher speculation taxes; and more widespread application of an Empty Home Tax, like that in place in Vancouver.
     During and since the election, the government has made promises to stem the unbridled speculation in the market. It says it will keep the 15 per cent foreign buyers tax but add a two per cent property tax surcharge on the assessed home values of property owners who do not pay tax in Canada on global incomes. It is estimated that this two per cent absentee speculators’ tax would generate $200 million annually for a housing affordability fund.
     The government has also promised to put an end to ‘Bare Trustee’ legal structures, which allow wealthy individuals to avoid property purchase tax, and potentially other taxes when they buy and sell real estate; and more transparency over the beneficial ownership of properties through trusts, numbered companies, and family members.
Increasing supply: On the supply side, during the election campaign, the NDP promised to build 114,000 affordable, rental, non-profit, co-op and regular housing units over 10 years. However, since forming a government in July, it has yet to provide details on how this would be accomplished.
Many, especially those in the housing industry, have been calling upon the provincial government to get into the sandbox with municipalities and put in place measures to fast-track the tens of thousands of housing units held up in the approval system. Others have been urging the government to require higher density housing around transit nodes, as a condition of any provincial funding for transit improvements.
Increased affordability for renters: During the election campaign, the NDP promised renters a $400 a year grant which would be somewhat equal to grants received by homeowners of properties worth $1.65 million or less. While the government has been somewhat quiet on this, especially since the Green Party rightly questions why grants should be paid to wealthy renters, others are eagerly awaiting confirmation that this promise will finally be implemented.
Protection of equity: At the same time as the government is being urged to make housing more affordable, it is also being asked not to do anything that might wipe out the equity that many new homebuyers have invested in their homes. It’s a tough balancing act.
The mini-budget: In a mini-budget last September the government pledged $291 million for 2000 modular housing units for the homeless, something which pleased me since nine years earlier, I did a study for the Liberal provincial government on how temporary modular units could provide fast and relatively cost-effective homes.
     The province also pledged $208 million over four years to build 1700 apartments for renters, seniors, and the disabled, and those with mental health issues.
     But will there be something in this budget for ordinary ‘middle-class’ British Columbians, including nurses and school teachers who earn relatively good salaries, but are still struggling to find affordable housing near where they work, especially in more expensive municipalities?
The Speech from the Throne: Last week’s throne speech set out the government’s general intentions but included few specifics. It promised to crack down on tax fraud, tax evasion and money laundering which is believed to also be impacting BC’s real estate market.
     The speech also promised stronger protections for renters and owners of manufactured homes and more money for affordable housing, “including social housing, student housing, seniors housing, Indigenous housing and affordable rentals for middle-income families.”
     So, it is within this context that many of us will await details of the budget, especially in terms of addressing affordability. While media will hear the budget measures during a lock up this morning, British Columbians will start hearing the details at 1:30 this afternoon.
     I cannot wait to see how many of these promises will be kept, and whether the government has truly created a comprehensive strategy to address both the demand and supply factors affecting affordability. Stay tuned.
Twitter @michaelgeller