In the first three years of the provincial government’s implementation of the Speculation and Vacancy Tax (SVT), the interventionist policy helped catalyze the conversion of approximately 20,000 condominium units in the metropolitan area. of Vancouver in unsecured rental housing.
That’s the conclusion based on newly released provincial government commissioned analysis, which was independently produced by UBC professor Tsur Sommerville and Jake Wetzel of Stada Analytics.
The SVT rate is 0.5% of the taxable value of a dwelling deemed vacant by Canadian citizens or permanent residents, and 2% for foreign owners and satellite families.
Between 2018 and 2020, the provincial government also collected around $230 million in revenue through its SVT scheme, with foreign landlords and satellite families paying on average five times more SVT than BC residents. The income generated is intended for the construction of affordable housing projects.
Over 99% of BC residents do not pay OAS.
The provincial government’s independent findings also align with a 2020 CMHC report that estimated a record 11,100 condominium units were added to rental housing supply in Metro Vancouver in 2019, including 8,800 rental units converted from existing condominiums and 2,300 rental units from new condominiums completed. in 2018 and 2019.
The conversion of condominiums into rental housing has been the main contributor to the supply of rental housing, far exceeding the supply created by new purpose-built secure rental housing developments.
However, in their report, Sommerville and Wetzel believe further SVT expansions may be needed if the provincial government intends to see further moderation in housing demand or an increase in condominium homes being added to the rental market. This is based on the number of owners subject to the SVT which decreases between 2018-2019 and stabilizes in 2019-2020.
Currently, SVT taxable areas are Metro Vancouver, Fraser Valley, Greater Victoria, Kelowna and West Kelowna, Nanaimo and Lantzville. The researchers suggest the provincial government could consider adding more taxable areas.
“While there may not be much foreign ownership or vacant properties in more rural areas, the expansion of SVT will deter future speculative investment which may lead to increased demand and higher house prices. “, we read in the report of the government of British Columbia.
“Several factors should be assessed when considering an extension of the SVT to new areas, including assessed values of residential properties, population, requests for inclusion, proximity to other areas specified by the SVT and whether the municipality is primarily a vacation area. Proximity to existing SVT zones is important as speculative behavior may be subject to “regional drift”.
Increasing SVT rates may also induce remaining non-compliant owners who pay tax at current rates to change their behavior – renting or selling. This would also result in increased government revenue for affordable housing.
Homeowners in the City of Vancouver have to deal with both the empty house tax from their municipal government and the SVT from the provincial government.
Earlier this year, Vancouver City Council approved increasing the EHT rate from 3% to 5% starting in 2023.
The report notes that the British Columbia Ministry of Finance recommends analyzing at least one more year of SVT data and monitoring the City of Vancouver’s results from a 5% EHT tax before enacting any tax hikes. its SVT rates.
Beyond interventionist policies to limit unwanted demand, a recent CMHC report said BC needs to catalyze an additional 570,000 new homes by 2030 to meet the affordability needs of current and future residents. .
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