The following are notes and slides from a speech by Jordan Bateman to the Langley Central Rotary Club on August 10, 2016. The topic: BC's new foreign homebuyers tax.

Housing Unaffordability by Jordan Bateman on Scribd

PRELUDE

Brenda Alberts

• Was a long time member of this club; left several years ago, but many of you know her
• Like all of you, passionately committed to making Langley and the world a better place
• Relay for Life, Rotary, Hospice, the arts community, Willoughby Community Hall, Canadian Museum of Flight
• Remembrance Day in the Fort. Veteran Gordon Gillard, there alone in 1999.
• Service is next Thursday, August 18, at 2 pm at CLA
• Langley needs more people like Brenda, and like you. Thank you for everything you do to help others.

INTRODUCTION

• It was a bleak time for the Vancouver middle class. Money was pouring into the red hot housing market from Asian investors and pricing everyday people out of the market.
• The premier heard their cries. Flashing a trademark grin, the premier announced a major tax increase.
• “Foreign investors, many speculatively, [are] driving up home prices beyond the reach of British Columbians,” the premier explained. “These people paid no tax and most [have] never paid a BC tax of any kind … these welcome newcomers should also contribute to the needs of the province and this should be done through some sort of ‘property transfer tax.’”
• No, this wasn’t Christy Clark on July 25, 2016. This was 1987. And the smiling premier was Bill Vander Zalm.
• Those quotes, pulled from Vander Zalm’s two books written long before the current real estate boom, remind us of how these problems keep coming back.
• The property transfer tax was originally created to apply only to the top five per cent of properties. But that luxury tax, under the watch of both NDP and Liberal governments, quickly became a tax on everyone.
• It was an unintended consequence of bad, rushed taxation policy
• And we’re about to experience this movie all over again

THE TAX

• 15% tax on foreign buyers purchasing residential property
• Only in the Lower Mainland
• $150,000 on a million dollar home
• $750,000 on a $5 million dollar home
• Most expensive house on MLS in Langley right now – 14,000 sq. ft. mansion in High Point. Listed at $6.89 million – foreign tax bill would be: $1.04 million.

WHAT’S THE GOAL?

• Guinea pig: First of its kind in Canada – we have no idea how it will go
• When government introduces new tax policy, there should be some sort of way to measure if it’s a success or failure.
• But this tax was brought in after months of government arguing against it, with no clear goals
• Is the point to raise money for government? How much money?
• Is it to freeze housing prices? Or cut them? By 5%? 10%? 30%?
• Is it to keep out foreign investors, or simply to gouge them?
• I submit the true goal is to get the BC Liberals re-elected

LOOPHOLE CITY

• Because the tax policy was rushed after months of the Liberals preaching against it, it’s riddled with loopholes
• You can bet wealthy investors will use their cadre of lawyers, accountants and tax experts to find ways around it
• Within 24 hours, several loopholes identified:

o   Permanent residents/citizens can buy on behalf of someone else

o   Quebec Immigrant Investor Program

o   Australia’s tax was beaten by numbered companies

o   Go outside Lower Mainland: Okanagan, Whistler, Fraser Valley, Victoria

• These loopholes are scary, because government will inevitably move to close them. When they do, the policy will expand beyond its narrow focus to hit more people.
• President Lyndon Johnson warned about legislation that was “more loophole than law”
• Remember Vander Zalm’s Property Transfer Tax: that luxury tax became an everyone tax, driving up the cost of housing

o   Now $1.5 billion a year (up $480 million year over year)

UNINTENDED CONSEQUENCES

• Rushed tax policy also results in many unintended consequences. Some of those stories are starting to come out

o   Hundreds of deals collapsed – had struck deal but had closings after the tax was brought in

o   Likely to bring lawsuits

o   Some sellers caught in middle (some deals collapsed because locals hoping for price crash)

o   Student-turned-taxpayer, here five years, loses out on $360,000 condo

o   Potential to anger major trading partners

o   Could see trade agreement challenges launched

o   Could see human rights challenges launched

o   Could deter professionals. Olli Juolevi. Sports stars. UBC profs. Doctors. Engineers.

B-B-B-BUT IT’S POPULAR/CLOSING

• So why did Christy Clark reverse two years of messaging and rush this tax in?
• Angus Reid has the answer – 90% of BCians in those early days approve this tax.
• There is no tax more popular than a tax on someone else
• But such poorly thought out policy will eventually require expansion
• These are early days: novel ideas generally have higher support than fall
• CLOSE – Our neighbourhood of red and black doors.

o   We have a blue one.

o   A tax on us – probably popular.

o   But when it doesn’t generate enough money for gov, it could be expanded to a tax on doors that are primary colours.

o   Red and blue. Won’t be so popular then

• And when this foreign investors tax costs taxpayers millions in legal and trade court battles, when it fails to lower prices (or worse, does lower them and people lose money), when it’s expanded to other buyers, this tax could become another money pit

SOLUTIONS?

• Hit on supply/Van’s 107 housing taxes/UDI report
• Too much red tape, too much bureaucracy ensnaring thousands of home starts