The British Columbia budget tabled Tuesday is forecasting that the real estate correction that drove down sales and prices in 2018 is over, and that property tax revenues will rise this year to help fund new benefits for families and students, climate action programs and revenue sharing with Indigenous communities.
The balanced fiscal plan introduced by Finance Minister Carole James includes no new taxes, but anticipates government revenues will rise by $2.4-billion, with some of the largest increases provided by the rising carbon tax, and growing revenue from property taxes.
The budget document forecasts the amount of revenue from property taxes coming into provincial coffers will grow by 4.2 per cent – almost double the rate of economic growth overall.
Notwithstanding those rising projections, the Finance Minister was more cautious in her remarks. She is not convinced the market has hit a stable point, and said that home prices – especially in Metro Vancouver and Victoria – have not come down enough to satisfy her government’s goal of affordability.
“I believe there is more [correction] to go,” she told reporters. “We are seeing things move in the right direction.”
Last year’s budget featured a series of measures to “moderate” skyrocketing housing prices. The changes, including a vacancy and speculation tax, coincided with tighter mortgage rules at the national level. The combined result helped cool an overheated real estate market.
Vancouver-area home sales plunged 39 per cent in January from a year earlier. Over the past six months, the benchmark price for single-family, detached homes in Greater Vancouver has decreased by more than 8 per cent.
The downturn blew a $325-million hole in the forecast for property tax revenues in the current fiscal year.
The budget documents are more optimistic about the coming year, predicting the province’s housing market to shift to “more balanced conditions” with home sales set to rise by 3 per cent this year, and higher still in the years to come, as well as a “moderate” increase to average home sale prices.
The budget promises a new Child Opportunity Benefit, a tax break that provides low- and middle-income families with benefits for children under the age of 18. However, the payments won’t start until October, 2020.
Students who have piled up debts for postsecondary education will get a break: The B.C. student loan program will not collect interest on new or existing loans, as of Tuesday.
For First Nations communities, the budget offers a reliable share of gambling revenues of about $100-million a year, which is expected to total $3-billion over 25 years. The money is earmarked for health, housing, economic development, and other services and infrastructure.
The province will spend $679-million this year to fund the Clean Energy Plan, which will help individuals and businesses to switch to cleaner transportation options and to invest in more efficient buildings. That program was key to satisfying the demands of the Green Party caucus, whose support is needed to keep the minority NDP government in power.
The budget continues a shift in government priorities since the NDP took office in the summer of 2017. Under 16 years of Liberal rule, the focus was on fiscal restraint and paying down the debt. Ms. James is aiming for modest surpluses, with any excess earmarked for new spending.
“This is a spending budget, they are investing in some of the political priorities of a social democrat government,” said Jock Finlayson, chief policy officer for the Business Council of BC. “The budget does not pay sufficient attention to the headwinds facing the economy due to slower global growth and rising tax and regulatory costs here at home. We wonder where future economic growth will come from to support the spending measures outlined in this budget over time.”
He agreed with Ms. James’s assessment of the housing market: “The real estate adjustments under way look to be pretty big. I’m not sure they have run their course yet, and that may have a slightly bigger dampening effect on revenues than they have forecast," he said.
Laird Cronk, president of the BC Federation of Labour, applauded the Clean BC spending, which he said will create new, green jobs. And he said the government is going in the right direction by maintaining its efforts to moderate the housing market. “They have made bold steps and they are paying off, but we need to give it some time.”
The budget forecasts a modest surplus of $274-million, but some of the spending announced on Tuesday is being tacked on retroactively to the fiscal year just ending.
Ms. James revived an accounting tactic that has not been used in a decade to spend money that wasn’t approved in her previous budget. She is proposing a “supplementary estimate” that will allow for $375-million in spending that will be retroactively added to the budget she tabled last year. The money will pay for one-time grants as well as increases to existing programs, such as a clean energy vehicle subsidy.
Andrew Wilkinson, the Liberal Opposition leader, said taxpayers are bearing the brunt of the new spending, while the most appealing new initiative, the Child Opportunity Benefit, is a long way off. “This is a budget that is designed to take people for a ride,” he said. “Your taxes are going up and the benefits won’t be seen for a year-and-a-half.”
But Green Leader Andrew Weaver applauded the measures. “It’s a good budget,” he told reporters. He said it includes “signature” features that the Greens fought for, from the investments in Clean BC to the interest-free student loans.