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A condo building under construction is surrounded by houses as condo towers are seen in the distance in Vancouver, B.C., on March 30, 2018.DARRYL DYCK/The Canadian Press

A far-reaching report on how to improve housing supply in B.C.’s large urban areas includes a recommendation to get rid of the province’s homeowner grant, as well as a proposal to examine whether to end the countrywide capital-gains exemption on principal residences. Within hours, however, the report’s most contentious recommendations were rejected by the two governments that had paid for it.

In a sign of what politicians see as an untouchable third rail in housing policy, B.C. Finance Minister Selina Robinson said less than an hour after the report was released on Thursday that her government is not contemplating any revision to the homeowner grant, which distributes almost a billion dollars of tax rebates to residential property owners.

“We are not interested in making any changes,” she said in the B.C. Legislature after Liberal finance critic Mike Bernier questioned her about the recommendation.

Federal Finance Minister Chrystia Freeland issued a news release almost immediately after the report was released, saying that “our government has been clear that we are not considering a capital-gains tax on principal residences.”

That doesn’t surprise the head of the expert housing panel, former NDP deputy premier Joy MacPhail.

“We expected the controversy,” said Ms. MacPhail, who led the panel that included people from private development, the banking sector, the non-profit housing industry and high-tech business. “We made a decision as a panel very early on that if we were not going to be bold, we should go home.”

Ms. MacPhail said she believes the idea of phasing out the homeowner grant should at least be debated. The almost $1-billion that it provides in property-tax rebates for residents with homes worth less than $1.625-million this year – “a huge expenditure given to people who are already better-housed in the province” – could be used for social housing, she said.

B.C. housing task force recommends cutting capital-gains exemption, boosting supply

Western Canada: Vancouver confronts its slow progress on affordable housing

The panel report also suggested that Ottawa should at least review the capital-gains tax exemption that people get when they sell their principal residence. That exemption is estimated to cost the federal government about $11-billion a year in forgone revenue.

The idea of altering Canada’s capital-gains exemption for principal residences is a topic that has started to see some discussion among economists and policy analysts, after decades of it being a no-go zone.

But Mr. Bernier said he was shocked by the report’s recommendations on that issue and the homeowner grant.

“There shouldn’t be a penalty to those fortunate enough to already be in the housing market.”

The report recommended 21 other less-controversial measures, some of which Ms. Robinson and Ms. Freeland said were worthy of study.

Among them: a tax credit for renters if the capital-gains exemption is not possible; more demands for cities to report on and show how they are meeting the need for affordable housing; and a new fund to help non-profits buy older, private-market apartment buildings that might otherwise be snapped up by investors.

The panel was struck in September, 2019, with both levels of government agreeing to pay for the study.

“By almost any measure, British Columbians’ ability to rent or purchase homes that meet their needs at costs they can afford has worsened in recent decades, with little or no sign of reversal,” says the report’s opening paragraph.

The report focused on five keys areas to be improved. The first is planning that “proactively encourages housing.” Next is reforming fees on property development, expanding the supply of non-profit housing, improving co-ordination among all levels of government, and levelling the field between renters and owners.

The report says B.C. cities should have to comply with time limits for approving new developments, and the time-consuming and unpredictable practice of negotiating community-amenity contributions from builders should end.

While there has been a lot of debate in Vancouver about housing, particularly over the role of foreign investors in driving up prices, the report focused on supply because that was the panel’s mandate, Ms. MacPhail said.

The report said the country needs to go back to the kind of investment in social housing it had in the 1990s, when one in every 10 apartments or houses built was subsidized by federal money.

Ms. MacPhail noted that recent reports indicate that Canada has not kept up with housing demand. A Scotiabank report said that Canada, with 424 homes for every 1,000 residents, has the least housing of any G7 country.

The panel report said repeatedly there needs to be more construction of all kinds.

“Persistent growth in housing prices and rents, combined with perennially low rental vacancy rates indicate … that supply remains below what is needed to moderate prices and improve affordability,” the report said. “When housing is scarce, middle-income households compete more directly with low-income households for rental units, in turn hurting low-income households’ chances of being housed adequately or at all.”

Central 1 Credit Union chief economist Brian Yu said the report summed up a lot of what policy experts, economists and housing advocates are saying is needed.

“Housing supply is a problem throughout the province, although most acute in the largest urban areas,” he said.

“Demand-side policies have had mixed success in the market, with impacts largely being temporary before prices march higher, which reflects the low-rate environment and various demand factors related to demographics and population growth.

“I agree that a focus on long-term supply should be on increasing the housing stock.”

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