A federal-provincial panel on housing supply and affordability in British Columbia expected trouble last spring when it filed its final report. It proposed medicine for a market gone haywire, but predicted that some of its advice was nevertheless likely to be “met with resistance.”
Among the recommendations was the obvious – governments need to work to get more housing built. But the panel, a mix of public sector and corporate representatives, also unanimously called for the end of the B.C. homeowner grant. It’s an annual property tax subsidy, dating back to 1957, paid to almost all B.C. homeowners.
The money starts at $570 per homeowner per year, with more for rural properties and owners who are seniors. The grants are expected to cost the B.C. treasury $887-million in 2021-22. The subsidy is only for homeowners who live in their homes. Landlords are not eligible. Nor are renters.
And this isn’t a subsidy for low-income households. As property values in B.C. have soared, provincial governments, both left and right, have escalated the value of the exemption. Five years ago the subsidy went to homeowners whose home was worth $1.2-million or less. Last year it was $1.625-million. This year, after the market soared some more, the cap – like a magical mountain that grows taller by the day – was raised by another 22 per cent, to $1.975-million.
The rising peak means that more than nine out of 10 homeowners will be receiving a subsidy from taxpayers – even if they have high incomes, and even if their home’s price keeps rising. The province issued its latest annual BC Assessment data last week; it showed that, in Metro Vancouver, the value of detached properties increased by hundreds of thousands of dollars.
The expert panel looked at all of this and saw the obvious: The system is strikingly unfair. It’s a tax break that mostly benefits people of above-average incomes. In the City of Vancouver, for example, more than half of households rent, and they’re being squeezed by rising costs. Yet homeowners, whose asset values are rising, are getting a payment from other taxpayers. And the subsidy helps boost home prices.
The panel called for the nearly $1-billion giveaway to be ended, with the money instead devoted to social housing. The panel also proposed “more equitable treatment of renters and homeowners,” since renters “end up paying higher taxes to offset revenue losses from homeowner exemptions.”
But highlighting the “disproportionate policy influence” of homeowners, the panel said that reform would not be politically easy, and would require “strong leadership.”
The NDP government rejected the proposal within hours of its publication. “We’re not interested in making any changes,” B.C.’s Finance Minister said in the legislature of the homeowner grant.
Across the country, there are variations on this generous tax treatment of homeowners vs. renters, but nothing so striking as in B.C. Nova Scotia has a system that favours longer-term owners at the expense of others, including renters. Toronto charges a higher property tax rate on apartment buildings than houses. And by not taxing capital gains on the sale of a principal residence, Ottawa provides what is effectively a national tax break worth $7.8-billion a year.
But B.C. is on its own with its regressive policy of giving cash to homeowners, every year, just because. Sixty-five years ago, a populist Social Credit government came up with this plan to regularly send out cheques. At the time, it was understood for what it is: Vote-buying, pure and simple. Yet as with similar measures, once introduced, it became difficult to end. Giving away money is surprisingly popular, at least among its recipients.
Which is why B.C.’s housing panel correctly anticipated the result of its call to turn off the taps. Even an NDP government deemed subsidies to owners of homes worth up to almost $2-million to be politically untouchable.
But there has to be a way to start whittling down the size of the grant. First, stop escalating the annual exemption level. Then a few years later, start ratcheting it down. If it must continue, only offer it to homeowners with low incomes. The nearly $1-billion a year this is costing B.C. could be far better invested in addressing the side-effects of Canada’s most inflated housing market, rather than further pumping it up.
But as the panel said, that would take something that’s always in short supply: Leadership.
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