Scrap the Property Transfer Tax
Wed, 08/03/2011 - 09:31
By Maureen Enser
There are many reasons people may take the decision to purchase a new home. Some of these include the need to upsize or downsize for lifestyle reasons, perhaps there is a desire to relocate to a better neighbourhood and meet the needs of an expanding family, or a young couple have taken the decision to make the switch from rental to homeownership. Sometimes, people must move for economic reasons or to be closer to their place of employment, and usually it is a combination of multiple different factors.
Originally intended to be a ‘wealth’ tax when it was introduced in 1987, the current BC Government now levies the Property Transfer Tax (PTT) on the majority of home purchases. In fact, 86% of homes purchased in BC are subject to the highest tax rate of 2%.
The PTT is a particularly targeted and hard-hitting tax on individuals in BC, as well as anyone who wishes to keep a roof over their family’s heads. It is a shelter tax that discourages lifestyle choice, social mobility, economic development and housing affordability.
Homebuyers can expect to pay about $7,044 in PTT to the Provincial Government for the average home purchased in BC. Over the life of a mortgage, a conservative estimate would add at least an additional $11,000 in interest repayments depending on borrowing rates, meaning the taxman is effectively squeezing homeowners out of almost $20,000 over the life of their mortgage.
Compared to other provinces and at a nation-wide scale, it is interesting to note that the BC Government levies more than triple the national average of $2,187 per home transaction. The fact that BC families are subject to this punitive shelter tax, more so than any other Canadian family, seems neither reasonable nor equitable.
In a city like Vancouver, which Bank of Canada Governor, Mark Carney, describes housing prices to be “extreme in both Canada and globally”, are we to be surprised at how unattainable housing is for the average-income family? When we consider the existence of taxes on homebuyers such as the PTT, successive governments have facilitated an environment that sustains extreme house prices.
The urban development industry contends that eliminating the PTT on new homes is highly likely to stimulate the construction of about 2,200 new homes in BC annually. The simple economics of supply and demand dictates such a move would place downward pressure on spiraling house prices, not to mention save homebuyers an average $7,000 directly on purchase.
Further, independent economic analysis demonstrates this amount of new construction would prove neutral to government tax revenues. With the construction of an additional 2,200 new homes, stimulated by an increase in demand and affordability, approximately $147 million in alternative tax revenues would be generated for the Province and municipalities from the homebuilding industry. This would offset the $138 million currently collected from new home sales.
Another major benefit for the BC economy that would result from the removal of PTT on new homes would be the creation of an additional 9,000 full-time jobs. These jobs would be directly and indirectly related to the construction of 2,200 new homes. Removing the tax means more jobs for builders, carpenters, plumbers, bankers, insurers, architects and engineers to name a few. Jobs for your kids, friends, partners and neighbours.
I would like to take this opportunity to encourage all future homebuyers in BC, renters who one day dream of owning their own home, students and graduates who hope to live close to future work opportunities, young first-time buyers and investors, to contact your local MLA advising of your concern with this nasty tax. It’s time to remove the vice-like squeeze the PTT is having on housing.
Maureen is Executive Director of the Urban Development Institute
By Maureen Enser
There are many reasons people may take the decision to purchase a new home. Some of these include the need to upsize or downsize for lifestyle reasons, perhaps there is a desire to relocate to a better neighbourhood and meet the needs of an expanding family, or a young couple have taken the decision to make the switch from rental to homeownership. Sometimes, people must move for economic reasons or to be closer to their place of employment, and usually it is a combination of multiple different factors.
Originally intended to be a ‘wealth’ tax when it was introduced in 1987, the current BC Government now levies the Property Transfer Tax (PTT) on the majority of home purchases. In fact, 86% of homes purchased in BC are subject to the highest tax rate of 2%.
The PTT is a particularly targeted and hard-hitting tax on individuals in BC, as well as anyone who wishes to keep a roof over their family’s heads. It is a shelter tax that discourages lifestyle choice, social mobility, economic development and housing affordability.
Homebuyers can expect to pay about $7,044 in PTT to the Provincial Government for the average home purchased in BC. Over the life of a mortgage, a conservative estimate would add at least an additional $11,000 in interest repayments depending on borrowing rates, meaning the taxman is effectively squeezing homeowners out of almost $20,000 over the life of their mortgage.
Compared to other provinces and at a nation-wide scale, it is interesting to note that the BC Government levies more than triple the national average of $2,187 per home transaction. The fact that BC families are subject to this punitive shelter tax, more so than any other Canadian family, seems neither reasonable nor equitable.
In a city like Vancouver, which Bank of Canada Governor, Mark Carney, describes housing prices to be “extreme in both Canada and globally”, are we to be surprised at how unattainable housing is for the average-income family? When we consider the existence of taxes on homebuyers such as the PTT, successive governments have facilitated an environment that sustains extreme house prices.
The urban development industry contends that eliminating the PTT on new homes is highly likely to stimulate the construction of about 2,200 new homes in BC annually. The simple economics of supply and demand dictates such a move would place downward pressure on spiraling house prices, not to mention save homebuyers an average $7,000 directly on purchase.
Further, independent economic analysis demonstrates this amount of new construction would prove neutral to government tax revenues. With the construction of an additional 2,200 new homes, stimulated by an increase in demand and affordability, approximately $147 million in alternative tax revenues would be generated for the Province and municipalities from the homebuilding industry. This would offset the $138 million currently collected from new home sales.
Another major benefit for the BC economy that would result from the removal of PTT on new homes would be the creation of an additional 9,000 full-time jobs. These jobs would be directly and indirectly related to the construction of 2,200 new homes. Removing the tax means more jobs for builders, carpenters, plumbers, bankers, insurers, architects and engineers to name a few. Jobs for your kids, friends, partners and neighbours.
I would like to take this opportunity to encourage all future homebuyers in BC, renters who one day dream of owning their own home, students and graduates who hope to live close to future work opportunities, young first-time buyers and investors, to contact your local MLA advising of your concern with this nasty tax. It’s time to remove the vice-like squeeze the PTT is having on housing.
Maureen is Executive Director of the Urban Development Institute