With a trade battle between B.C. and Alberta heating up, Albertans with B.C. vacation properties will soon find out if they are in for a hefty property tax increase.
Finance Minister Carole James unveiled B.C.’s new “speculation tax” in this week’s budget, the first in Canada. It targets vacant homes in an effort to discourage foreign investors from pushing up urban real estate prices by parking money in a hot market.
James confirmed that the speculation tax will apply to vacation homes owned by Canadians from other provinces. Like the foreign buyers tax, which B.C. is increasing from 15 to 20 per cent, the speculation tax is extended beyond Metro Vancouver to the Fraser Valley, Nanaimo, Central Okanagan and Capital Regional Districts.
That includes Kelowna, West Kelowna, Greater Victoria, Parksville, Qualicum Beach and other communities popular with Albertans as holiday and retirement homes.
James said Thursday the speculation tax may be extended to other areas later. Kootenay communities have long struggled with high housing prices and a shortage of rentals as Albertans have bought up mountain properties for summer and ski season getaways a short drive from Calgary.
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The speculation tax requires legislation to be passed this spring. It is to begin at 0.5 per cent of property value, rising to two per cent later in the year as promised by the NDP in their election campaign.
“If you pay income tax in British Columbia you are not captured,” James said. “If you’re from outside the province, and you leave your home vacant, you will be taxed.”
The finance ministry has not yet defined “vacant” as it applies to a holiday getaway that may be used a few times each year by an out-of-province owner. Finance officials say to avoid the tax, owners will have to have a “long-term rental” rather than short-term deals through such services as AirBnB.
But James said the tax is designed to persuade people to offer their second residence for rent when they’re not using it.
“If you want to ensure that you don’t pay the tax, you put your house on the rental market and you encourage people to rent it,” James told reporters after a post-budget speech to business owners in Victoria.
The speculation tax will be administered outside the existing property tax system. Notices are to be mailed out to direct out-of-province property owners to a finance ministry website that will detail the various exemptions. Paper and phone options will also be offered.