West Kelowna property owners could be on the hook for over $10 million in additional taxes when B.C.’s proposed speculation tax comes into effect.
A report to be presented to West Kelowna city council today detailed how a speculation tax would directly affect West Kelowna property owners financially.
Click here to read the full report.
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"Using 2017 assessments, it is anticipated that the Province will collect up to $10,330,000 from West Kelowna property owners for 2018," said the report's author Jim Zaffino.
"These numbers will be lower if the Province eliminates the tax on what it classifies as long-term rentals. These are funds that are not intended to be returned directly to the community."
Proposed in the 2018 provincial budget, a 2% speculation tax would be levied against vacant homes in Kelowna and West Kelowna.
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However, many owners of vacation and future retirement homes in both cities have argued they are being unfairly punished when they have poured money into businesses.
Mayors of both Kelowna and West Kelowna have expressed displeasure with the proposed tax, saying the province never consulted either municipality in regards to the potentially disastrous impact it could have on local economies.
"We believe the tax is a negative, for one it directly impacts only two municipalities when the entire Okanagan is a popular place for vacation and retirement homes,” said West Kelowna's Mayor Findlater.
"Many people from Alberta who anticipate moving here for retirement buy a home in advance and now they may be looking to buy that dream home somewhere just to the south or just to the north of West Kelowna or Kelowna.”
Watch KelownaNow's exclusive interview with Mayor Basran regarding the speculation tax.
The 241-page report, authored by Jim Zaffino laid out a total of seven unintended consequences of the tax and details how it would have little to no effect on actual property speculators.
- The new speculation tax will affect speculators relatively little. lf purchasers intend to flip the property in a short period, it would be to make a quick profit. As they would only be responsible for the new tax within that short period, the tax would probably be included in the sale price, and do little to deter speculators.
- Long-term, non-resident owners who are not speculating on the housing market – they slmpty own the home – would have to pay that same tax year after year. This category of purchaser will occur for various reasons, including those purchasing future retirement homes. lt is common for Canadians and some foreign buyers to purchase a second home with the intention of moving to West Kelowna once they retire. Until they retire, the residence may be used to rent to students or used as short-term rental until the residence is needed. This new tax may increase the rental cost, as the owner would try to recoup some of the new tax
Highlights of the other five unintended speculation tax consequences are discouraging developers, hurting trades jobs and creating an unfair advantage for neighbouring communities not affected by the tax.
A petition to "Stop BC's Speculation Tax" has quickly gathered close to 9,000 signatures and echoes the sentiments of local officials.
Real estate experts have also warned that the market could see negative effects as non B.C. residents, primarily Albertans, who own properties in Kelowna and West Kelowna grapple with the new speculation tax.
“This is also liable to have a detrimental effect on the Okanagan economy, not because of the intended changes to real estate prices, but due to the unintended loss of revenues generated by those homeowners who take advantage of local services such as car dealers, wineries, restaurants, gas stations, etc. and the resulting potential job losses,” said OMREB President Tanis Read.
“In the long run, I can’t see how curbing sales of recreational, student or non-primary housing options to people from provinces next door and beyond will address the Lower Mainland’s issues with housing affordability.”
