B.C. introduces home-flipping tax legislation

The B.C. government has introduced the Residential Property (Short-Term Holding) Profit Tax Act — also referred to as the home-flipping tax.

The legislation, outlined in the BC NDP’s pre-election budget in February, aims to “discourage investors from buying housing only to turn a quick profit.”

The government has explained that, under these proposed rules, homes sold within the first year of being purchased will face a tax rate of 20 per cent of the profit, declining to zero per cent over the second year.

Approximately seven per cent of homes sold in B.C. between 2020 and 2022 were resold within two years, the government noted in February.

If passed, the legislation will take effect as of Jan. 1, 2025.

“Buying a home is one of the biggest milestones in people’s lives – whether it is their first apartment or sizing up for a growing family – everyone wants to find a place to call home and build a good life,” Minister of Finance Katrine Conroy said Wednesday. “We don’t think families should have to compete against wealthy speculators when they are purchasing a home, which is why we’re taking action against investors who use the housing market as a stock market.”

‘It’s all about creating housing’: finance minister

Some people have criticized the tax and questioned whether it will actually have the desired effect. In response, Conroy said Wednesday the flipping tax is just “one of the tools in our toolbox.”

“It’s one more tool to say that we need to lower the prices, and speculators actually increase the prices of housing in the province,” she explained, adding B.C.’s flipping tax will complement the federal one.

“It’s going to create housing, and if it doesn’t, if they (speculators) are going to pay their taxes, that money goes directly to create more housing. So it’s all about creating housing.”

The government says revenue made from the flipping tax will be put into “strengthening housing programs and building new homes in B.C.”

It adds certain exemptions will apply, including for “unavoidable life changes,” such as divorce, illness, death, and relocation for work.

The province says builders may also be exempt from the tax, if what they are doing is “adding to the housing supply, including building housing on residential property with no existing housing, or adding an additional suite or housing unit to a property that has an existing home.”

“Quite frankly, we have more people than housing and we need to find ways forward,” said Housing Minister Ravi Kahlon.

Kahlon says the tax won’t solve the housing crisis. He says “specialists” have been recommending the government take action on demand and supply at the same time.

“I’ve already been hearing from homebuilders, in particular, who were saying with shock and surprise that they were actually able to get parcel land to build housing on at a reasonable price, because people knew this was coming, and they decided that they would rather sell it at a bit of a loss, as opposed to paying the tax.”

When asked why the province felt the need to introduce its own flipping tax, given the federal one, Kahlon said the “clearly, if you’re seeing seven per cent of sales over two years still being speculative in nature, it means that’s not enough.”

“I think the federal government has recognized what we recognize, and what we hear everyday for British Columbians, which is: our housing should be for people and not for speculators. And so, as the minister of finance has highlighted, the way this tax is structured is that it works in conjunction with the federal government’s,” Kahlon explained.

“In the end … if people are not paying the speculation tax, it’s actually a good thing over the long term. It means it’s because speculation is not happening.”