With just a day to go before a suite of new rules come into force, uncertainty is mounting within the real estate sector.

I’ve previously asked the Minister of Finance (who is responsible for this file) on both May 10 and on May 16 whether or not she would consider stepping in to rectify numerous problems that have arisen from the impending ban on limited dual-agency transactions in this sector. The BC NDP inherited this problem from the BC Liberals’ “sledgehammer” approach to dealing with what was largely a Metro Vancouver issue. There are profound consequences for rural BC if this ban goes ahead.

As I note in the press release that we issued today, the rule changes are significant, and penalties for non-compliance are substantial, yet the implications and means of implementation of the new rules are still not well understood in the industry. Real estate professionals across B.C. are bringing forward stories about inaccurate and conflicting information, and inadequate training regarding these new rules.

It’s important that the Minister of Finance and the Office of the Superintendent of Real Estate to extend the timeline for implementation in order to ensure all realtors, and consumers, have access to the training and accurate information required for them to comply with the new rules.

Media Release

Weaver calls for an extension in timeline for real estate rule changes
For immediate release
14 June 2018

VICTORIA, B.C. – Today, in response to ongoing concerns expressed to him by realtors across B.C., Andrew Weaver is once more calling on the Minister of Finance and the Office of the Superintendent of Real Estate to extend the timeline for the introduction of the real estate rule changes.

“I have numerous concerns about the timeline for the implementation of the new rules for the real estate profession, due to come into effect tomorrow, June 15,” says Andrew Weaver, Leader of the B.C. Green Party.

“The rule changes are significant, and penalties for non-compliance are substantial, yet the implications and means of implementation of the new rules are still not well understood in the industry. Real estate professionals across B.C. are bringing forward stories about inaccurate and conflicting information, and inadequate training regarding these new rules.

“This state of affairs is not helping to protect consumers. I urge the Minister at this 11th hour to work with the Superintendent of Real Estate, to extend the timeline for implementation of these rule changes until the fall.

“Extending the timeline for implementation is essential in order to enable brokerages and boards across the industry the time to adapt to the changes and to undertake adequate education with agents, which, in turn, enables them to adequately serve consumers.”

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Media contact
Sarah Miller, Acting Press Secretary
+1 250-858-9891 | sarah.miller@leg.bc.ca

Today in the Legislature I rose during question period to ask the Minister of Social Development and Poverty Reduction why the government had yet to increase the $375 shelter allowance for income assistance. This rate hasn’t increased in a decade yet housing costs have risen dramatically.

Below I reproduce the video and text of our exchange.

Video of Exchange

Question

A. Weaver: In September, government raised social assistance rates by $100 per month. Not only, of course, do I support the move, but I also commend government for implementing this increase. Rates had been frozen for a decade, leaving people worse off year after year, as their buying power eroded with inflation and the affordability crisis exploded.

Nevertheless, while support payments have gone up, the shelter allowances have remained the same, at only $375 a month. This is far, far below what it actually costs to find shelter.

For example, the organization Raise the Rates found that in Vancouver, even a single-room-occupancy hotel, known as an SRO — the cheapest form of housing available — cost $548 a month. And a number of advocates and journalists have documented the appalling and unsafe living conditions that people are forced to endure in many SROs in Vancouver.

My question to the Minister of Social Development and Poverty Reduction is this: do you agree that $375 does not come close to reflecting the true cost of finding shelter in B.C., let alone shelter that is safe and secure?

Answer

Hon. S. Simpson: I thank the Leader of the Third Party, though I did lose the bet on getting a question-free session.

I agree with the Leader of the Third Party. Persons on income assistance, persons with disabilities and hundreds of thousands of other people who are living vulnerable and living poor are struggling immensely in this province today. I’m proud of the $100 increase that we put in place, the first increase in over a decade for people on income assistance.

As I said, there are significant numbers of working poor in this province who are struggling as well, and I’m excited that at the end of this week, we’re going to have a $1.30 increase in the minimum wage, the first step on the way to a $15.20 minimum wage.

On the issue of housing, the member is correct: it is challenging, as we move forward, but we have many steps that we’re taking. I’m excited about the biggest investment in housing in the history of British Columbia in the February budget. I’m excited about the increases around rental assistance programs and SAFER grants. I’m really excited about the 2,000 modular units that are out there being built today, that are being occupied today, that are helping the most vulnerable people in the province, people living homeless, and giving them a place to live. That’s progress, and that’s leadership.

The last thing I would say is: we’ll bring in the poverty reduction plan, and yes, we’re going to deal with housing.

Supplementary Question

A. Weaver: There certainly was a lot of pent-up answer waiting for a question there.

A substantial gap remains between social assistance rates and what is required to maintain a dignified standard of living. That’s why during the election the B.C. Greens committed to transitioning people to livable incomes, starting with an increase in social assistance rates by 50 percent above 2017 levels by 2020.

The previous critic on this file said last year: “Every year I ask the minister how on earth they come up with $375 as the shelter allowance for income assistance, because there’s nowhere in B.C. that’s available for $375.” I would agree with her, but unfortunately, this remains true today, and the average rent of a bachelor apartment in Vancouver is over $1,000 a month.

My question, again, to the Minister of Social Development and Poverty Reduction is this: will you increase the shelter allowance as part of the forthcoming poverty reduction program and strategy?

Answer

Hon. S. Simpson: We have 557,000 people living in poverty in this province. We’ve had the highest rates of poverty for over a decade and a half, pretty much every year, and certainly the highest rates around child poverty.

We have challenges. We need to deal with the affordability questions that the member’s talking about. We need to create opportunities for people to break the cycle of poverty. We need to deal with the issues of social isolation and social inclusion for people struggling in poverty, whether they be the 100,000 children living in poverty, the Indigenous and the disabled who are living in poverty.

We’re going to do that. We’re going to bring legislation this fall that will legislate the poverty reduction plan, and British Columbia will no longer be the only province in this country without a poverty plan. We will end that this fall. We will bring the plan shortly after, and we will address those issues of improving the lives of people in this province, including on the housing issue.

Over the last year or so I have twice (February 2017 and October 2017) introduced a bill to protect agricultural from continuing to be subject to speculative investment activity.

Today during budget estimates for the Ministry of Finance I asked the Minister why her government had neither applied the foreign buyers tax nor the speculation tax to land in the ALR. In particular, I sought answers to why her government is not stepping in to stop prime farmland being carved up and converted into mega mansions.

Below I reproduce the video and text of our exchange.

Video of Exchange

Text of Exchange

A. Weaver: I just have a couple of questions in two areas to finish my estimates questions to the Finance Minister. The first is in the area of ALR protection. The ALR was left unprotected from the measures announced in the budget to cool the market for the residential real estate sector, which has encouraged speculation in ALR. My first question is: why didn’t the foreign buyer tax and the speculation tax apply to the ALR? And why was, for example, foreign ownership not restricted to the ALR, like has been done in areas across Canada, including Alberta, Saskatchewan, Manitoba, Quebec and PEI?

Hon. C. James: Thank you to the member for the question. I think there are two pieces I just want to focus on.

I think the first one is…. As the member will know, there’s a comprehensive policy review going on with the Minister of Agriculture right now in looking at a whole range of issues related to agricultural land. We’re doing our policy work — side by side, I guess, is the best way to describe it — along with the work that’s being done in the Agriculture Ministry. So we don’t want to either get ahead or be duplicating work that’s going on.

As the member will know, there was a large consultation done, and so people were giving their feedback. To look at further work that needs to be done around the agricultural land, we’re doing that policy review, as I said, along with the Agriculture Minister.

But I think it’s important to note that both the foreign buyers tax and the speculation tax do apply to houses, to the residential property that’s on agricultural land. I know the member’s speaking about a broader base when it comes to the agricultural land, but in fact, those taxes do apply to the class 1 residential housing that is on agricultural land if they’re in the areas that are covered by those taxes.

A. Weaver: Yes indeed, I was concerned about the broad, bare land of agricultural land that can be purchased that does not have a foreign buyers tax. Then Richmond council can be approached, and that land could then have a mega-mansion put on it, which was the subject of the concern being expressed here.

In the budget, the minister stated that she’d be changing the tax treatment of residential property in the ALR in order to close property tax loopholes. My question is then: how are you changing property tax treatment, and when can we expect to see this done?

Hon. C. James: We’re looking at the changes. These are draft changes to the School Act to exclude ALR properties that are in the residential property class from the 50 percent land exemption. We’re going through that process right now, again, as I said, in tandem with the work that’s going on in the Agriculture Ministry. This would require changes, so we certainly hope it’ll come by the fall.

A. Weaver: Again, the review. We’ve been talking about the review, and the Minister of Agriculture is indeed undertaking such a review. But in fact, we’re not waiting for the results of the review before changing the tax treatment on residential property.

We know what’s happening in an ongoing fashion in Richmond is that the speculation and mega-mansions are devouring ALR there. For example, last year, Richmond lost 50 farms due to mega-mansions. We can’t, frankly, afford to wait a year to see more action.

Why are we not taking immediate steps now to impose the foreign buyers tax and the speculation tax on the ALR land? What is stopping the minister from doing that?

Hon. C. James: I certainly appreciate the urgency of this issue. I appreciate the examples that have come forward, particularly in Richmond, as the member mentions. They are issues right now and challenges right now. But there is, as I said, the comprehensive review going on. We need to make sure that…. Many of these changes have to happen through different acts, not through one act.

For example, the changes to the school tax related to the school tax on agricultural land also have to be changes to the Assessment Act. Again, we don’t want to piecemeal it. We want to make sure that the changes that we make are really going to make a difference. That’s why we’re working together with the Agriculture Ministry.

There is an opportunity, hopefully, in the fall to bring forward those changes, to have coordinated with the feedback that people gave and to be able to make a comprehensive change that will prevent the kinds of examples that the member has raised.

It’s been more than four years now since I started calling on government to close the bare trust loophole which is being exploited to provide cover for anonymous real estate transactions as well as to avoid paying property transfer and, potentially, capital gains taxes.

A bare trust is a legal entity that allows for the separation of beneficial and legal ownership. The beneficial owner of a property is the person or persons who make all the decisions concerning such things as rent, repairs, management, sale etc.; they are also the person or persons who receive all the revenue from and arrange financing for the property. The trustee of the bare trust has no substantive decision-making capacity as they simply act upon the instructions of the beneficial owner. Typically the trustee is a corporation that has no other purpose but to act as a trustee for the bare trust and for which the beneficial owner owns all the shares.

Now here’s the loophole. Suppose you own a home or apartment building that you want to dispose of. If you simply transferred title, like most of us do when we sell a home, the purchaser would have to pay the property transfer tax.

But if instead the property is in a bare trust where the trustee is a company, then you will pay no tax. All you have to do is sell your shares in the company for 1$ (the company has no assets anyway), and sell the “beneficial ownership” rights of the property to a third party via a “bare trust agreement” which is not registered at the Land Title Office.  Since no change in title occurs, no tax is paid.

Today during budget estimates for the Ministry of Finance I asked the Minister once more as to what the hold up is. While I appreciate that government is now collecting data on beneficial owners and sharing that data with the Canadian Revenue Agency (thereby potentially giving the CRA the ability to crack down on capital gains evasion), she is still resistant to do what Ontario did ages ago and apply the property tax to transfer of beneficial ownership rather that to transfer of title.

Below I reproduce the video and text of our exchange.

Video of Exchange

Text of Exchange

A. Weaver: I’d like to pivot to the issue of beneficial ownership and bare trust, a key issue and aspect of both the B.C. NDP and B.C. Green election campaigns. As the minister will know, I’ve been calling on government — both past government and present government — to close this loophole for years now.

In this budget, we’ve taken some steps, which I recognize, requesting more information about beneficial ownership on property transfer tax forms, as well as establishing a beneficial ownership registry. But we need to do more than this, frankly, and rather than just collecting information on the beneficial ownership, we need to take steps to actually close the loophole — as was done decades ago in Ontario in direct response to seeing some shenanigans occurring in the real estate sector.

We know that the market has already discounted this, and the market had expected government to announce that the measures would have been taken in their budget.

I have two questions in this regard, and then I’ll conclude. What information are we currently collecting about beneficial ownership on PTT forms — that’s property transfer tax forms — and what additional information are we collecting now? When do these changes come into effect, and what are the purposes of collecting this additional information? What do you expect the impacts to be from gathering this information?

Hon. C. James: Thank you for the question. This is an issue that the member has been raising for a while, and it’s certainly a piece that we’re keen on moving on. I think there are some lessons to be learned from the Ontario example, where Ontario, again, didn’t do the collecting of the information and so had some challenges when it came to implementing the tax that they’re looking at.

We will be starting, as the member has said, with changes coming in the fall on information that’s collected. The best way probably to describe it is it’ll basically be look-through rules, so it will provide an opportunity for us to look at the owners of the land, regardless of what structure they’ve put in place. All that information will be held by the Ministry of Finance.

We will be bringing in, as well, information-sharing rules that will be put in place, particularly with the CRA, so we have the immediate opportunity to be able to look at tax loopholes or tax fraud if it’s there. That’ll give us a chance to be able to do that. Then, when we have the information, that gives us the next step to be able to look at. Whether it’s Ontario or other jurisdictions or other ideas and approaches, it’ll give us an idea of the challenges and the ability to be able to determine further action.

A. Weaver: To be fair, I frankly don’t think that’s good enough. We are, right now, proposing a speculation tax, which is causing chaos in the real estate sector because we don’t have information, and we’re making exemptions as we move along.

We have a clear understanding of what the bare trust loophole is being used for in the residential property. We know you don’t have to go and collect data to know exactly what’s going on. Talk to realtors. Talk to commercial developers. Talk to bankers. Talk to accountants.

We know that properties are being purchased in trust. Those shares are owned by a corporation, and those corporation shares are flipped and switched. We know that that’s happening with offshore companies as well, and we know that that is fuelling the speculation that we truly want to deal with in the housing market.

The spec tax is not dealing with speculation. The spec tax is a paper wealth tax. Whereas a measure that we could take to actually deal with speculation, a measure that was dealt with in Ontario…. I’m told it was dealt with in Ontario precisely because of concerns about money laundering that was happening at the time in the housing market there in Ontario. The tax went on to the beneficial ownership transfer.

It is critical, because you buy at home, a mega-home, and you buy it for, say, $2 million in a trust, and you can flip that five times. You can launder money in this flipping, and there is no record. You’re collecting information, sure. But there’s property transfer tax avoidance, which should be there to discourage this behaviour.

Now, the bare trust existed…. There are reasons historically why it was important to have these properties in trust, particularly in commercial properties. But it is being abused in the residential market.

I’ll conclude, then, by saying I don’t think it’s appropriate not to close a loophole now. I think we have a measure to truly deal with speculation right now. The Attorney General, the member for Vancouver–Point Grey in opposition, pointed this out. The government said they would do it. They campaigned on doing it. Here we are a year later. We’re collecting data about hypothetically doing it down the road while implementing, at the same time, a speculation tax that is actually not dealing with speculation.

So it’s a plea. Why is the minister not standing up and closing this loophole that is being exploited right now in British Columbia and is leading to speculation — instead, taking the steps to introduce a tax that doesn’t actually deal with speculation but instead conflates two issues? One is the issue of satellite families; the other, the issue of vacancy.

Hon. C. James: I appreciate the member’s urgency around this. We feel the same urgency, but we also want to make sure, as I said, that we provide the opportunity to really get at what we need to get at and to get at the individuals we need to get at. I think, as the member has described well, there is all kinds of discussion out there. There are all kinds of people talking about examples that they know of where people who are very sophisticated at tax planning are utilizing these opportunities.

What we’re doing first is figuring out who owns what. That’s a critical piece because right now there isn’t a registry in place. There isn’t an example in place that gives us that. The work we’re doing right now will help us to do that. It’ll help us to build a registry to determine who’s incorporating where. It’ll require people, when they incorporate, to actually register that. So again, we’ll have a tracking around where things have occurred, where people are utilizing the opportunity to be able to avoid paying the correct taxes.

Then the next step, obviously, is to take action. But this will still give us the opportunity to share that information with the CRA and go after existing taxes that are not being paid. I don’t want the member to believe that this does nothing. In fact, it provides us with the opportunity to share that information with the CRA to be able to deal with taxes that aren’t being paid now or opportunities that people are trying to utilize to not pay taxes now. This will give us a chance to do that by the fall.

Further steps then can come after we’ve got the registry in place and we have the opportunity to address it.

In the Ministry of Finance budget estimates yesterday I had the opportunity to question the Finance Minister on a number of topics concerning the recently proposed speculation tax.

Below I reproduce the text and video of our exchanges.

Text of exchange

A. Weaver: I have a number of questions, just to follow up on this theme. I thank the members for Prince George–Valemount and Surrey–White Rock for canvassing this issue. A couple of these questions have been addressed, but I’d like to develop the narrative just very briefly.

I’ll start off by saying I understand the issue that the minister is addressing. The housing market has got out of control through wanton speculation. I do understand that it is the government’s prerogative to choose the means and ways to deal with it.

The approach the government has taken is not the approach we would have taken. Nevertheless, we agree to disagree on this, and we do support government’s effort. I will say that our approach would have been to actually address taxation after sale of a property, when people had the ability to pay, as opposed to upfront with respect to a paper value.

With that said, I also want to thank and commend the minister for listening to the concerns that we’ve brought to her from a number of areas and issues. I just want to canvass two more of these areas and see what she says.

The first question to the minister is this. With respect to the intention of the speculation tax, is the intention of the speculation tax to reduce the number of homes being left empty by encouraging people to sell or rent, or is it to generate revenue?

Hon. C. James: I think the member has hit on a very important point. I would be thrilled if we saw all of these properties become rental properties and some people not having to pay the tax, because that would be, in fact, the achievement of providing more housing in these communities that have an almost zero vacancy rate.

I think, as I said earlier, we have been conservative in our numbers when it comes to the tax revenue coming in, because we don’t expect that everyone will look at renting their places out. But we have been conservative in those numbers for precisely that reason, because the hope and the encouragement is that people will actually utilize their empty, vacant properties to be able to increase the supply of housing in communities.

A. Weaver: The follow-up question, then, is with respect to the budget. The question is: why is the government anticipating flat revenues, then, from the speculation tax? Shouldn’t they be expecting a diminishing amount over time if the speculation tax were to take the effects that the government is hoping it would take?

Hon. C. James: Thank you to the member for the question.

I think it’s important to note, and we’ve talked about this on other taxes, that it’s important to be able to see behavioral change to be able to build into the budget. I expect that there will be adjustments after the tax is in place and after we start seeing behaviour.

If adjustments need to be made in the budget, the adjustments will be made in the budget. But we certainly expect that there are more vacant homes that are going to be not rented out that will continue to bring in tax revenue. But adjustments that need to occur can occur, and that’s why we build improvements in the budget, as we go along.

A. Weaver: I’d like to switch, then, to land that’s proposed to be under development.

Now, I’ve heard a number of concern. I’ve met with a number of developers, both here in Victoria and Vancouver and other areas, with respect to the problem that could arise if the speculation tax is applied to undeveloped land. The scenario you might imagine is a builder acquires some land, is now waiting — in some cases, a couple of years — for a permitting process to go through with the local municipality. The speculation tax starts to get involved.

The actual builder or developer has to face one of two choices. Do they pay this up front, and then that, ultimately, would be passed along to the buyer — which actually goes against government’s mission and mandate to try to create affordable housing — or do they walk away from the project because it’s just not worth the hassle.

My question with this is: will the speculation tax, as implemented, be dealt with in a way similar to the way that Vancouver has addressed the vacancy tax, by ensuring that developers aren’t liable to pay the tax in specific cases where land is being collected and put in a process for development?

Hon. C. James: Thanks to the member.

We certainly have been engaged in those discussions. I think the member points out the Vancouver model. I think one of the discussions…. We’ve been working with UDI, we’ve been working with the Canadian Home Builders Association, the urban land initiative — there are a number of groups that we’ve been working with — to look at exactly the kinds of challenges that the member raised.

There are different development timelines in different communities. Some require an upfront consultation with the community before the development permit is even issued. Others require the development permit and then out to do the consultation. So we’re looking at all of that as part of the implementation. There will be an answer shortly.

We’re working with those groups to make sure that we capture all of those kinds of examples that the member raised.

A. Weaver: I have two final questions. The last one on this topic is that one of the key things, of course, in the industry is uncertainty. Uncertainty creates turmoil in businesses. I know some examples of projects that are on hold because of this uncertainty.

My question is: when can developers expect certainty on whether or not they will be subject to this tax?

Hon. C. James: Thank you to the member for the question.

We certainly recognize that. People are eager to know all of the final details. We want to make sure we finish up these consultations and take into account all of the examples. So “soon” is what I would say. I certainly hope before the summer that we’ll have all of this wrapped up and have the details out.

A. Weaver: Thank you to the minister for the answer. My final question is with respect to secondary suites. Now, I’m not sure whether these are covered or not, so my question is: if the intention of the speculation tax is to actually reduce the number of homes being left empty, are these situations included now, or is there a way of exempting them from the speculation tax?

Let us suppose that I am somebody who lives in Victoria or Vancouver and I have a secondary home in Kelowna and that secondary home stands vacant. But now I put a secondary suite in that secondary home, and I recognize there’s an opportunity — an opportunity for income, safety for my house because I’ve got now somebody living in that secondary suite, and also I might perhaps eliminate the speculation tax.

Would a person who is subject to the speculation tax be exempt from the speculation tax if they were to create a secondary suite in their house that would not otherwise have existed were there not the speculation tax in place?

Hon. C. James: Certainly, it’s consistent with the intent, which is to make sure that people are renting their places out, so that would apply. They would be renting their place out.

Video of Exchange