Wilkinson steps into a trap he set himself

Lets not understate the fact that BC's new speculation tax isn't without controversy. It is. There are some folks unhappy that they're now subject to a tax that didn't exist until now. But lets also discuss why we are here and the big mistake that BC Liberal leader Andrew Wilkinson is making.

We are here because of the 2005 legislation passed by the BC Liberals to de-regulate the real estate trade. It became a self regulated industry with significantly reduced government oversight. In fact, oversight passed to the industry itself.

Land speculation has been a thing since land has been able to be purchased and sold. It can be a high risk venture, but most often pays off well. By deregulation, rules and oversight to said speculation slipped away and the practice of 'shadow-flipping' took root in some of the province's hottest markets. In short, it allowed shady realtors to manipulate home sales in such a way to make hundreds of thousands extra in commissions while simultaneously avoid paying taxes.

It was dirty and it forced the prevailing home prices (artificially) through the roof. Nobody other than high rolling investors and the already-rich could get into the Vancouver market. It spread too. Some folks saw real estate as a slot machine or ATM perhaps. The BC Liberals seemingly turned a blind eye because they were collecting a property transfer tax on the final value of the property in question; it generated billions from an ethically questionable practice.

The immediate drawback to this hyper inflated market was that fewer and fewer were able to participate in the local economy as land values, rentals and home prices shot up in tandem. Even middle class incomes weren't enough to sustain the mortgage payments needed to carry the debt needed to buy a home.

The BC Liberal solution? Offer prospective new home buyers with an interest free loan on the down payment to get into what's already unaffordable.

The BC Liberal government get credit for ending the practices of shadow flipping, reasserting gov't authority in oversight and banning 'dual agency'; all of which were key factors in the housing crisis we're in.

But that was the limit of their efforts. As if by reverting to earlier rules, everything would be ok. Its not; vacancy rates in the big cities (affected) are still historically low and rents continue to climb faster than paycheques. Land/home values are still out of reach for most people in areas they need to live.

Speculation is still the problem. Empty homes picked up at the top end of this cycle are sitting empty while we don't have the space to put people.

Before we go on, if its true that middle income folks earn in the range of $60-80k per year, what is the likelihood that someone with that income bracket is going to own more than one property in a high value market like Vancouver? Probably very low. That's not to say that it can't happen: multiple home owners may have entered the market 40+ years ago and grabbed a few places when prices were closer to Earth. But its just not likely that someone earning $72,000 per year is going to own ONE home let alone 2+.

This is the stage set for the NDP who campaigned on a speculation tax; introduced variations while in opposition, so that's what they brought in when they took over.

The details I'll spare for this article but there are a few key points to highlight.

• The law carves out several tax 'zones' where high unaffordability, low rental vacancy are serious concerns (large cities, etc)
• Every home owner gets a notification of the tax and a means to exempt themselves from said tax on an annual basis.

Its the second point that's caused some noise. Its the reverse billing model approach this government has taken. Be as critical as you want, but tell me of a means where you think that folks would freely admit to being speculators sitting atop empty homes in high value markets *and* opt into paying a tax for it and I'm all ears.

Now, the point of a political party is to paint your opponent as a bad guy who's out of touch with the common folks just trying to get by. Thus, the BC Liberals struck, off key, with a message that this new tax is an attack on working people. 

Wrong.

See my earlier note where I refer to what middle income folks typically earn and the likelihood of said folks holding onto empty homes, etc. Is this really a thing? Sure its not impossible, but is this really a thing?

Without trying, the BC Liberals positioned themselves as the defender of big money, corporate interests (again) as this new tax only affects (less than) one percent of home owners in the affected region. The 99.9% of everyone else is unaffected, other than some paperwork.

I couldn't script a bigger policy failure than what the BC Liberals have done here. They could have easily agreed that speculation is a problem, admit that their best laid plans in the mid 2000's didn't pan out as planned and offered some ideas to tinker with the enabling legislation.

Nope.

They hitched their wagon to the 1% again and are going to be rightfully forcefed this error on the campaign trail. 

If Andrew Wilkinson's leadership survives the summer, I would be surprised.

My 2 bits