Buyers of newly-built homes will get a break on their taxes, as part of changes in the B.C. budget designed to address the Lower Mainland's red hot housing market.
The government will, starting Wednesday, exempt any purchaser of a newly-built home, condo or townhouse valued under $750,000 from the property transfer tax, potentially saving them up to $13,000.
The deal only applies for the first owner of a new home, and the buyer must live in the property for at least a year. It's valid anywhere in the province, but only for Canadian citizens and permanent residents.
To make up the money, government will increase the property transfer tax by one per cent, to a total of 3 per cent, on any home sale worth more than $2 million.
The move may help encourage the construction of new housing, which Finance Minister Mike de Jong said is crucial to addressing the limited supply, but rising demand, for homes in B.C.
"We've taken some pretty purposeful steps to assist those who have the demand and incent the supply," he said.
It's on top of an existing first-time homebuyer exemption for new and used homes, which remains in place for properties less than $475,000.
"We should be capturing the bulk of the market, and as I say with respect to new homes, hopefully creating some incentive for more homes to be built," said de Jong. "We will be working with municipalities to try and facilitate that. So big changes. And we'll be tracking closely the impact they have on market and market behaviour."
Government data indicates a typical condo or townhome in east Vancouver would fall under the threshold, as would a typical townhome or condo in west Vancouver.
De Jong's budget outlined $47.5 billion in spending for the 2016/17 fiscal year, starting April 1, with a projected $264 million surplus. It's the fourth consecutive surplus budget for the Liberal government.
Even as it sought to cool the housing market, the province is enjoying a financial windfall from the property transfer tax it charges on sales. That tax has jumped more than 60 per cent above last year's expectations and is on track to bring in $1.5 billion in the current fiscal year - surpassing the revenue earned by the carbon tax.
To address the issue of foreign buyers spurring real estate prices, de Jong said the government will resume tracking data on who buys property.
Buyers will later this year have to disclose the country of their residence, which is data the province hasn't collected since 1998.
"A purchaser will need to disclose whether they are a Canadian citizen or a permanent resident of Canada, and if they are not one of those they will need to disclose the country the are a citizen or resident of," said de Jong.
Government will also track the beneficial owner of corporations buying property - known as bare trusts - but not move to close the loophole that allows the corporation to transfer shares to a new person, effectively selling the property but avoiding the property transfer tax
The budget did not contain any incentives for local governments to increase the density of housing projects through zoning and bylaws. De Jong threatened legislation that could force municipalities to make transparent the costs their development fees are having on new homes, but said government will first discuss the issue at this year's Union of B.C. Municipalities meeting.
Tuesday's budget also included extra funding for the Ministry of Children and Family Development, which has been rocked in the past year by several high-profile deaths and suicides of children in government care.
MCFD's core operations will get a $65 million boost next year, which will increase front-line programs and hire around 100 new social workers, according to the budget.
The province rejected calls to increase the social assistance rate for B.C.'s most needy, instead announcing a small $77 monthly increase to the disability income assistance rate to a monthly total of $983 effective Sept. 1. The change will affect 100,000 people - though half of those people will receive a lesser amount than $77 a month, because they already receive a bus pass or transportation allowance from the ministry.
"I don't think this makes life easier for people but hopefully it makes life a little less hard," said de Jong.
It's the first increase to the disability rate in nine years. The overall welfare rate remains unchanged.
Much-anticipated changes to the Medical Services Plan premiums largely failed to materialize in Tuesday's fiscal plan. Premier Christy Clark had previously called the flat rate system for MSP as "antiquated" and in need of major reform.
Instead, government increased monthly premiums on adults by $3, to $78 a month starting January 2017. And it eliminated a special rate for adult couples, meaning an additional $14 monthly increase for a family with two adults.
The changes will net government $147 million more, but is offset by $70 million in "enhanced premium assistance," according to the budget.
Children will be exempt from premiums, saving a minimum of $800 per year for families, said de Jong. Two million residents, including kids, won't have to pay any premiums, and 335,000 will pay reduced premiums under additional support, said de Jong.
There will also be a push to inform seniors, many of whom are not taking advantage of their MSP exemptions, that they are entitled to a tax break, said de Jong.
MSP will generate $2.4 billion in revenue towards health care spending that is estimated to rise to almost $19.6 billion, or 41 per cent of total spending. Government continues to plan for 4 per cent annual increases in future years, meaning costs are only going to increase. De Jong defended MSP premiums as a necessary way to fund health care.
"It may be politically attractive to create the impression that MSP premiums don't exist or disappear, but of course they do because the $2.4 billion that we receive in MSP premiums will need to come from somewhere," he said.
"I'd rather be as open and honest with British Columbians as possible and disclose what they are paying and what prupose they are paying."
Elsewhere in the budget, education spending remained basically frozen including inflation.
The budget included $12 billion in taxpayer-supported infrastructure capital spending over the next three years.
Taxpayer-supported debt is budgeted to rise to $43.2 billion, which de Jong said is a slowing of the growth of debt compared to previous years. Taxpayers will spend 3.7 cents per every dollar in debt servicing.
Total provincial debt is estimated to rise $2.4 billion next year, to $67.7 billion. The debt-to-GDP ratio will drop to 17 per cent, said de Jong.
The budget contained several new small tax credits for farmers donating food to non-profits, as well as an expansion of the BC seniors' home renovation tax credit.
However, de Jong warned that the film and television industry's increased use of the film tax credit program, combined with the low Canadian dollar, would force government to revisit the program in the near future.
The government followed through with the creation of its liquefied natural gas Prosperity Fund, despite the fact no LNG projects have actually started construction. The budget allocates $100 million to the fund, but state a minimum of 50 per cent of future funds will be used for debt repayment.
The Prosperity Fund money will come from the current 2015/16 fiscal year, ending March 31. In that current year, government said its estimated $265 million surplus has risen to a projected $377 million.
10 things to know about the 2016/17 provincial budget:
1. Buyers of newly-built homes worth up to $750,000 will be exempt from the property transfer tax, saving up to $13,000, effective Wednesday (only for Canadian citizens or permanent residents).
2. The new home tax exemption will only apply to people who actually live in the home as their principal residence for a year after the purchase (relatives do not qualify) and B.C. will share information with Revenue Canada to double-check whether the rules are being followed.
3. Homes (both new and used) sold for more than $2 million will see an increased property transfer tax of 3 per cent, up from 2 per cent.
4. The existing first-time homebuyers program for used homes remains in place, but the threshold is unchanged for properties worth less than $475,000.
5. Property buyers will need to disclose their citizenship for government tracking.
6. MSP premium rates will rise $3 per month for an adult to $78, starting in 2017, but children are now exempt.
7. The special discounted MSP rate for couples is eliminated, adding $14 a month to a family with two adults.
8. Taxpayer-supported debt is budgeted to rise to $43.2 billion, which means 3.7 cents of every dollar government earns it pays in debt servicing.
9. The $47.5 billion budget next year will have an estimated surplus of $264 million. The economy is expected to grow 2.4 per cent.
10.Income assistance for those on disability will rise $77 a month, except for those who already receive a bus pass or transit assistance. It's the first increase in the rate in nine years. The overall welfare rate remains unchanged.
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