Vancouver raises tax on foreign home-buyers to relieve tensions

Signal of change / Vancouver raises tax on foreign home-buyers to relieve tensions

By Courtnee O'Neill / 22 Oct 2016

Vancouver has introduced a new tax law adding 15% to the purchase price of a home for foreign buyers, with the aim to make housing more affordable for local people and reduce its negative social impacts. Currently Canadian citizens pay a Property Transfer Tax of 1% on the first $200,000 of the purchase price, 2% on the remaining amount up to $2million and 3% on the rest. The foreign tax will be paid in addition to the Property Transfer Tax. Immediate effects of this tax have been recorded by The Real Estate board of Greater Vancouver. Within the first month Vancouver’s home sales fell by 26% and the average price of a detached property declined to C$1.47million ($1.1m). This appears to be a positive step towards inhibiting the housing crisis. However is it enough to stem the social effects of gentrification? The average price of a detached family home in downtown Vancouver has hit highs of C$1.56m (US$1.2m). This hefty price tag has increased by 32% in the past year and has attracted an influx of foreign investors to the area . It has also been reported that there has been a rise in uninhabited homes bought by foreign investors in Vancouver, totalling near 11,000. These rapid changes have displaced local people out of the city centre as a result of rising living costs.

So what?

Vancouver’s tax represents a confrontational approach to the controversial issue of gentrification, which is affecting cities across the world, such as London, Johannesburg, Amsterdam and Berlin. The term ‘gentrification’ was coined by Ruth Glass in 1964 and since has transformed the way we approach our cities. Referring to the demographic shifts in urban areas, the phrase has come under scrutiny as a result of its implications for the poorer areas of our society and cultural heritage. The effects of wealthy buyers pushing local people out of areas are prevalent in many societies today. Foreign investors are often particularly blamed for stoking the housing crisis by pushing prices beyond the means of ordinary citizens and leaving homes empty. Berlin’s local authorities have recently been in the spotlight for taking a different approach to the problem.

The latest movement, The Neukollen Tenants’ Alliance proposes to introduce ‘milieuschutz’ in their neighbourhood. This term translates as ‘Social Environment Protection’ . It puts restrictions on buyers modernising their properties to the extent of the existing residents being pushed out. It also prevents buyers from purchasing large properties and dividing them in to small flats for their own financial gain. Measures similar to this have been put into effect in other parts of Berlin to enforce laws that prevent division in society and offer support to those who have been affected by gentrification. This anti–gentrification movement reaffirms that regeneration should be for all, not the wealthy few.

It must be noted that foreign investors are not the sole problem when considering issues of gentrification. However Vancouver’s new tax law has triggered more discussion on the issue as a whole. Alongside the local governments’ attempts to curb the repercussions of gentrification, many have called for businesses to share the responsibility by welcoming members of existing communities and working to avoid cultural gaps in their workforce. Will a measure as simple as a new tax be enough to bring gentrification under control? And might other cities follow the lead of Vancouver or Berlin?

Sources

https://www.theguardian.com/world/2016/aug/02/vancouver-real-estate-foreign-house-buyers-tax

What might the implications of this be? What related signals of change have you seen?

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