On Feb. 20, Finance Minister Carole James unveiled the NDP’s 2018 budget plans which included a 30-point plan in hopes to establish a fairer housing market – by stabilizing it, cracking down on real estate fraud and in creating more rental housing units for citizens.
With new implementations taking place, we thought it’d be handy for fellow real estate investors to know about these changes.
- The Speculation Tax
For those who currently don’t pay income taxes in the province of BC, this new policy may affect you. The tax rate for 2018 will be $5 per $1000 of assessed value, with rates proceeding to rise to $20 per $1000 of assessed value in the following year of 2019. A good example of this can be found in a $500,000 condominium, where it will incur $10, 000 in property taxes per year. This could indefinitely affect any positive cash-flow that your property currently has.
As for those who are out of town investors, it would be an opportunistic time to sell your property within this year to avoid being subject to the 2019 speculation tax.
- Tax Reporting for Condo Assignment Sales
Occasionally, some investors choose to not report their taxes for their condo assignment sale(s) so they can keep a larger portion of their financial gain – this is no longer possible as the provincial government now requires condo developers to collect and report comprehensive information about their assignments; this information will thus be shared with federal and provincial tax authorities to ensure no one evades their taxes on property assignments.
It is advised that you have your accountant report all sales and purchases of any condo assignments to the CRA on your behalf and to pay the taxes amounted from them. Paying capital gains taxes means you have made money, and by living a more righteous life we’re sure you will be rewarded in the future with more opportunities of capital gains! 🙂
- Allowing Online Accommodation Providers to apply PST and MRDT (Hotel Room Taxes) on short-term rentals
If you currently have any rental listings on online accommodation platforms such as AirBnb, VRBO and others, you are now enabled to collect and remit both the PST and MRDT amounts payable to the provincial government. As for those who have listings on Craigslist or Kijiji, it is also recommended to collect and remit both taxes, though there are currently no regulations in place that requires you to do so at this moment.
- Making a $6 Billion-plus investment in affordable housing to deliver 114,000 affordable homes and building more than 14,000 units for middle-income earning individuals, working families and low-income seniors
With more affordable homes and units being built for the middle and working class, there will be a decrease in competition of renting from us real estate investors – we can then market to higher income tenants and working professionals who are less likely to be unable to afford to living in our properties. This saves us from the headache of receiving bounced cheques and drastically decreases the likelihood of evictions. This is awesome!
- Government is partnering with post-secondary institutions to deliver at least 5,000 new spaces in student housing
Though the NDP government is hopeful about the additional amount of at least 5,000 new spaces in post-secondary institution housing – specifically because they expect more rental housing would become freed up, we believe this goal is not as easy to obtain. Based on our knowledge, the majority of students attending our post-secondary institutions live at home and their relocation will only result in a room becoming freed up in their family home. Additionally, these proposed student housing units will only be implemented with the full cooperation of post-secondary institutions with the government as they require additional funding to carry out establishing these student homes. More so, there is also the added factor of whether or not there is land available nearby these campuses. All of the procedures required to making this possible would surely take quite some time, so us investors can still sit back and enjoy the cash flow gains from our student rentals for the time being!
- Increased funding for the Residential Tenancy Branch
An increase in funding will result in reduced wait times for solutions to landlord/tenant disputes which is a huge plus for us Landlords, as should we be unfortunate to encounter a bad tenant, it ensues a tedious process until we can evict them out of the rental property.
These are just some changes to keep in mind on how it may either affect you now or on your next income property.
To read more from the 30-point plan geared towards housing affordability in B.C., click here.
And as always, if you ever have any questions about real estate investing or need help choosing the next best income property, please contact us.