June 26, 2020

Submitted by email: [email protected]

RE: Submission to Expert Panel on Housing Supply & Affordability

On behalf of the British Columbia Real Estate Association (BCREA), thank you for the opportunity to provide a submission on what can be done to make housing more affordable in BC.

The lack of housing supply is impacting people’s ability to find a home. The Canadian Home Builders’ Association estimates that, by 2030, Canada will be short approximately 300,000 housing units, with a disproportionate number in BC. By reducing barriers to creating more housing supply, the federal and provincial governments can balance supply and demand while putting people to work.

BCREA recommends a series of measures that the BC Government and Government of Canada can undertake to help British Columbians to have more access to affordable, appropriate housing through: • encouraging housing supply. • supporting property owners, buyers and tenants, • addressing the high cost of strata insurance, • COVID-19 economic recovery, and • developing smart anti-money laundering initiatives

Encourage Housing Supply 1. Exempt properties in the development process from the additional school tax using the same policy framework created to exempt development projects from the Speculation and Vacancy Tax. The additional school tax increases the tax burden for owners of high-valued residential properties in BC, including detached homes and vacant lands. Taxing vacant lands held for development increases the cost of development, rather than encouraging housing supply. The Canadian Home Builders’ Association of BC and other stakeholders worked with the Ministry of Finance on specific exemptions for the Speculation and Vacancy Tax, and we believe the same approach should be taken with the additional school tax.

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Support Property Owners, Buyers and Tenants The following recommendations will help address immediate concerns and support future home buying decisions. As first-time buyers enter the housing market, the units they vacate become available to new tenants, adding much-needed supply to the rental market. The following recommendations will help address immediate concerns and support future home buying decisions.

2. Reverse the Canada Mortgage and Housing Corporation (CMHC) change to underwriting policies for insured mortgages as of July 1. First-time homebuyers will be hit especially hard by CMHC’s latest borrowing restrictions. Some young families and new Canadians who had plans to buy homes of their own may now be sidelined as they wait to save more money for a down payment to comply with new requirements, or be forced to look far beyond the neighbourhoods in which they had planned to establish their lives.

3. Implement the Office of the Superintendent of Financial Institutions changes to the B-20 stress test announced in February 2020. On February 18, Minister of Finance Bill Morneau announced that in April the new benchmark rate would be the weekly median five-year fixed insured mortgage rate from mortgage insurance applications, plus two per cent. The change was suspended due to the pandemic, and BCREA now urges the federal government to proceed – and to also apply the same rate to uninsured mortgages. To quote the Government of Canada news release, this will “help more Canadians achieve their housing needs while also taking measured actions to contain risks in the housing market.”

4. Increase the First-Time Home Buyers’ Program Property Transfer Tax exemption threshold to $750,000 from $500,000. An exemption threshold of $500,000 does not match the reality of housing prices in BC. BCREA believes that increasing the exemption for first-time buyers will expand choices for first-time buyers.

5. Eliminate the Speculation and Vacancy Tax (SVT). BCREA’s economic analysis provides evidence that the tax is ineffective outside of Metro Vancouver. While the SVT may have contributed to reduced home sales and an increase in rental supply, it is difficult to disentangle this from impacts of the mortgage stress test and other policies like the City of Vancouver’s Empty Homes Tax. Moreover, the effect of these polices appears to be short term with little impact on long-term affordability. Considering the marginal impact of the SVT and the current difficult economic climate, BCREA believes the tax

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creates a barrier for homebuyers and unnecessary administrative complications for government. Wholesale elimination of this tax would serve as a potential market stimulus and economic recovery measure.

COVID-19 Economic Recovery The COVID-19 pandemic has created hardships for many British Columbians, exacerbating the growing mismatch between housing demand and residential construction. The BC economy lost nearly 400,000 jobs in March and April, affecting many property owners, tenants and builders. Support for homebuyers helps British Columbians access the most appropriate housing for their needs while supporting jobs in a wide variety of industries across the province. These recommendations will help bridge the gap while recovery is underway.

6. Strongly encourage local governments to fast-track development applications. Some local governments are already taking steps to speed up approval of development applications, recognizing the need to match housing supply with pent-up demand. BCREA recommends local governments consider the following: • relaxing other defined deadlines in municipal bylaws, such as deferring timelines of development and building permit applications from May until the beginning of Phase 3 of BC’s Restart Plan, • amending policies that require physical meetings, such as public hearings, with municipal representatives and members of the general public, by allowing virtual access to meetings, • waiving public hearings for projects that fit existing design guidelines, Official Community Plan designations and other existing policies, pursuant to the Local Government Act, and adopting other measures described in the Development Approvals Process Review.

7. Introduce a joint provincial-federal program to fund residential and commercial landlords who have accrued rent deficits as a result of COVID-19. This program would help mitigate the impacts of rental deficits faced by landlords and tenants by working to prevent insolvencies and foreclosures. When a tenant is unable to pay their rent, the landlord may also experience cash-flow problems impacting their business and their ability to provide employment and flexibility for tenants.

Address the High Cost of Strata Insurance Since fall 2019, many BC strata corporations have faced significant cost increases when renewing their insurance. Some buildings have struggled to find insurers willing to renew their coverage at all. This alarming situation creates uncertainty and risks that could have serious impacts on the housing market and the economy. The BC Government has recently proposed changes to address

Expert Panel on Housing Supply & Affordability Page 4 June 26, 2020 the issue of high strata insurance costs. If passed, the bill will implement several of our previously made recommendations, but we encourage the government to make continued action.

8. Enforce the Strata Property Act and provide mandatory training and best practices for strata councils, either through a new organization modelled on the Condominium Authority of Ontario or by assigning this role to the Ministry of Municipal Affairs and Housing. There are more than 30,000 strata corporations in BC, and at least a quarter of the population lives in stratas. Yet, the Strata Property Act is not fully enforced and anyone can be a member of a strata council. While organizations that represent strata corporations provide excellent services, they are voluntary. BCREA believes there are many opportunities to support all BC strata corporations and the people who live in them.

As you know, the real estate sector is an essential pillar of the BC economy. A 2019 study from The Canadian Real Estate Association estimates that each home sale on the Multiple Listing Service® in BC between 2016 and 2018 generated approximately $72,000 in related expenditures in the three years after the sale. These expenditures include general household purchases, furniture and appliances, moving costs, renovations, legal and appraisal services, as well as about $7,000 in taxes.

BCREA is the professional association for about 23,000 REALTORS® in BC, focusing on provincial issues that impact real estate. Working with BC’s 11 real estate boards, BCREA provides continuing professional education, advocacy, economic research and standard forms to help REALTORS® provide value for their clients.

To demonstrate the profession’s commitment to improving Quality of Life in BC communities, BCREA supports policies that encourage economic vitality, provide housing opportunities, respect the environment and build communities with good schools and safe neighbourhoods.

Sincerely,

Darlene K. Hyde Chief Executive Officer

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Copies: Hon. Carole James, Minister of Finance ([email protected]) Hon. , Minister of Municipal Affairs and Housing ([email protected]) , MLA – Prince George-Mount Robson ([email protected]) , MLA – Surrey Panorama ([email protected]) Todd Stone, MLA – Kamloops-South Thompson ([email protected]) Lori Wanamaker, Deputy Minister of Finance ([email protected]) Kaye Krishna, Deputy Minister of Municipal Affairs and Housing ([email protected])