New home flipping tax introduced, but will it help the housing crisis?

While the goal of making the housing market affordable is one most can get behind, some are concerned that the home flipping tax won’t have the intended results.

“On paper, somebody in an office somewhere thinks that this makes sense and it’s going to have this outcome. That’s not necessarily the case on the ground,” said Team Powerhouse Realty Managing Broker Janine Phillips.

Phillips says home flippers play an important role in the housing market, as they play a role that she says actually helps gets more homes on the market.

“The generation that’s buying homes right now aren’t super keen on doing renovations themselves all of the time, or maybe they don’t have the liquid assets, the cash in the bank to do so. So flippers do play a very important role in the housing economy, in the sense that they have the funds to beautify a home that would otherwise be overlooked by buyers because they don’t have the skill or funds to make it their own,” she said.

Bailey’s statement adds home flippers are leaving homes vacant and holding them for profit, a problem for potential first time homebuyers who may be priced out of the market. However, Phillips believes even if these houses were on the market, they still wouldn’t help the overall health of real estate unless work was done to make them attractive properties.

“What we might actually see is the homes are available at a lower price, but nobody wants to buy them,” Phillips said.

The provincial government did account for this, as this new tax offers exemptions for people who make improvements to a home prior to selling it, although these exemptions would not completely negate the tax. Bailey added this new tax is one of several ways the provincial government is looking to improve the health of the housing market by creating more availability and lowering prices.

“We are discouraging people from leaving homes vacant in more ways than one. Measures like the new flipping tax, the Speculation and Vacancy Tax, and the additional property transfer tax (ie. foreign buyers tax) are part of the broad suite of actions the Province has taken to help people find homes they can afford to rent or buy,” Bailey’s statement said.

“The provincial government’s B.C. home flipping tax looks to discourage speculative behaviour in our housing market. B.C.’s flipping tax is paid in addition to any federal or provincial income tax on the sale,” it continued.

While the government views this as a way to improve the situation, Phillips believes it creates more roadblocks and challenges towards home selling and purchasing, and she worries it could possibly make the market even more difficult to navigate.

“Regulation keeps on getting thrown. They’re not cohesive,” she said, when discussing both the provincial and federal government’s various regulations and taxes that have been introduced in recent years.

One other concern Phillips has is that this tax has been backdated to January 1, 2023, meaning you could’ve bought a property without knowing about this new tax and are now stuck with a tax that you could not have known was coming at the time.

“They bought a first time home, they want to sell it so they can upgrade, that opens up another first time home in the market. That’s great. But if those people now think, ‘hey, it’s going to cost me 20%, 10%, whatever they are on that sliding scale now,’ maybe they’re going to hold off a year to avoid that tax. Well, we don’t have that inventory to sell now,” Phillips said.

While it’s still far too early to see how strong of an impact this new home flipping tax will have on the market, one benefit that could possibly bring change is the fact that all the revenue from this tax will go into strengthening housing programs and building new homes in BC, according to Bailey’s statement.

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by Tommy Osborne

New home flipping tax introduced, but will it help the housing crisis?

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