UDI’s Position on the HST
Dear Members:
As you know, we have been addressing the impact of the proposed HST on new housing – for sale and rental. We have heard loud and clear your concerns and opposition to the new system and have learned that the vast majority of new family housing in the growth areas of the province (Lower Mainland, Greater Victoria, Greater Kelowna regions) will be priced over the $400,000 threshold that has been proposed.
Over the past couple of weeks, we have undertaken an analysis of the impact on a variety of family housing forms (2 plus bdrms) and have also analyzed the impact on new versus resale housing. For purposes of easy comparison, we have chosen to use the mean (average) price of a variety of new housing forms and compared this to resale product at the same price. However, it should be noted that the mean price of a new family condo in Vancouver, for instance, is $801,400 while the mean price of a resale family condo is $574,400. The mean price of a new single family Coquitlam home is $744,800 but the mean price for resale is $459,679. The mean price for a new Burnaby townhouse is $472,900 but the mean price for resale is $427,900.
New housing costs include a variety of newer regulatory requirements and extractions as well as higher land and construction costs that may not have been applied when the resale housing was originally built.
In addition to the increase in regulatory costs, new housing is at a disadvantage when it comes to taxation. GST only applies to new housing. Now, with the introduction of the HST, the disparity between new and resale housing is magnified. For example:
· When comparing a new versus resale townhouse in Burnaby, both valued at $472,900 (average price for new townhouse in Burnaby), the new townhouse will pay $32,983.70 more in taxes.
· When comparing a new versus resale single family home in Coquitlam both valued at $744,800 (average price for new home in Coquitlam), the new home will pay $52,300 more in taxes.
· When comparing a new versus resale family condo in Vancouver both valued at $801,400 (average price for new family condo in Vancouver), the new condo will pay $60,890 more in taxes.
When you account for the increased financing costs at 6% over 20 years required to cover these taxes, the disparity is very dramatic – the townhouse taxes now cost $43,170.80, the single family home taxes now cost $80,519.80 and the condo taxes now cost $93,745.70.
Given this, our members believe they will face waning consumer demand for new product which may lead to an equally troublesome concern that more jobs will be lost until such time as the economy recovers and there is significant increased pressure for more housing.
We are currently working through the implications on rental housing but early comment from our members who build rental housing is that the HST will be a backward step at a time when our members were considering building rental.
We will be meeting with government officials and the Premier over the next week and we would like your input on our key recommendations which include:
1. Increase the threshold from $400,000 to a much higher number – at least $600,000 or - the average price of family housing in growth areas of BC
2. Index the threshold so it increases with average price of family housing in growth areas of BC
3. Increase the current flat $20,000 rebate to a much higher number and index as above, or - remove the cap and make rebate 5% of the tax collectible (this, combined with the estimated 2% input credits should bring us closer to tax neutrality).
4. Grandparent all pre-sales and projects (including phased development agreements) in the development process prior to July 1, 2010.
5. For projects complete but not pre-sold or those that need to be self-assessed for rental purposes, allow offset of any PST obligation that occurs prior to July 1, 2010, irrespective of the date of sale or self assessment of units.
6. To mitigate the growing disparity between new versus resale housing, eliminate the Property Transfer Tax on vacant land and new housing.
This last posting about HST was 6 months ago. I wonder, is there an update?