You have to go back more than 30 years to find the origin story for a flipping tax, and at the start it was a non-starter.
A tax on real estate speculators who buy properties in order to ride runaway price rises and quickly sell them for a quick buck was promised in the 1991 election campaign, which Mike Harcourt won for the NDP. But over the five-term of his government, it never materialized.
A quick scan of provincial media shows scant mention of the idea in following years. But by 2016, as the term “red hot” was routinely being applied to the Vancouver real estate market, then-mayor Gregor Robertson cited an economist’s support for the idea and said he would aggressively advocate for one.
Vancouver house prices were jumping 25 per cent a year at that point. The idea of a flipping tax started appearing in various real estate analyses and was included as an ask in the city’s long-range housing plan.
After the NDP took power in 2017, the speculation tax was imposed, mostly on absentee owners. But they held off on a specific flipping tax. Municipal leaders wanted one, but then-finance minister Carole James told the Times Colonist in 2018 it wouldn’t have encouraged owners to put units up for long-term rentals, a key goal of the speculation tax.
In the 2021 federal election campaign, the Liberals promised an anti-flipping tax, and followed through with capital gains tax changes that now apply to principal residence sales after short-term ownership.
(That campaign briefly featured a federal Liberal candidate who had sold dozens of properties in quick turnovers and made a fortune in the flipping racket.)
When David Eby announced his run to succeed outgoing premier John Horgan in 2022, he committed the party to a flipping tax to chase speculators out of the market. The promise is essentially what is being enacted today; a new surtax (20 per cent) on profits from sales of properties held for less than two years. It reduces over that time frame and includes exemptions for life changes such as job loss, divorce or death.
In provincial politics, it should be one of the easiest new taxes to establish because it’s aimed at a group everybody hates — greedy speculators who make fortunes and drive housing prices up for everyone.
But it has taken more than a year to get the point where it is ready to enact (the legislation is pending). And it may well be a few years late.
Flipping windfalls only happen when housing prices are surging, and interest rate hikes have curbed prices lately. Prices are holding or dropping slightly. Very modest rises are forecast in the medium term. There’s not much money to be made in flipping, except in specific circumstances.
So the flipping fire truck will be arriving in January 2025, but the blaze looks to be under control.
If a flipping tax had been in place seven or eight years ago, the government would have made a quick fortune at the outset and the tax would likely have sharply curbed the practice.
Premier David Eby and Housing Minister Ravi Kahlon held another news conference Monday to highlight the upcoming tax. Eby said he’d be happy to see it make zero dollars, as long as it curbs the practice. His wish may come close to true.
Housing analysts say only a small fraction of owners sell before two years at the best of times and the market trends work against the practice.
BC United housing critic Karin Kirkpatrick said it is primarily a political show rather than a measure to effectively lower prices. “It looks like there might be about 400 units a year that would have this tax imposed … which is negligible.”
She said it will be hard to administer since length of ownership will have to be calculated on all sales and case by case determinations have to be made on applications for exemptions.
It will still be good to have on the books, as a warning to flippers. It could have an effect when the next spiral starts.
But even Eby and Kahlon are emphasizing that it is only one small part in their multi-pronged attack.
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