Decision to increase rebate called a victory for affordable housing
Four months of lobbying appears to have paid off for the provincial homebuilding industry, as the government yesterday announced it will increase the threshold for the harmonized sales tax rebate on new housing.
The increase, to $525,000 from the previously announced $400,000, is designed to ensure the majority of new home buyers in B.C. will not pay more tax as a result of harmonization.
The HST, which combines the five per cent GST and seven per cent provincial sales tax, is to be implemented July 1.
According to Casey Edge, spokesman for the Victoria branch of the Canadian Homebuilders’ Association, it’s one blow struck in the battle for housing affordability.
“We asked for a threshold of $600,000; they have announced $525,000, which is certainly better than what was being offered previously, but we also think it is the number that would have been arrived at had there been consultation with industry and proper policy development done,” he said. “That said, it leaves more money in the pockets of consumers buying a home. Housing affordability was always our issue [with HST] and it is still our issue.”
Edge said in cities like Victoria, where the average price of a new home is $600,000, the increased rebate threshold only works if the province “gets serious about their commitment in the Throne speech to address affordability.”
“The costs will continue to increase. The rebates will become less significant unless government deals with that issue.”
The homebuilders have suggested a number of ways to deal with affordability, including scrapping the property transfer tax — a tax that gets embedded in the final price of a home, as it’s charged on the sale of land to a developer and from a developer to a contractor and then passed on to the home buyer.
“The government clearly deserves credit for listening and at least partly addressing the issue with the increase, but it’s just one part of the solution — now they need to look at the other parts,” said Edge, noting homebuilders are still concerned the HST provides a boon to the underground economy.
With the threshold increase, purchasers of new homes costing up to $525,000 will be eligible to receive a rebate of 71.43 per cent of the provincial portion of the HST, up to a maximum of $26,250.
Homes over $525,000 would receive a flat rebate of $26,250, but the buyer would pay the higher rate on the balance.
When the HST was first announced, the threshold was set at $400,000 and the maximum tax rebate was set at $20,000.
“We heard the concerns from consumers and industry about how the HST might affect home buyers, and this increase will move the threshold to above the average new-home price in the province,” said Finance Minister Colin Hansen. “A similar rebate will also support the construction or substantial renovation of affordable rental housing.”
Victoria real estate agents also welcomed the announcement, though Victoria Real Estate Board president Chris Markham suggested the government ought to go further.
Markham said agents would still like to see the HST applied only to the value of the house itself.
“This would create a more level playing field across the province given the wide range of land values throughout the various real estate markets in B.C.,” said Markham.
John Winter, president and CEO of the B.C. Chamber of Commerce, also applauded the decision.
“Residential real estate and home building are key economic drivers for this province,” Winter said. “We are glad to see that the government is committed to carry out the HST transition as smoothly as possible for these sectors, and we look forward to seeing the continued implementation of mitigation strategies in the coming months.”
