B.C.'s homeowner grant fix creates surprise winners
The B.C. government's big 33 per cent lift in the threshold to qualify for the homeowner grant is geared to protect those at risk of losing the grant in the Lower Mainland, where property assessments jumps of 40 per cent were typical this year.
But it has also created some unexpected winners.
The increase means homes valued up to $1.6 million will get the full grant and won't be subject to any clawback.
It's irrelevant to those whose homes are still worth less than the old threshold of $1.2 million who were going to qualify anyway. They continue to get the $570 annual credit against their property taxes if under the age of 65, or $845 for seniors.
The targeted beneficiaries are those with homes previously worth perhaps $1.1 million that have jumped to $1.4 or $1.5 million, who would have lost the homeowner grant without the change.
For detached houses, that's the lower end of the market in Vancouver and arguably mid-range in Richmond, Burnaby and pricier parts of Surrey.
"In and around Vancouver, it's family homes," UBC associate economics professor Tom Davidoff said. "But outside of Metro Vancouver, and to a lesser extent Victoria, that's pretty heady stuff. So you're giving money to people who are doing very nicely."
Because the same threshold applies everywhere in B.C., the biggest winners include high-end home owners in rural regions where real estate prices are little changed and much lower than the Lower Mainland.
In fact, in northern B.C. there are only seven homes in the entire region valued above the new threshold of $1.6 million that won't qualify for the homeowner grant, according to B.C. Assessment records.
More than 50 homes in the region didn't qualify last year – because they had assessed values above $1.2 million a year ago – that will get the grant in 2017 thanks to the change.
Homes that now qualify there include palatial country houses on acreages or lakefront near Fort St. John, Prince George and Williams Lake.
Another benefit for those well-heeled rural homeowners: They get the higher homeowner grant of $770 (or $1,045 for seniors) that applies in northern and rural areas.
Similarly, a luxury condo in Vancouver now worth $1.5 million might qualify under the higher limit after being disqualified a year ago, because Metro condos generally have not gained in value as fast as detached houses.
Davidoff argues the homeowner grant is unfair to non-homeowners and an overly blunt instrument that the province should replace with targeted cuts to income tax or sales tax.
"Any time you throw benefits at home ownership, that's a gift to the incumbent owners and it pushes up prices," Davidoff said. "If you cut income or sales taxes, that actually increases economic activity. Handing people money for being homeowners doesn't do anything for economic activity."
As for concerns that house-rich but cash-poor seniors need to keep their homeowner grants, Davidoff noted they can defer their property taxes until an eventual sale or death.
"Anybody over 55 has the right and in my opinion almost the obligation to defer their property tax. It has a one per cent interest rate. Anybody, no matter how rich or poor, would be out of their minds not to take the province up on that."
B.C. Finance Minister Mike de Jong said past suggestions of eliminating the homeowner grant "did not go over very well" with the public, adding the province has also opted to apply the same threshold province-wide, instead of setting different ones for each region.
"While I understand some local mayors may have preferred to carve out a part of the province, this is a program that exists to the benefit of all British Columbians, no matter where they live," de Jong said.
Communities Minister Peter Fassbender said he isn't pushing for a change, noting people in the north have extra costs that Metro Vancouverites don't have to pay.
NDP housing critic David Eby said New Democrats pushed for the threshold increase.
"We would also stop giving homeowner grants to people who don't pay income tax in British Columbia," Eby said.
An estimated 91 per cent of homes province-wide will qualify with the new threshold, and that drops to 83 per cent within Metro Vancouver.
Raising the threshold means the province will pay out $821 million in homeowner grants, an increase of $12 million. The expenditure would have decreased if the government had left it unchanged.