On February 22nd, 2024, Finance Minister, Katrine Conroy tabled the provincial Budget. UDI was disappointed by many of the items included in Budget 2024, and felt that it lacked meaningful measures to get more housing built faster or reduce the growing costs of constructing new homes.

The Government also introduced the Flipping Tax that will apply to the sale or assignment of homes within two years of purchase. However, those engaged in construction or real estate development who add to the housing supply will be exempt. While we anticipate that the new tax could impact pre-sales, more details are needed to fully understand the impact that this will have on the building sector.

Some measures were encouraging, including efforts to reduce the taxes and fees on the purchase of a new home through increasing the Property Transfer Tax (PTT) exemption thresholds for first-time home buyers and on new construction as well as reductions in PTT for newly built rental housing. However, taxes, fees and charges remain high. Last year, UDI estimated that these government-driven costs accounted for as much as 30% of the value of a new home in Vancouver, and the measures in Budget 2024 don’t go far enough on this critical issue.

There were other measures announced in the Budget aimed at bringing costs down, like raising the Employer Health Tax (EHT) thresholds and an Electricity Affordability Credit which will apply to residential, commercial, and industrial buildings. In addition to.

While there was additional funding for BC Builds and training programs (including those that support construction), the Budget lacked meaningful measures to increase and accelerate housing supply or address the infrastructure gaps that are holding up projects across the province.

Highlights

New Flipping Tax Details

Budget 2024 introduces a Flipping Tax that will be effective for properties sold on or after January 1, 2025. There will be a 20% tax on the profit from selling a home within the first year of buying it. This rate declines to zero by the end of two years. The tax will apply to “… the sale of properties with a housing unit and properties zoned for residential use, and exclude land or portions of land used for non-residential purposes.”

• Exemptions will be provided for those who add to the supply of housing or engage in real estate development and construction.
• There are exemptions for certain life circumstances that motivate the sale of the property such as separation/divorce, death, disability/illness, relocation for work, involuntary job loss, a change in household membership, personal safety, or insolvency.
• The tax is intended to also capture pre-sale assignments.
• More details will be provided when the legislation is released later this session.

The Ministry of Finance has also provided some initial clarifications regarding the new Flipping Tax. 

PTT Exemption Changes

The Budget also raises the PTT exemption thresholds for first-time home buyers and new construction.

• This measure increases the thresholds for first-time home buyers for homes with a fair market value (FMV) of $500,000 to $835,000 - with the first $500,000 fully exempt. The benefit will decline as the FMV increases above $500,000.
• Effective April 1, 2024, there will also be an increase in the new construction PTT exemption threshold for homes with FMV up to $1,100,000 with a declining benefit as the FMV increases.

There is also an increase to the PTT exemption for eligible new purpose-built rental buildings available from January 1, 2025 to December 31, 2030.

• This measure would apply to new purpose-built rental buildings on the first PTT payment.
• This applies to the general PTT, and builds on the current 2% PTT exemption introduced in last year’s Budget.
• To be eligible, buildings would need to be non-stratified, and held as rentals for a period of at least 10 years. The entirety of the residential component of the building (if mixed-use) must be used for rental, and the building must have at least four rental units.

More funding for BC Builds

The BC Builds Program announced last week will benefit from an additional $198 million in funding allotted in this Budget.

• The funding will be split between operating ($150 million) and capital investments ($48 million).

Additional Tax Measures

Budget 2024 introduces the BC Electricity Affordability Credit targeted at reducing costs for residential, commercial and industrial users. This will start in April 2024 and run for one year.

• Commercial and industrial users can expect bill credits equal to approximately 4.6% of their electricity consumption.
• The Credit will be based on the previous year’s electricity consumption, and it will be paid out monthly over the next year.

The Budget also raises the Employer Health Tax (EHT) exemption threshold from $500,000 to $1 million. Businesses with payrolls between $1 million and $1.5 million will continue to receive partial exemptions.

CleanBC funding

There will be $318 million in the Budget for new operating funding to continue CleanBC grant and rebate programs. This funding will also support the development and implementation of new regulatory measures in the CleanBC Roadmap to 2030.

Training Program Support

Future Ready Skills Grants will see increased funding of $228 million over three years. The grants are for people 19 years and older to help them access training for in-demand fields such as construction. The new funding will also double student loan maximums. In addition, the current program providing Training Tax Credits was extended for three years to the end of 2027.