Seven Real Estate Pros Weigh In On Affordability And Foreign Buyer Taxes

by irina | On May 30, 2018

Affordable housing in metropolitan areas is notoriously difficult to come by — especially when foreign buyers leave their investment properties vacant and unavailable to local residents. That’s why the city of Vancouver, British Columbia, recently raised its foreign buyer tax from 15 to 20%. The increase is designed to counteract the affordability crisis and keep home prices within reach for Vancouver residents.

The impact of the tax hike in metro Vancouver remains to be seen, but the move has sparked conversation about whether American cities like New York and San Francisco should do the same. We asked the experts of Forbes Real Estate Council to weigh in.

All photos courtesy of Forbes Councils members.

1. A Tax Hike In NY And SF Would Hurt, Not Help, Affordable Housing 

Only a government body could rationalize that increasing a tax on wealthy foreign buyers from 15% to 20% will help affordable housing. A 15% hike didn’t deter anyone; 20% won’t either. How could it possibly work in uber-expensive NYC and SF? It would have severe unintended consequences: You would be creating new revenue, but increasing prices. That is bad policy. Better ideas exist than this. – Kevin HawkinsWAV Group, Inc.

2. SF And NY Will Lose Competition In The Global Market 

Increased taxes for foreign buyers on property taxes where most of them already don’t use public school system crosses the line. There is an international market to be chased, and increasing taxes make you lose competitiveness in global demand. Closing doors for foreign money in SF and NY will not increase efficiency, especially since they already have too many regulations. – Rodrigo SchiavoPremier Capital Realty, LLC

3. A Rigorous Acquisition Process And Upfront Fees Would Be Better Deterrents 

I don’t really see how a property tax hike will deter foreign buyers from investing. It is better to have a more rigorous acquisition process with large upfront fees, similar to the Australian market, that would deter foreigners and provide more opportunities for locals. – Engelo RumoraList’n Sell Realty

4. Governments Shouldn’t Try To Discourage Foreign Investments 

It’s best to let markets go through their ups and downs organically. Not allowing the foreign investment in real estate also prevents the ripple effect of money being spent in other areas of the economy and it prevents more foreign people and money from coming into the country. – Allan RankinRe/Max Royal Properties Realty Ltd. Brokerage

5. The Government’s First Priority Should Be Local Affordability 

What happens if locals cannot afford to live in their own communities? All real estate is local. Local homebuyers are the life-blood of towns and metropolises alike. If the only option is for government to weigh and manage all options and implement affordable housing initiatives on behalf of locals, then they are doing very important and appreciated work for the future of their communities. – Garratt HasenstabThe Mountain Life Companies™

6. Increased Home Building Density Will Balance Supply And Demand 

As a Vancouverite, I can tell you this city was built on foreign money like many other cities. The unforeseen damages are lost investment opportunities for the city and lost jobs for trade workers. The best way to make housing more affordable is to let the builders build more homes by increasing density. The more supply, the less of the demand, which translates to more affordable homes. – Chris RyanBEYOND Properties Group

7. Mixed Income Projects Could Help Affordability 

Economists would tell you the effects of this tax do not help the affordability, only increasing the costs for the user. The best solution is density, density bonuses, tax-exempt financing for qualified projects and tax credits for subsidized housing. The very best solution may be mixed-income projects that get the best of both worlds: affordability to AMI and tax credits to incentivize. – Randy C. NortonGreen Mesa Capital

Source: Forbes