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.
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 Hawkins, WAV 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 Schiavo, Premier 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 Rumora, List’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 Rankin, Re/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 Hasenstab, The 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 Ryan, BEYOND 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. Norton, Green Mesa Capital