Efforts to cool hot housing markets target ‘foreigners’ instead of speculators

Thursday, June 22, 2017

In an era where anti-immigration policies are picking up steam, “foreign” is a dangerous word. And therein lies the problems with the Ontario and British Columbia measures that impose additional taxes on non-residents buying residential property in the Toronto and Vancouver regions.

Notice that, on a quick reading, it appears that I used “foreign” and “non-residents” interchangeably. But they’re not, and the tendency to confuse them can lead to the same type of stereotyping that makes the police practice of “carding” so offensive.

There’s little doubt that the B.C. law, enacted in August last year, and the Ontario law, which came into force in April, are aimed at Asians. That’s the heart of a class action suit filed by a Chinese citizen who has been living in Vancouver as a student. He seeks to have B.C.’s 15 per cent tax on non-residents declared unconstitutional as discriminating against Asians. His court documents argue that the law violates equality rights by making an “arbitrary” distinction between those who are citizens and permanent residents of Canada and those who are not, and “perpetuates prejudice and stereotyping on the basis of national origin.”

Among other things, dictionaries define “foreign” as “strange,” “unfamiliar,” “irrelevant,” “alien” and “outlandish.” So is it any surprise that the new laws have reinforced a lingering suspicion that any Asians, including Canadian Asians, who are prospective homebuyers could just as well be “speculators?” The irony is that Canada is doing what it can to attract foreign investment, and who’s to say that an Asian is more likely to be a “speculative” type of buyer as opposed to, say, an “investor?”

Aggravating the situation is the fact that the new laws really don’t target speculators. They target non-residents regardless of the purpose for which they’re buying a home, be their intention to quick-flip, invest long-term or merely find a residence for children who may be coming to Canada as students (and who, admittedly, can get a rebate if the child is the actual purchaser and remains enrolled full time for two years in an “approved institution”).

Arguably, the media is more complicit here than government. B.C.’s legislation is found in the innocuously named Bill 28, the Miscellaneous Statutes (Housing Priority Initiatives) Amendment Act, 2016. Ontario had the good sense to call its levy the non-resident speculation tax. I couldn’t help but notice, though, that the B.C. premier’s office announced  the measure with the headline “Action on foreign investment, consumer protection and vacancy puts British Columbians first.” Shades of “Make America Great,” if you ask me.

The headlines made things worse. Global News, the Vancouver Sun, the Toronto Star, CTV, the Calgary Herald, the Huffington Post, Macleans and a host of other sources referred to the B.C. measure as aimed at “foreign buyers” or “foreigners.” Even the University of British Columbia got in on the nomenclature. Indeed, the word “non-resident” is virtually non-existent in the ledes to the B.C. stories.

Things are a little better in Ontario, likely because the government included “non-resident” in the name it gave its tax. Although both Global News and the CBC clung to the “foreign” nomenclature, the vast preponderance of references is to “non-residents.”

Overall, professional services firms were more sensitive, although KPMG, Gowling WLG, and McMillan LLP missed the boat in their client bulletins. Toronto’s Mayor John Tory also used the “foreign” lexicon. So far as the public goes, it may be that the emphasis on foreigners in the press following the B.C. legislation institutionalized the “foreigners” aspect in the public’s mind. In fact, since the B.C. legislation was introduced, I haven’t heard anyone — either in casual conversation about the real estate market or in researching this column — refer to the restrictions in either provinces as aimed at “non-residents.”

This isn’t a rant against controls over property ownership by non-residents. They’re not new to Canada, having found homes in Prince Edward Island, Quebec, Saskatchewan and Alberta. They also exist in Australia, the U.K., Hong Kong, New Zealand, Singapore and Switzerland.

What it is, some may say, is a shift in my position on oversensitive political correctness, which I’ve lambasted previously in these columns. That’s a criticism that deserves some thought, but bear this in mind: because what governments and media do in terms of political correctness paves the way for the public’s perception, a higher standard applies than it would to individuals.

One last note: hopefully, Donald Trump and his tradephobic administration won’t get wind of this. Writing in the National Post, Barry Appleton, an international trade expert practising with Appleton & Associates, warned that the B.C. measures (and by implication the Ontario measures, which weren’t in force when he wrote the piece) violate NAFTA and other treaties. The violations could cost Canadian taxpayers “hundreds of millions, or even billions” of dollars resulting from “mass claims.”

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