BC Bringing in 20 Percent Home Flipping Tax Next Year to Target ‘Bad Actors’

B.C. Finance Minister Katrine Conroy tables the budget in the legislative assembly at the legislature in Victoria on Feb. 22, 2024. (The Canadian Press/Chad Hipolito)

British Columbia has implemented a new tax that targets the quick sale of residential properties in a bid to “discourage speculators” from driving up housing costs.

The province’s home-flipping tax, unveiled Feb. 22 as part of the 2024 budget, will single out people who sell homes two years or less after purchasing. It is set to take effect Jan. 1, 2025.

B.C. Finance Minister Katrine Conroy said the tax will be levied on home flipping profits with revenues going to build “middle-class homes” throughout the province.

She described the tax during her Feb. 22 presentation of the provincial budget as a way to target “bad actors” who put “profits ahead of people.”

“Even those who earn a decent income are finding it hard to own a home, and that doesn’t sit well with our government,” Ms. Conroy said. “To those who just want to make a quick buck by flipping homes, things are about to get more difficult.”

How the Tax Will Work

The NDP government’s home flipping tax will apply to income from the sale of residential properties that were owned for less than two years.

The tax rate will be highest for those who own properties for the shortest period and will decline the longer the property is owned.

The tax rate will be 20 percent on income earned from homes sold within 365 days of purchase. The rate will drop the longer the home is owned with sellers being slapped with a 10 percent tax around the year-and-a-half mark.

Once the home has been owned for 730 days the flipping tax will no longer apply.

The tax will be collected on income earned from the sale of properties with a housing unit as well as properties zoned for residential use.

Ms. Conroy stressed the tax is not meant to punish people for circumstances beyond their control, however. Homeowners going through a divorce or who are dealing with illness or a death in the family will not be subject to the tax. Other exceptions include relocation for work, job loss, or bankruptcy.

Income earned from homes sold on reserve lands, treaty lands, and lands of self-governing indigenous communities will also not be subject to the tax.

“The purpose of this tax is to support housing supply, not impede it,” the government said in a post on its website. “Exemptions will be provided for those who add to the housing supply or engage in construction and real estate development.”

The tax must be paid on top of other federal or other provincial income taxes incurred from the sale of a property.

B.C. Real Estate Association chief economist Brendon Ogmundson has expressed concern about the new flipping tax having a cooling effect on the housing market.

He pointed out that investors trying to capitalize off short-term market conditions usually do so within six months, rarely holding on to properties for a year or more.

“One concern I have is that because the government has now implemented a disincentive to sell within a two-year horizon of purchasing, there will be some potential sellers that are prompted to delay listing resulting in a lower level of listings inventory than without the tax and tighter market conditions,” he said in a Feb. 22 post on X, formerly known as Twitter.

“As a result, it is entirely possible that home prices would be higher with the flipping tax than with a no-tax baseline.”

Additional Housing Measures

The budget also expanded the province’s property transfer tax exemptions. The First Time Homebuyers Program threshold has been increased to $500,000 on the purchase of a home with a “fair market value” up to $835,000.

“An estimated 14,500 people—twice as many as before—will now be eligible for support to buy their first home, helping them move out of the rental market and freeing up rentals for others,” budget documents read.

Those buying newly built homes worth up to $1.1 million will also receive a cost reduction through the newly built home exemption.

“Eligible purpose-built” rental buildings with four or more units will receive a property transfer tax exemption until 2030 in a bid to “lower the cost and encourage the construction of more rental units,” according to the budget.

The budget estimates raising property transfer tax exemption thresholds and incentivizing the building of new rentals and homes will save residents $100 million per year.