Metro Vancouver’s real estate market may no longer be “red hot,” but a price drop from $1,605,800 to $1,479,000 for a typical single-family home doesn’t offer much hope to those being squeezed by the unrelenting housing affordability crisis.In 2018, all levels of government took steps to fix the problem and improvements were made.
However, the most promising step came just before year’s end when the City of Vancouver voted to study how a Land Value Capture (LVC) could help address the crisis – a powerful tax policy idea that is gaining considerable momentum across B.C.
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Put simply, an LVC is a tax on speculation directed at landowners making windfall profits from skyrocketing land prices. This is different from the school tax implemented by the provincial government last summer, which taxes all residential properties above a certain value. Instead, an LVC targets owners whose land value increased due to rezoning or major infrastructure projects paid for by public dollars, and it taxes a portion of this land lift.
To illustrate, let’s say a piece of real estate is vacant and is worth $100 million. A new SkyTrain station is built next door, and the land is rezoned for higher density so more people can access the new transit line. Overnight, the value of the property increases to $400 million because of its location and the rezoning, resulting in a $300 million profit. You then have to ask yourself, why is the landowner the only one who benefits, when millions of taxpayer dollars also went into creating this increase in land value?