BURNABY, BC (February 21, 2012) - The Minister of Finance, Honourable Kevin Falcon announced the 2012 budget today with more positive news for the residential construction industry. Last week the Minister released the new harmonized sales tax (HST) transition rules, which will take effect April 1, 2012. Announced today:

$10,000 First Time New Home Buyer Bonus 

BC First Time Home Buyers are eligible for an income tax credit bonus effective February 1, 2012 to March 31, 2013 calculated at 5% of purchase price, up to a maximum of $10,000.

BC Seniors Home Renovation Tax Credit

Up to $1,000 a year for those over 65 years old to assist with increased independence and flexibility to remain in their homes longer.  

Release of Surplus Corporate Assets

Surplus properties and assets, will be released for sale including parcels of land previously acquired for development of transport corridors and parcels of crown land, providing potential building sites.

"Renovations in BC are a $7 billion business, we had hoped that the finance department would adopt our suggestions on a renovation tax rebate on all renovations to help mitigate the negative impact of the HST," said Doug Wittal, President of the Canadian Home Builders' Association of BC. "but measures announced today, combined with Friday's announcement on the HST transition rules will certainly stimulate small renovations for seniors, and assist first time home buyers facing the challenge of getting into the housing market."

Government announces the transition rules for the HST early

BURNABY, BC (February 17, 2012) - The Honourable Kevin Falcon, Minister of Finance held a press conference today in Victoria to announce transition rules for the harmonized sales tax and the affect it will have on the home building industry. Effective April 1, 2012 the threshold for new housing rebates will be increased from $525,000 to $850,000, including secondary homes.

"We are elated the Provincial Ministry of Finance and the Federal Finance Department asked for our input and that our provincial government listened to the lobbying efforts of CHBA BC," said CEO, M.J. Whitemarsh. "We had the confidence the Government would take our concerns to heart and implement the best solution for our industry, the news today was worth the wait and is even better than we could have anticipated."  

Since the referendum results to rescind the tax, the Canadian Home Builders' Association of BC (CHBA BC) has worked diligently providing information from members to the government requesting the implementation of the transition rules be done as simply and quickly as possible to prevent any further stalling of the residential housing industry.  

"The out-of-box forward thinking from the Government has created a stable situation for all CHBA BC members who build secondary homes," Whitemarsh said. "Houses purchased as of April 1st will ultimately be receiving a $42,500 discount, now that the threshold has been raised."

Releasing the transition rules on housing early was a wise and bold move on government's part, one that is mutually beneficial. CHBA BC lobbied for a tax rebate to be created for consumers on new home purchases and renovations, so the industry could move forward and gain momentum once again.

"Raising the threshold is a brilliant decision that is fair and equitable, a huge benefit to all consumers that will spur the market," said Doug Wittal, President of CHBA BC. "Including the second home market outside the GVRD and CRD will create a huge boom, creating jobs and pushing the industry forward in very innovative ways."  

Delay in B.C. Building Code creates opportunity for builders

Code updates for wall, attic & basement construction could be significant

An anticipated increase in energy standards in B.C.'s Building Code is now expected to be introduced only after the next update to the National Building Code, bringing the two codes in line with each other.

What does that mean to builders in B.C.? Those who are already going above Code to include enhanced energy efficiency will continue to enjoy a marketing advantage, as energy-aware buyers seek the long-term savings and performance value of efficient homes (and improved resale value).

Meanwhile, those who have not yet adopted energy efficiency standards above Code now have more time to learn and prepare for Code changes, which may include significant changes in wall, attic, and basement construction.

Why is the Code update delayed?

"Energy standards were first introduced in the 2008 Code update, with options for following a prescriptive path, or a performance option," says Doug Overholt, representative for BC Hydro's Power Smart New Home program. "Now, we understand the province is awaiting the model energy content that will be in the National Building Code before increasing the B.C. standards."

The federal government is updating energy-related provisions in the National Building Code to bring them in line with the objective-based format used in other national model construction codes, meaning that energy-efficiency will now be a stated objective within the Code. A special public review will run from January 9 to March 2 to allow input on the Code revisions.

In B.C., national model codes are often adopted verbatim, but the energy provisions are expected to undergo extra scrutiny since B.C. has already advanced energy efficiency in the provincial Building Code. No date is set for the next update to the B.C. Code's energy provisions.

How Power Smart helps with energy efficiency

"We work with builders to help them find the best options for improving their product," says Kari Reid, program manager for Power Smart New Homes. "We provide financial incentives, marketing support, and advice so they can offer energy efficient homes and help lead the market.

"When the new Code does come, those who have already changed their practices will be ready. Meanwhile, they're able to leverage the marketing value of demonstrating that they're leading-edge builders. We're keen to see the code change so that energy efficiency becomes the baseline for all building — but we can already see the market shifting."

Fellow CHBA BC Members:

At a meeting earlier today Premier Clark acknowledged the negative impact transition from HST to PST will have on our industry. The anticipated time to complete the transition is 18 months, a time during which consumers will defer purchasing new homes and making renovation decisions to save tax. Premier Clark acknowledged that at a time when government is creating progressive opportunities for growth and increasing the demand for more jobs, it makes no sense to hamper our industry, one that is a huge contributor to our provinces' economy.

Premier Clark shared that government is working on a plan to mitigate the impact transition could have on new homes and renovations. We will meet again in early September.   

We will be working diligently to get answers quickly and will keep everyone informed as we learn more.  

Vicki Gerrits

President, CHBA BC 

HST for Buyers of Single Family Homes: How Will HST Affect Me?

Understanding the HST

• Starting July 1, 2010 HST will apply to new residential housing; however, the BC government has implemented changes to minimize the impact to home buyers.

• Before HST, PST had been paid on all materials used in the construction of a home.

• This PST was embedded in the cost of a new home. It is estimated that this embedded PST added 2% to the cost of a new home.

• All home buyers who purchase a new home (primary residence) after October 20, 2009 that they take ownership and move into after June 30, 2010 will receive a rebate for HST.

• This rebate can be assigned to the builder, so home buyers only need to pay the ‘net’ home price (the home price plus the HST, less the rebate).

• The rebate is 71.43% of the provincial part of the HST paid (7%).

• For owner built (custom) houses, the maximum rebate will vary depending on whether HST applies to the land. If the owner already owns the land and HST did not apply, the maximum rebate is $17,588. If HST was paid on the land, then the maximum rebate is $26,250.

• With HST, you can also claim a PST Transitional Tax Adjustment (TTA) rebate to help offset the PST embedded into the construction of the home. This rebate is based upon what percentage of the home was completed before July 1, 2010.

HST Net Effect

 Consumers today, appear oblivious to the fact that tax on tax, or tax pyramiding appears acceptable, especially on the single largest purchase one makes - their home. CHBA BC believes that it is our responsibility to ensure they are informed and educated of this tax on tax purchase.

 Based on good taxation principles, the practice of adding tax onto tax is considered inefficient and unethical, removing accountability, negating transparency and removing the visibility that consumers demanded not so long ago.

 CHBA BC believes that most consumers don’t realize that when they see the asking price of the new home they want to purchase, close to 20 per cent of that price comprises municipal fees and levies, licensing and permitting fees, provincial taxes, and of course, the federal goods and services tax.

 We all know that in order to maintain our healthy lifestyle in the best place on earth, with world-class transportation, facilities and parks, we need to pay our fair share of taxes.  But the operable word here is ‘fair’. 

 When a municipality increases its development cost charges or permitting fees, the additional cost is added on to the construction of the house whose materials and services have already been taxed.  Then, when the house is sold, the property transfer tax is charged on the total amount, including the property transfer tax and professional fees that have already been collected on the raw land, before the house was built. GST is then calculated on the purchase price and the closing costs and legal fees are also taxed, and on and on it goes.

 If tax pyramiding is the existence of an embedded tax onto which subsequent taxes are applied, then unfortunately it is alive and doing well in British Columbia.

 Are municipalities and provincial government services aware that they create this pyramid of taxation? We doubt it. Each level of government adds a taxation burden onto the consumer without taking into account the holistic picture of the government imposed costs from other bureaucratic levels.

 CHBA BC believes that demonstrating the enactment of tax pyramiding should initiate each level of government to examine their individual practice of exacerbating the tax pyramid on new housing stock in BC.

 “As a result of the advice you have provided to government and B.C.’s unique real estate conditions, the Province is proposing to increase the threshold for B.C.,” said Colin Hansen, Minister of Finance, in a statement to CHBA BC early today.

 The Province is proposing to increase the threshold for the B.C. HST new housing rebate from $400,000 to $525,000 to ensure that, on average, purchasers of new homes up to $525,000 pay no more tax due to harmonization than is currently embedded as PST. Purchasers of new homes would be eligible for a rebate of 71.43 per cent of the provincial portion of the HST paid on a new home, up to a maximum of $26,250. Homes above $525,000 would receive a flat rebate of $26,250 or the same 5% that CHBA BC has recommended. This enhanced rebate represents a 30 per cent increase in the threshold and maximum rebate available.

 “CHBA BC has worked diligently to ensure meaningful change to the HST threshold and we are pleased that government has acknowledged our recommendations in their final decision. We will over the next two years continue to compile empirical data to demonstrate to government that this threshold sill needs to be raised. Indexing will also be top of mind as we continue lobbying,” said Bob Deeks, President of CHBA BC. 

 The Province is also proposing transitional rules for new housing. The provincial portion of the HST would not apply to sales of new homes where ownership or possession is transferred before July 1, 2010.

 CHBA BC suggested to government that new houses should be entitled to grandparenting up to July 1, 2010. Grandparenting rules issued in today’s notice state that sales of newly constructed or substantially renovated homes would be grandparented where the written agreements of purchase and sale are entered into on or before November 18, 2009 and both ownership and possession of the homes are transferred under the agreement after June 2010.

 The Canadian Home Builders’ Association of BC, a viable industry driven organization, is the voice of the residential construction industry in BC, and is built on a vision of strong and positive roles for the housing industry. CHBA BC is committed to supporting the professionalism of our over 1700 members and providing affordability, quality and choice for consumers. CHBA BC’s voluntary membership comprises builders, developers, renovators, suppliers and other professionals who are dedicated to industry excellence.

“This is an essential step to make our businesses more competitive, encourage billions of dollars in new investment, lower costs on productivity and reduce administrative costs to B.C. taxpayers and businesses,” said Premier Gordon Campbell after announcing the plan.

“Most importantly, this will create jobs and generate long-term economic growth that will in turn generate more revenue to sustain and improve crucial public services.”

The government plans to harmonize the seven per cent provincial sales tax (PST) with the five per cent federal Goods and Services Tax (GST) effective July 1, 2010.

The HST will be a single tax at 12 per cent, which the government argues will remove input costs for construction and other businesses.

Under the current taxation system, PST is paid on every part or component at every stage in the production process.

Home builders in B.C. are also concerned the new HST may have a detrimental impact.

The tax is expected to add about $15,000 to the cost of a $500,000 home.

“The last thing we need right now is another impediment to homebuyers,” said Peter Simpson, CEO of the Greater Vancouver Homebuilders Association (GVHA).

He is worried the HST will reduce the affordability of homes for the new buyers.

The provincial sales tax for new housing is currently embedded in the cost of some construction materials.

The imbedded tax is about 2.4 per cent of the cost of the home, but no PST or GST is charged.

Under the HST, an additional tax is applied, to a five per cent base, on a sliding scale starting at two per cent on a $400,000 home and moving up to five per cent on a $1 million home.

However, up to five per cent of the new tax is eligible for a rebate.

Simpson is concerned because the output of new homes is about 50 per cent of what it was last year at this time.

“We expressed concerns with a number of harmonization impacts, including transition rules, indexation and tax neutrality.”

The homebuilders wanted the HST to be tax neutral, but this option was rejected by the premier.

The new tax will also add five per cent onto the labour component renovations, which brings the total tax up to 10 per cent.

There is concern that this tax will create a new incentive for homeowners to get involved in the underground economy.