British Columbia provincial leaders rejected a call by Vancouver's largest developers for the government to loosen restrictions on foreign investment in real estate as the country grapples with a housing crisis.
"I agree that we need more homes for people, but we’re not looking at this," B.C. Housing Minister Christine Boyle said in an interview on CBC Radio this week. "I don’t want to go back to the wild west days of foreign investment leaving condos and neighborhoods empty all over and ratcheting up the price of housing. That was not a good place."
Executives with Beedie Living, Bonnis Properties, Polygon and more than 20 other Vancouver-based real estate firms asked the B.C. government to reconsider its tax on foreign buyers, and for the federal government to loosen its rules that ban foreign investors from purchasing residential property in Canada.
The group argues that the policies intended to curb speculation — or the purchase of real estate with the intention of reselling at a higher price in the near future — and improve affordability "may be unintentionally affecting the construction of new homes and impacting jobs," according to the letter to Canada Prime Minister Mark Carney, B.C. Premier David Eby, Boyle and other federal, B.C. and local lawmakers.
"Our direct request to government is simply this: the new home construction industry is vital to the B.C. economy, and the national foreign buyer ban and provincial foreign buyer tax need to be reconsidered, or modified," according to the letter dated July 29.
The real estate executives cited a 50% decline in the number of new housing starts in B.C. in March from the same period in 2024 as a reason to revisit the federal ban on residential property purchases by non-Canadians and a provincial tax on foreign buyers passed in 2016.
"Many real estate companies are already facing difficult decisions, from scaling back operations to workforce reductions," according to the letter.
Federal ban
Ottawa in late 2022 passed the temporary prohibition to address a surge of foreign residential investment that they said drove up rents and priced many Canadian first-time homebuyers out of the market.
By reducing the effect of foreign ownership demand, the federal prohibition "helps to ensure that homes are used for Canadians to live in, not as a speculative asset class for foreign investors," a Canadian Housing, Infrastructure and Communities ministry spokesperson said in a statement emailed to CoStar News.
The federal government, responding to pressure from developers, eased parts of the ban a couple of months after it took effect in 2023. The changes allowed temporary residents on work permits to buy property and lifted restrictions on purchasing and developing vacant land, among other provisions.
However, the provincial tax on foreign buyers and the federal law — that was extended for two years by the government last year and is now slated to expire in 2027 — have had the unintended consequences of reducing housing production, especially construction of for-sale condominium projects, according to the developers' open letter.
Vancouver developers are holding a record inventory of 13,000 unsold condos as presales of new units compete with owners trying to sell their condos, Steve Saretsky of Saretsky Group Real Estate Services noted in a post on YouTube.
That's nearly triple the average presale inventory during the pandemic era, Saretsky said.
"No wise developer is going to start new projects until this backlog clears, hence the cries for removing the foreign buyer ban," Saretsky added. "The gap between new condo and resale prices is getting too wide. This is why you're seeing developers panicking and saying, 'bring in the foreign buyers to kickstart demand.'"
It's a strong argument that preconstruction and new home sales should be exempt from the ban, said Brandon Donnelly, a Toronto-based real estate developer, in a blog post.
"With this approach, foreigners won't be competing for our existing housing stock," Donnelly said. "Over the longer term, it is likely that most of these pre-sales will end up as new rental supply, or as a resale home for Canadians."
No changes expected
Eby acknowledged the decline in housing starts across Canada, and said provincial leaders are committed to working with developers "to build housing for British Columbians."
But, "we're not going back to the old model of doing things" that allowed uncontrolled foreign speculation in Canadian housing, Eby told reporters during a recent news conference in Northern B.C. to kick off new liquefied natural gas exports to Asia.
"We're going to make sure we're building housing for families, for Canadians," Eby added.
Eby also said the province has no plans to reduce or eliminate the foreign buyer tax.
"You can buy a property here, but you're going to pay a very significant property tax, and we're going to use that money to fund public services," he said.
The ministry, when asked whether the government would consider further changes to the ban to address the developers' concerns, said it "does not speculate on future policy decisions."
"The government of Canada recognizes the important role that the real estate and construction industries play in ensuring housing supply," according to the statement. "We continue to work closely with partners across the board to solve the housing crisis."