VANCOUVER—In an attempt to right the scales between lucrative condo development and lagging rental construction, the B.C. government will introduce legislation to give cities the power to zone areas as rental-only.

At the same time, the province is also promising to introduce measures to crack down on presale condo tax evasion.

Finance Minister Carole James said she believes the practice of flipping condo presale contracts is common and is a contributing factor in “inflating real estate prices.” Sellers are not always paying the tax on their profits, she added.

James plans to introduce legislation to change the Real Estate Development Marketing Act to require developers to collect and report information about presale contract assignments. Developers will also have to include information in presale contracts to inform buyers that the data collection is taking place.

Anne McMullin, CEO of the Urban Development Institute, said her real estate lobby group supports both measures, although she characterized presale assignment flipping as small, affecting around 3 per cent of presales.

“We had been talking about this before the budget: if you really want to address speculation, this is where you had to address it,” McMullin said, contrasting the presales measure with a new speculation tax on vacant properties the government introduced in the February budget. The UDI opposed the speculation tax.

“If you really want to address speculation you need to look at assignments and that people are paying their proper share of taxes.”

Last summer, Vancouver Mayor Gregor Robertson called on the province to better regulate the presale condo market. Speculative activity in the presale condo market had been on the rise as Vancouver-area condo prices soared throughout 2017, according to the Urban Development Institute.

“Many developers market their product overseas as well as locally,” Robertson told StarMetro at the time. “There’s certainly some questions about real estate regulations and how much insider trading happens within buildings that don’t come available to the general public.”

Vancouver city council would later pass a motion to explore the possibility of requiring developers to offer presales to local residents for a period of time before selling overseas.

On a different, but related issue, rental-only zoning is a policy municipalities have been calling for as a way to keep nosebleed land-value increases in check. The province will also have to introduce new legislation to allow municipalities to use this new type of zoning.

Rental construction largely stopped by the early 1990s, replaced by condos, and that 30-year gap in rental supply is a main contributor to the region’s tight rental market. Several Metro Vancouver municipalities have recently offered incentives to developers to build rental, such as fee waivers, reduced parking requirements or extra density.

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McMullin believes rental-only zoning will work as long as it isn’t used in areas that have already been zoned for more density, because suddenly restricting zoning to rental could cause land values to sink. The idea makes sense for areas such as single family neighbourhoods that are about to go through a density increase or low-density areas near transit that have potential to be up-zoned.

She would like to see the provincial go so far as to legislate the requirement that cities do not use rental-only zoning to “down-zone” areas.

Jen St. Denis is a Vancouver-based reporter covering affordability and city hall. Follow her on Twitter: @jenstden

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