Tax reforms urged to shield Metro farmland from mega-home builders

15 per cent tax makes ALR land 'magnet' for foreign buyers, low threshold makes it too easy to qualify for low farm tax rate

A giant farm mansion while it was under construction in 2012 in Surrey.

A giant farm mansion while it was under construction in 2012 in Surrey.

B.C.’s new 15 per cent foreign buyers tax on Metro Vancouver homes may be spurring more offshore real estate investors to instead snap up farmland and then build monster houses on soil that should grow food.

That’s the concern being raised by Richmond Mayor Malcolm Brodie, who says the tax creates yet more pressure to turn good farmland into luxury estate homes.

“I expect it to accelerate,” Brodie predicted.

A foreign buyer doesn’t pay the 15 per cent tax if they buy a piece of bare farmland, he noted, but that buyer can then build a home and thereby skirt the tax, which applies only on the residentially used portion. Much lower property tax rates for farmland are an added attraction.

“That becomes an incentive for someone who wants a big home to not buy a conventional residential parcel,” Brodie said. “Buy a farm parcel. Farm the rest of the land. Build a big home on it. And you’ve saved 15 per cent. It’s a magnet for that kind of development.”

Richmond council flagged the issue with the government the day it unveiled the new tax in late July. The NDP opposition also pushed for an amendment to apply the tax to agricultural land as well, but government MLAs rejected it.

Call to reform farm tax breaks

Meanwhile, a report from Metro Vancouver urges major reforms to the system of generous tax breaks for even minimal hobby farming of agricultural land.

The current rules mean that a mega-mansion in the Agricultural Land Reserve pays a tiny fraction of the amount of property tax that would be due had the home had been in an urban residential zone.

The Metro report argues the threshold to achieve the farm tax classification and a lower property tax rate should be raised from the current $2,500 in annual income for farms under four hectares – a level unchanged since 1993 – to at least $3,700.

It also suggests creating a second tier with most of the tax break not kicking in until perhaps $10,000 is earned, to provide incentive to do more with the land.

A 2009 review panel recommended increasing the farm-income threshold to $3,500 at that time, but the B.C. government kept it unchanged to foster small-scale farming.

RELATED: Are tax breaks for hobby farmers driving up the price of agricultural land?

Another Metro-proposed reform would eliminate the 50 per cent exemption from school and other agency property taxes, including TransLink tax, for ALR land deemed residential. In 2015, the school tax exemption reduced ALR property taxes within Metro by $4 million, and 78 per cent of that benefit was for homes on unfarmed ALR land.

The Metro report also suggests that unused farmland be assessed at a higher rate as if it was in a residential or commercial zone of an urbanized area, to help unwind the incentive to build homes and businesses on farmland.

Roughly half of the farmland in Metro Vancouver isn’t used for farming as it is, the report says, warning the encroachment of non-farm uses erodes the viability of farming and food security, and increases potential conflict between farmers and residents over issues like odour.

Communities Minister Peter Fassbender says he will consider the reforms proposed by the regional district.

“We want to make sure that land designated as farmland is being used to farm,” Fassbender said, acknowledging the $2,500 requirement to get the farm tax break may be out of date.

“I think it bears reviewing and discussing it again,” Fassbender said.

“If there are actions that government can take to ensure that possible tax loopholes are closed and that our rules are reflected in what is actually happening on farmland, we will take a look at it and I’m sure take the appropriate action.”

NDP housing critic David Eby said he suspects local speculators play a larger role than foreigners, in the hopes land can eventually be removed from the ALR and developed.

He accused the provincial government of failing to act much sooner to protect both housing and farmland, while loosening the rules on how ALR land can be used.

“The fact that there are still revelations about tax avoidance and speculators fueling an out-of-control market that hurts British Columbians is astonishing to me.”

Farm house size limits

The rise of mega-houses eating up farmland has for years been a concern of food security advocates and local politicians.

The province at one point drafted a template bylaw to regulate the maximum size and placement of a home on a farm, to keep it as usable as possible for agriculture. But it was left to local councils to pass such regulations.

Brodie said Richmond council tried to regulate such large houses on farmland a few years ago but backed down in the face of strong opposition from land owners.

“We’re seeing more of the large houses on farmland more than we ever saw before,” Brodie said, adding it would have been better if the government had imposed province-wide regulations, as Richmond council had urged.

Vicki Huntington, the independent MLA for Delta South, said monster home construction on farmland is less of a problem in Delta, where a strong bylaw restricting farmhouse size and placement has been in place for several years.

The bigger problem in Delta, she said is the purchase of parcels or options on them by speculators holding out for potential future industrialization of farmland.

Huntington also suspects money laundering is a motivation for some buyers, pointing to unkept blueberry bushes as evidence some have little apparent interest in earning farm income the land once produced.

A large home on agricultural land in Richmond.

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