The Urban Development Institute wants the province to immediately exempt all new homes from the provincial tax portion so the HST hit is no longer an issue for prospective home buyers who may delay purchases.

HST repeal lag impacting home construction jobs

Industry outlook darkens as buyers wait for lower tax.

The province is under pressure to quickly neutralize the impact of the Harmonized Sales Tax on new home buyers in order to save thousands of jobs at risk in the construction industry.

The HST is to be eliminated no later than April of 2013, but until then it continues to add seven per cent to the value of new homes over $525,000.

The Urban Development Institute wants the province to immediately exempt all new homes from the provincial tax portion so the HST hit is no longer an issue for prospective home buyers who may delay purchases.

“We are very concerned that there’s going to be a significant reduction in jobs for the next year,” executive director Maureen Enser said.

“They’re going to remove the HST eventually so why not make people whole today?”

Enser estimated at least 2,000 planned home starts have now been shelved since the HST referendum result and many more are likely. Each unit typically represents up to four industry jobs.

Even if the province doesn’t expand the rebate to all new homes, she said, business would be better if developers at least knew for certain the rules in the months ahead and the timing of the switch from the 12-per-cent HST back to a five-per-cent GST on new home sales.

Pre-sale agreements with buyers are critical to financing many developments, but Enser said those contracts are nearly impossible to sign when tax implications are uncertain.

Some buyers are waiting until the HST is repealed to purchase and Enser said that may make it harder for developers to liquidate existing units and then reinvest in new projects.

Peter Simpson“This has been a gong show since day one,” said Greater Vancouver Home Builders’ Association CEO Peter Simpson (left).

He said the impacts go beyond actual builders and renovators to workers in local plants that make components like doors, windows and flooring.

“I don’t think they have a good understanding of what this ripple effect of fewer housing starts is going to have.”

Although housing starts in the region are currently running ahead of 2010 levels, Simpson said the vast majority of new construction is in multi-family units mainly priced under the $525,000 threshold.

More expensive single-family house starts are way down, he said.

Simpson said the province could use short-term tax credits or reduce the Property Transfer Tax to offset the lingering impact of the HST until it is repealed.

Large renovations are also taxed more under the HST right now than they will be once B.C. returns to a PST and GST system.

Urgent repairs like leaky roofs are going ahead, but Simpson said many homeowners will hold off on discretionary work, such as a costly kitchen upgrade.

A spokesperson for finance minister Kevin Falcon said no special arrangements are planned for home builders.

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