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HST decision reminds me: Be noisy. Government listens when enough people send a message. - Saturday, December 05 2009 When it made public its HST intentions in July, the government proposed a rebate threshold of $400,000, a figure that even to the most casual of housing observers was deemed to be ridiculously low for this region. I mean, good luck trying to find a new single-detached home priced below $400,000 anywhere in the Lower Mainland.The objections from the homebuilding industry on behalf of new-home buyers was immediate and persistent. I believe the pushback from organizations and individual builders -- some of whom beat a path to the offices of the premier and finance minister -- surprised government officials, and precipitated a rethink of how this unpopular tax would be applied to new homes. As an alternative to scrapping the proposed HST altogether on new homes (wishful thinking), the Greater Vancouver Home Builders' Association and other groups such as the Urban Development Institute suggested a threshold of at least $600,000. Hey, if you don't ask, you don't get. For months, we couldn't determine if the message was landing, or falling on deaf ears. Then, on Nov. 19, without a hint to the industry, the finance ministry announced via a news release that the provincial government was proposing to increase the threshold for the HST new housing rebate from $400,000 to $525,000, and the flat rebate from $20,000 to $26,250. "We heard the concerns from consumers and industry about how the HST might affect home buyers, and this increase will move the threshold to above the average new home price in the province," said Finance Minister Colin Hansen. "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. This enhanced rebate represents a 30-per-cent increase in the threshold and maximum rebate available," said Hansen. "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. In addition, sales of new homes under written agreements of purchase and sale entered into on or before Nov. 18, 2009, would not be subject to the provincial portion of the HST, even if both ownership and possession are transferred on or after July 1, 2010," he said. So, giving credit where credit is due, kudos to the provincial government for its action. That said, there is much more the government can do to mitigate the tax burden on buyers of new homes before the polite handshake turns into an enthusiastic high-five. Many homes are priced well above the $525,000 threshold, and those buyers -- many of them average folks -- will be strapped with significantly higher sales taxes under HST. And let's not forget the provincial property transfer tax (PTT), the lucrative cash cow that just keeps milking and milking, every time a home -- new or used -- is purchased. The PTT was implemented by the Socreds in 1987, and has been embraced by NDP and Liberal governments ever since. If you think the underground cash economy is rampant now, just wait until the HST comes into play. At least a third of all home renovation and improvement takes place in the underground economy. The cash deals are done under the table, and under the radar of governments at all levels. Now before you start applauding the fact some folks are stickin' it to the man, consider this: The underground economy means governments are losing billions of dollars annually. Taxpayers -- you and I -- are picking up more than our share of the tab because of these cheats. And homeowners are placing themselves at significant financial and emotional risk engaging in cash deals with contractors. If there is no contract that clearly spells out the role and responsibility of both the homeowner and contractor, there is no accountability, likely no permits or inspections, no warranty, no liability insurance if someone gets hurt, and no legal standing if the job goes sideways. The federal government's Home Renovation Tax Credit, which sunsets on Feb. 1, 2010, seems to be quite popular and is helping to combat some of the cash deals, since receipts are required to qualify. Surrey builder Gary Friend, president of the Ottawa-based Canadian Home Builders' Association, has recommended to the federal government that it should introduce a permanent home renovation tax rebate of 2.5 per cent, which would restore revenue neutrality for the federal government. "Such a rebate would also serve to encourage homeowners to invest in maintaining and enhancing their homes, which, in turn, would preserve the value of Canada's housing stock," said Friend. Here in B.C., the provincial government should consider a similar renovation tax rebate of the provincial portion of the HST, which would be paid directly to homeowners, who would be required to provide proper documentation and receipts showing applicable taxes were paid to contractors. When HST is implemented, the absence of meaningful tax rebates from the federal and provincial governments will fuel an already burgeoning underground economy in home renovation, to the detriment of homeowners, play-by-the-book professional contractors and government at all levels. Mark my words. This is my last column until January. I would like to convey, from my family to yours, best wishes for a joyous holiday season, and a happy and healthy new year. By Peter Simpson, Special to the Vancouver Sun, December 5, 2009 Peter Simpson is chief executive of the Greater Vancouver Home Builders' Association (GVHBA). 
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