Developers warn new levies could restrict supply just as building momentum faded
British Columbia’s 2026 budget sharpened tensions between the province and its real estate sector, with fresh housing taxes landing amid already weak construction activity and rising fiscal strain.
The fiscal plan increased the Speculation and Vacancy Tax to 4% for foreign owners and untaxed worldwide earners starting in the 2027 tax year, up from 3%, and raised additional school tax rates on residential properties over $3 million beginning in 2027.
It also expanded provincial sales tax to professional services including accounting, engineering, architecture and certain commercial real estate commissions, a shift expected to add to soft costs on development projects.
“There is unfortunately not a lot to like from either a macroeconomic or housing perspective in this budget,” Brendon Ogmundson, chief economist at the BC Real Estate Association (BCREA), said.
“We understand that the province is in a difficult position and needs to raise revenues, but doing so on the back of an already struggling housing sector will ultimately prove to be self-defeating.”
Tax changes target high‑value and underused properties
BCREA argued that higher school tax rates on development lands, the application of PST to housing‑related professional services and the higher Speculation and Vacancy Tax would raise project costs that developers are likely to pass on to buyers, further challenging project viability.
It warned that layering “tax increases” onto an already difficult environment would “only make an already challenging development climate more difficult.”
Sluggish homebuilding has been evident as builder confidence has remained weak, with the Canadian Home Builders’ Association reporting persistent cost pressures and financing challenges even as national housing starts data showed strength concentrated outside Ontario and BC.
BC markets have already been grappling with elevated inventories and hesitant sellers through 2024 and 2025, as many buyers stayed on the sidelines awaiting lower rates.
Debt pressures limited room for relief
The province framed the budget as a response to mounting debt and higher interest costs, with independent analysis from the Business Council of British Columbia pointing to a steep climb in the taxpayer‑supported debt‑to‑GDP ratio and an expected surge in annual debt‑service costs over the next several years.
What it could mean for lenders and investors
For lenders, brokers and institutional investors, the mix of higher holding costs on land, new PST on key professional inputs and steeper taxes on underused or high‑value properties risk further delaying or downsizing projects just as policymakers pressed for more units.
Local development charges and protracted approvals already added significant per‑unit costs in major markets such as Vancouver, narrowing margins and constraining the pipeline of new supply.
In a province where affordability depends on a sustained ramp‑up in construction, taxing the very activity needed to close the supply gap risks keeping both homes and mortgage volumes below their potential.
Make sure to get all the latest news to your inbox on Canada’s mortgage and housing markets by signing up for our free daily newsletter here.
