UBC Faculty Research and Publications

Foreign Buyer Taxes And Housing Affordability Pavlov, Andrey; Somerville, Tsur; Wetzel, Jake


To improve housing affordability many jurisdictions around the world have introduced substantial taxes and other restrictions on non-resident home buyers. We use the foreign buyer tax introduced in British Columbia, Canada in August 2016 to investigate the extent to which such taxes and restrictions improve housing affordability for the local population by reducing house prices. Our work is based on a direct transaction-level identification of foreign buyers. This identification was instituted through legislation prior to the announcement and subsequent introduction of the tax. Using a difference in differences methodology to compare house price changes pre- and post-tax between high and low foreign buyer concentration neighbourhoods, we find the tax to reduce house prices on the order of 6%. The quantitative effects are also striking, with overall foreign buyer share falling from 9.5% of transactions in the six weeks prior to the announcement of the tax to 1.7% for the four months following the tax. Additionally, we find that the tax had no effect on areas and market segments with little presence of foreign buyers.

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