B.C. Minister of Finance Brenda Bailey tables the provincial budget as Premier David Eby looks on in the legislature in Victoria, on Feb. 17, 2026.CHAD HIPOLITO/The Canadian Press
Last month, the government of British Columbia announced a series of spending cuts while simultaneously raising numerous taxes in response to a ballooning deficit that is projected to hit a record $13.3-billion.
Home builders are particularly concerned about the proposed expansion of the provincial sales tax.
The province said it would expand the tax base so that various services that were previously exempt from provincial sales tax would become subject to it as of Oct. 1.
A week after the budget was tabled, 19 business organizations – including the British Columbia Chamber of Commerce, Business Council of British Columbia and the Retail Council of Canada – called on the province to scrap the proposed PST expansion.
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“B.C. cannot afford policies that raise input costs, discourage investment, and weaken our competitive position,” the organizations said in a press release. “B.C.’s PST is already the most uncompetitive sales tax in Canada, and Budget 2026 doubles down. This expansion creates a massive new administrative burden and a ‘tax on a tax’ for every project.”
Home builders are particularly concerned because the PST is being expanded to include services such as accounting, architecture, engineering and property management – at a time when developers are already struggling with high costs and a weakened real estate market.
“Adding costs in this market at this moment tells builders that housing is no longer the priority,” said the Urban Development Institute – the lobbying body that represents developers – in a statement. “Capital will respond to that message and will move elsewhere. And when capital leaves, housing supply follows.”
The province has not provided an exact list of services the PST expansion would include, but developers are expecting an increase of $1,000 per unit on a low-rise wood-frame building and $800 per unit on a high-rise concrete building, according to an analysis by Evan Allegretto, president of B.C. operations for Intracorp Homes, a Vancouver-based developer that also operates in several American markets.
Homebuilders in B.C. are concerned about the proposed expansion of the provincial sales tax.DARRYL DYCK/The Canadian Press
Mr. Allegretto, who also serves on the board of directors for UDI, said his analysis has costs varying depending on the size of the project because large projects tend to have a wider breadth of consultants, although economies of scale can be achieved. Although he is concerned about a new tax and additional cost, his main point of concern is less so on the upfront side of the PST expansion and is instead more so on the back-end.
“The big thing that most people won’t capture is, because the PST affects property managers and building operations, it’s going to make the buildings less valuable,” he said. “The problem with that is banks provide debt on the value of the buildings. What happens is there’s gonna be these large equity calls from current owners, or somebody that wants to buy in the future, and they’re going to need more equity. What that does is make the returns on the equity way worse.”
According to his analysis, operating expenses would increase by approximately $10,000 a year for a low-rise wood-frame building with around 150 units and $20,000 per year for a high-rise concrete building with around 330 units. That would decrease property values by $250,000 and $470,000, respectively, if calculated using a 4.25-per-cent cap rate, or potential one-year return on investment.
“I’m more concerned about the back-end operational costs, because it directly affects the value of buildings, and it affects the debt. It’s a path in the wrong direction. A thousand dollars on the front-end, I guess you can swallow it. But a value change of $500,000 on the back-end is quite meaningful – especially for a mom-and-pop that doesn’t have a bunch of capital sitting on the sidelines to inject when you have to renew your financing.”
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In their press release, the Greater Vancouver Board of Trade emphasized that, unlike the GST or HST, PST is not refundable for businesses and is thus a “permanent loss” to a business’s bottom line – a cost that could get passed along to consumers.
According to Mr. Allegretto, the industry is actively lobbying the provincial government to exempt housing and housing-related professional services from PST or to at least amend the PST so it can be recoverable. As of this week, the province has yet to respond.
“It’s just death by a thousand cuts,” said Mr. Allegretto. “Every tax – speculation tax, vacancy tax, development charges, PST, GST – when looked at in isolation is small. But when they’re compounded, they become very big. The industry has figured out that approximately 30 per cent of costs for new housing is tax. This [PST expansion] would increase it.
“Any new tax, on anything, is bad for the economy,” he added. “I’d rather the government try to find incentives that increase economic activity and increase sales under the current tax structure, versus adding taxes. It’s tough. It just makes the investment market here worse. I believe in Vancouver long-term. I believe in Canada long-term, but in the short-term, we’ve gotta get through some issues before things get better. Taxation continues to burden all levels of the economy, and we need to find ways to incentivize things versus making it harder to do business.”