Jim Prentice declares war on house flippers?

As many of you know, the Alberta PCs recently released the Rachel Notley Budget, which included tax hikes and aa variety of "sin tax" increases.

But as a coworker found out, one of those sins isn't quite like the others...
The other part of the fees is variable and in some cases will be 6 times higher than the current level. That means that to buy a $500,000 home in Alberta with a $400,000 mortgage the fees will rise from $150 for land title and $140 for mortgage registration to $675 for land title and $555 for the mortgage registration. That means the total payable rising from $290 to $1,230.
In the case of this particular coworker, who is unlikely to be able to close before July, the price of registering his house is going to go from "about $300" to "about $1500". I wasn't exactly going to hammer him for exact figures just so my blog was more accurate, but we're talking a 400% increase in the registry fees here. That's not small potatoes!

So are we looking here at a backdoor way of trying to stop house flippers? It's possible, and another sign that Prentice has decided to accept the NDP lies lock stock and barrel about what government is for and what a sensible taxation policy looks like. If the costs to the government of transacting this registry (which doesn't seem likely considering the trend in Australia) have really increased by 400% lately, then Prentice is right to blame overpriced union labour for all of our deficit woes!

They probably still are, of course, but I'm doubting the salary of the provincial officials has increased by that much. More likely, Prentice is trying his hand at replacing the invisible hand again. See what I mean about this budget being as bad as if Rachel herself had put her horrendous hand on the tiller?

It is worth noting that, unlike vehicle or corporate registries, the land titles registry is not privatized, and as recently as January 2015 the government rejected the potential cost-savings of doing so

If this move isn't geared then to recovering the costs of overpaid public sector workers then what is it geared for? The house flipping argument seems the strongest, since a substantial fee increase like this does mean that the flippers pay the most, even though in a normal economic condition their margins are pretty strong. Notice the "normal economic conditions" caveat though: as oil prices continue to slump the real estate market could be in quite the depressed state. A (different) coworker who follows these things went apeshit last week when she discovered that there are currently 74 homes being foreclosed in the Edmonton area, a number that seems poised to climb. Reducing the profitability of house flipping means that the demand on foreclosure properties is going to be relieved, which might incentivize banks to try to work with existing property holders to find more agreeable terms. As well, as home sales plummet with the economic uncertainty, house flippers (including a former coworker who used to flip a dozen houses a year -- I seem to know a lot of house flippers) will have to hold onto their properties longer, and an extra registry fee tacked on it will contribute to making the "vulture picking at the decaying flesh" business model less appealing.

To quote John Schuck in Star Trek VI, "none of these facts are in dispute, Mister President"

However, there are a few problems with the "Prentice Blames House Flippers" theory to explain the huge spikes in fees. For one, house flippers already get burned in these economic conditions. The serial house flipper I described above, for example, during the 2008 recession he and his wife owned seven properties, and were spending well north of $9000/month in mortgage payments and condo fees on homes that they were finding impossible to flip for a profit. An extra $7000 or so in government fees would have stuck like a mallfucker, it's true, but it's still less than a month of mortgages. Given the choice, I can't see them being that resistant to offloading the properties, registry free hike or no registry fee hike. It's also true that unlike other aspects of the budget, the land registry fee hikes weren't well publicized or discussed by the government, which means that (along with the other sin taxes) these were tax hikes that didn't have any conceivable macroeconomic benefit that Prentice or Campbell could stand up and crow about. [the benefit doesn't even need to be an actual benefit for them to do this, all there has to be is a macroeconomic argument that Martha and Henry won't notice passes muster. Hell, he already did it with the flat tax -ed] A quiet little dirty tax hike to raise revenue is actually how the government is spinning it, noting that the fees are such a small percentage of the overall transaction, still (almost) lower than the national average, yadda yadda yadda. This would match with the Prentice theme of buying into Rachel Notley's economic illiteracy: specifically that you can increase taxes on "corporations" or "the rich" and they'll just happily keep sending you that cheque and not do anything at all to avoid giving you the extra money (and, often, the money they were already giving you).

There's another possibility, of course, that this is a master plan to convince both the government and the opposition benches to privatize the land titles registry to match the corporate and motor vehicle registry as well (see Note above). Raising fees to a ridiculous level in order to spur a change and remove the lazy and overpaid provincial bureaucrats (see Note above) and ultimately save the government money seems far fetched, but nobody can accuse Jim Prentice of not playing a long Machavellian game from time to time.

Regardless of the why, the fact remains that Prentice has raised user fees on Albertans. From camping to smoking to drinking to buying a house to being a successful person with a high income, all the nastiest of sins has been punished by the Alberta PCs.