Home reno black market expected to boom

Aldergrove B.C. StarJuly 13, 2010

Construction industry insiders say the Harmonized Sales Tax is likely already driving more of the home repair and renovation business underground, fuelling an increase in under-regulated and potentially dangerous workmanship.

Business ads have already popped up on Craigslist promising ways to skirt the 12-per-cent HST.

Port Coquitlam-based renovator Jeff Bain, of JKB Construction Ltd., said he’s already had one big project put on hold because of a customer’s reluctance to pay HST.

“There’s a good portion of the population that isn’t educated on the pitfalls who are going to go in that direction,” he said of the black market. GST previously applied on construction work, but the HST gave cash-only operators another seven-per-cent advantage over legitimate contractors as of July 1.  Bain said his illicit competitors typically don’t take out city business licences or building permits, pay Work Safe BC insurance premiums or pay income tax on their cash deals– adding up to a big cost differential.

“It’s hardly a fair playing field when somebody can undercut you 40 per cent or better,”he said.

Greater Vancouver Home Builders’ Association president and CEO Peter Simpson warns customers run multiple risks if they hire under-the-table operators. Besides the potential to get ripped off – it’s hard to sue someone if there’s no writtencontract – a renovation done without permits or inspections leaves no protectionagainst shoddy electrical work, for example.”They’re putting themselves at tremendous risk if things go dreadfully wrong,”Simpson said.

A cheap deal can backfire years later.

Unpermitted renovations can come to light when a homeowner tries to sell or have new work done – at which point city inspectors can order walls ripped up to prove a past renovation or addition was done safely.

A less obvious danger is liability, Simpson said, noting that if there is no written agreement, the homeowner is deemed to be the contractor and legally responsible for things like worker safety.

He points to the case of an Ontario couple who hired two men to refinish their hardwood floors.

It was the dead of winter and the duo kept the windows closed up.  One of the workers stepped back to admire his work and lit a cigarette, detonating the flammable fumes that had filled the room.

“They were both blown right through the window and one of them died,” Simpson said,adding the couple is now being sued because the workers weren’t covered underworker’s compensation.

“If somebody falls off a ladder or drops something on their foot on the property, they’ll look to you to get compensated.

“The home builders’ organization is lobbying the federal and provincial governments to create a permanent tax rebate for home renovations, along the lines of the temporary home renovation tax credit that was briefly offered as a recession-fighting measure.  One of the advantages of such a mechanism, Simpson said, is that homeowners would have to have receipts to qualify.

That paper trail would disqualify the cash-only operators and help narrow the disadvantage legitimate contractors are now under as a result of the HST.

“Government has to find ways to make it easier for homeowners to resist the lure ofthe cash deal,” Simpson said.

Finance minister Colin Hansen has said the provincial government is continuing tostudy the impact of the HST on home renovations.  Home renovations are a big business in Metro Vancouver, accounting for 31,000 jobshere and $1.6 billion in wages annually.

The total value of all home renovations performed last year in Metro Vancouver was estimated at $3.7 billion.

Simpson said at least 30 per cent of that is believed to be underground.

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