A proposed tax on vacant foreign-owned properties came under fire Monday during a House of Commons finance committee meeting.
The Underused Housing Tax Act, proposed as part of Bill C-8, would implement a one per cent tax on the value of dwellings owned by non-resident, non-Canadians that are considered vacant or underused, excluding vacation homes.
The Liberal government first announced the tax during its 2020 economic fiscal update, aiming to cool a housing market that has set sales records during the pandemic, sending prices soaring amid low interest rates and increased demand for additional living space.
According to the Canadian Real Estate Association, the average price of a Canadian home increased by a record high 26.6 per cent during 2021.
Liberal MP Yvan Barker voiced his support of the tax, stating that it would limit the amount of vacant properties across the country while raising an estimated $150 million per year that would be directed toward constructing affordable housing projects.
“I suspect that would help address the supply problem we’ve heard about in this committee, as well as the skyrocketing prices of housing,” Barker said.
However, reluctance to implement the tax focused around potential retaliation from the U.S. government and the consequences it could have for Canadians who own real estate south of the border.
“A lot of Canadians own property in the United States,” said Conservative MP Greg McLean. “If we’re going to tax American buyers on their properties in Canada, surely they’re going to reciprocate very quickly.”
Following a move by the City of Vancouver to impose a tax on empty dwellings in 2017, the B.C. government implemented its own speculation and vacancy tax (SVT) in 2018.
Designed to discourage people from using housing as an investment vehicle, the SVT applies a three per cent tax to properties belonging to offshore investors and satellite families who earn more than half their income outside the country.
The tax has netted a total of $231 million during the three years since it was introduced, including $81 million in 2020.
However, economists question whether or not the B.C. taxes have increased affordability, and McLean pointed out they target a significantly larger portion of home buyers than nationwide averages, noting “7.7 per cent of activity in the Vancouver real estate market is consumed by foreign buyers.”
