Canada’s New Underused Housing Tax

Canada has just lately launched laws to implement an Underused Housing Tax (UHT).[1] (You may learn our weblog on this laws right here) The UHT will apply to non-resident, non-Canadian homeowners of residential property. As others have identified, the UHT accommodates some uncommon coverage decisions.[2] For instance, if the aim of the UHT is to extend housing provide, it ought to apply equally to Canadian and non-Canadian homeowners of properties in Canada. As drafted, it solely applies to non-Canadians.

An additional uncommon coverage selection within the UHT pertains to the definition of “residential property,” which is outlined to imply property in Canada that’s both: 

  1. a indifferent home or comparable constructing…;
  2. part of a constructing that may be a semi-detached home, rowhouse unit, residential condominium unit or different comparable premises…; or
  3. a prescribed property.

The UHT would subsequently appear to use solely to actual property with a house on it. One taxpayer response may subsequently be to demolish a house on a property to keep away from being topic to the UHT. This may look like an excessive measure, however in lots of city markets in Canada a lot of the worth of residential property is within the land fairly than the constructing itself. Although you will need to observe that, if the land have been in Vancouver, the Vancouver Empty House Tax would tax such an empty lot.

The UHT will function alongside current empty residence taxes. For instance within the Metropolis of Vancouver, a property may very well be topic to the Metropolis of Vancouver Empty Properties Tax and the B.C. Hypothesis and Emptiness Tax in addition to the UHT. Contemplate, for instance, a non-resident, non-Canadian proprietor of a $2,000,000, vacant single household residence.

Metropolis of Vancouver Empty House Tax

The Metropolis of Vancouver Empty Properties tax[3] applies at a price of three% of assessed worth, and thus the EHT tax for 2022 could be $60,000.

Extra details about the Metropolis of Vancouver Empty Properties Tax will be present in our earlier weblog posts.

Provincial Hypothesis and Emptiness Tax

The B.C. Hypothesis and Emptiness Tax will apply at a price of two% of assessed worth for non-residents, i.e. $40,000 for 2022.

Extra details about the B.C. Hypothesis and Emptiness Tax will be present in our earlier weblog posts right here and right here.  

Federal Underused Housing Tax

The UHT will apply at a price of 1%, i.e. $20,000 for 2022.

In our instance, the entire tax burden annually will subsequently be $120,000, or 6% of truthful market worth. No credit score is given underneath the UHT for the tax payable underneath the Metropolis or Provincial taxes.

This tax burden will be averted by renting the house to an arm’s size tenant on a month to month foundation for not less than 6 months annually. The UHT will be averted just by demolishing the house, though vacant residential tons in Vancouver are nonetheless topic to the Metropolis of Vancouver Empty Properties tax.


Coverage makers must fastidiously think about whether or not any new proposed tax meets its targets. The aim of accelerating housing provide, notably in Vancouver and Canada’s different main cities, is standard and sure wise given rising costs. It’s not in any respect clear, nevertheless, that the UHT (alone or together with current taxes) does all that it may to attain this aim. A tax which is designed to extend housing provide shouldn’t provide an equal incentive (tax exemption) to taxpayers who lease out housing inventory (rising provide) to those that take away it from the marketplace for a number of years.

[1] December fifteenth, 2021, Invoice C-8 obtained its first studying on the Home of Commons. The Invoice accommodates the Underused Housing Tax Act.

[2] C.D. Howe Institute, Legault, Brown “4 Design Flaws in Ottawa’s Underutilized Housing Tax”, December 8, 2021


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