Underused Housing Tax Act

Pursuant to Bill C-8, the Underused Housing Tax Act would implement a 1 percent tax on the value of dwellings owned by non-resident, non-Canadians that are considered to be vacant or underused. 

Several exemptions apply.  Notably, properties that are the primary place of residence for the owner, owners’ common-law partner or owners’ children.  In addition, vacation/recreational properties are also excluded.

The new measure will take effect on January 1, 2022.

PBO constructed the tax base in each year using the provincial residential property assessment values.  These were then projected using the growth in the value of housing stock from the PBO’s economic model.

Overall provincial assessment values were then limited to the share of the residential value assumed to be owned by non-residents and non-Canadians subject to the tax.  This relied on data from Statistics Canada, the Canadian Mortgage and Housing Corporation.  An adjustment for non-Canadian ownership was made based on data from the British Columbia Ministry of Finance.  These values were further reduced by the estimated overall share of dwellings in rural areas.

Finally, the tax base in each province was further adjusted by a behavioural response to the imposition of the new tax.  This was estimated using the observed change in the tax base arising from the increase in British Columbia’s Speculation and Vacancy Tax from 0.5 percent to 2.0 percent.

Administrative costs for this measure were not included.

The main sources of uncertainty arise from the uneven breadth and quality of data available regarding non-resident, non-Canadian residential property ownership.  This could over- or under-estimate the applicable tax base.

In addition, the behavioural response is estimated from the increase in British Columbia’s Speculation and Vacancy Tax.  However, there were other tax changes implemented at the same time.  Hence, the estimated response potentially reflects the combination of several measures and could overestimate the behavioural response.

• Estimates are presented on an accrual basis as would appear in the budget and public accounts.
• A positive number implies a deterioration in the budgetary balance (lower revenues or higher spending). A negative number implies an improvement in the budgetary balance (higher revenues or lower spending).
• Totals may not add due to rounding