In addition to the changes resulting from the release of the BC Budget, the City of Vancouver recently implemented an annual tax on empty or under-utilized residential properties called the Empty Homes Tax (“EHT”), also known as the Vacancy Tax, to help address the City’s housing affordability issues.
Properties are considered to be vacant if they have been unoccupied for more than 180 days during the tax year. Instead of just requiring that owners of vacant homes declare if their homes are empty, the City requires that every owner of a Class 1, Residential property in Vancouver complete an annual property status declaration to determine if their property is subject to EHT. Class 1 residential properties include:
- Single-family residences
- Multi-family residences
- Duplexes, apartments, condominiums
- Nursing homes
- Seasonal dwellings, manufactured homes, some vacant land, farm buildings and daycare facilities.
Failure to make a property status declaration will result in a property being deemed vacant and therefore subject to EHT. When EHT is payable, owners will be required to pay a tax of 1% of the property’s assessed taxable value for the previous tax year – meaning that the tax can add up quickly. The tax will be applied annually, with the first tax year beginning on January 1, 2017.
An owner will not be subject to EHT if they can meet the requirements under one of the following exemptions:
- Occupancy for full-time work
- Owner in care
- Estate of deceased
- Transfer of property
- Undergoing redevelopment or major renovations
- Strata rental restriction
- Court order or Limited use residential property
For more details on these exemptions please visit the City’s website.
Under the Transfer of Property exemption, if a property’s legal ownership is transferred before December 31st the new owner, while required to submit a property status declaration, will be exempt from paying EHT. If a property’s legal ownership is transferred on or after January 1st, the purchaser cannot make a declaration for the previous year on behalf of the vendor. Therefore, if the closing date falls after January 1st but before the vendor has submitted the property status declaration, the purchaser should include language in their purchase and sale agreement requiring that the vendor submit the declaration – or obtain evidence the declaration has been submitted.
Under the Redevelopment exemption, if a property is empty for more than 180 days because it was undergoing major renovations or redevelopment and all the necessary permits were issued, EHT will not apply. However, the construction work must be carried out diligently and without unnecessary delay for this exemption to apply. Properties that are under construction, or slated for construction, but their permits are pending, will be subject to EHT.
Vacant unimproved residential properties that are not in the development process will be subject to the tax unless an exemption applies. However, EHT will not apply to a Class 1 residential property that is vacant land, when all of the following apply: (1) there is no existing dwelling unit on the land; (2) permits to build or develop have been applied for and are under review; and (3) the application to build is being diligently pursued.
Further details about the EHT can be found on the City’s website. The Urban Development Institute’s commentary on the EHT can be found here.