What is Empty Homes Tax?
The Empty Homes Tax is a municipal tax that affects anyone who owns a Class 1 Residential Property in the City of Vancouver.
It is an annual tax at a rate of 1% of a property’s assessed taxable value.
According to BC Assessment, which runs real property assessments throughout the province of British Columbia, Class 1 Residential Properties are defined as the following:
Class 1, Residential — single-family residences, multi-family residences, duplexes, apartments, condominiums, nursing homes, seasonal dwellings, manufactured homes, some vacant land, farm buildings and daycare facilities.
Why was the Empty Homes Tax created?
The purpose of the tax is to lessen the empty homes in Vancouver. The tax was created in 2017 with the objective of returning empty or underutilized properties to people who live and work in Vancouver.
Vancouver faced a severe housing crisis with rental properties. There were not enough rental properties available for people in Vancouver. Thus, the rental pricing was high due to lack of supply. The Empty Homes Tax was created with the purpose of countering this issue.
Since the implementation of the Empty Homes Tax, the vacant properties in the city decreased and the trend continues. In recent news, Vancouver saw a 14.6% decrease in vacant properties in 2019.
How does the Empty Homes Tax help the Vancouver Housing Market?
The tax serves as a motivator for owners to make use of their empty or underutilized property and avoid the tax. By renting out their properties, they increase the supply in the rental housing market. This alleviates some issues of the severe housing problems in the city.
The revenues of the tax also go towards reinvesting in affordable housing initiatives. The City of Vancouver has a three-year action plan to make housing more affordable and livable for residents. These initiatives use The Empty Homes Tax revenue.
Who does the Empty Homes Tax apply to?
Class 1 Residential Property owners must submit an annual property status declaration.
The Empty Homes Tax applies to all residential properties that were not a principal residence or rented out in the last six months of the year.
Properties that are a principal residence are exempt from the tax. Therefore, most homeowners in Vancouver will be exempt from the tax under this criteria.
It is imperative that homeowners fill out the annual declaration in order to be assessed properly and not pay the tax. If they do not fill a declaration, the tax will apply to them even if they should be exempt.
Exemptions to the Empty Homes Tax
The following circumstances make the property exempt from the Empty Homes Tax even if the property has been vacant for over six months:
- Court order – The property is under court order prohibiting occupancy.
- Strata restrictions – Strata rental bylaws restrict the property from rental use.
- Limited property use – “Limited in use” and restricted for a specific use other than residential use.
- Owner in care – Unoccupied because owner is undergoing medical care and is residing in a care facility. (Up to two consecutive tax years)
- Under construction – Undergoing major renovations or redevelopments with all necessary permits approved.
- Leased land – Class 1 Residential leasehold lands must be occupied the same way non-leased land would be in order to be exempt.
- Owner passed away – Empty because the registered owner is deceased.
What does this mean for people selling their property?
The same rules apply to homeowners who are selling their homes. A listed property is not exempt from the tax solely because it is on the market.
If a listed residential property is not occupied for over six months, the tax still applies.
However, the property will be exempt if there is a transfer of legal ownership during the tax year.
What does this mean for people buying a property?
Buyers can request a copy of the property status declaration from the sellers in the Contract of Purchase and Sale document. They can also request a Vacancy Warranty. This confirms the property has not been vacant for more than six months during the current or prior year.
Buyers and sellers should work with their Vancouver Realtor to take necessary steps with regard to the Empty Homes Tax.
There is another tax that is in play! The government is in a constant state of change and implementation when it comes to taxes. Make sure you are on top of all the taxes due. Check out our current blog post on taxes here!