The BC Speculation and Vacancy Tax is a levy placed on BC homes that are vacant homes or homes that are empty more than 6 months of the year. The tax was first implemented in 2018 by the BC NDP Government in order to address the housing crisis. The purpose was to free up housing that was underutilized so it would become available for renting or buying, thereby increasing available housing stock and providing a better balance between supply and demand.
While homes can remain empty part of the year for a number of reasons, back when this tax was brought in, speculation by foreign investors was having a large impact on housing availability. Hot housing markets such as Vancouver are magnets for foreign speculative investors, who buy properties and leave them empty while waiting for the right time to sell. Not only does this remove housing from the available pool for residents, it potentially drives up the cost of housing as well.
However, foreign buyers aren’t the only drivers of speculation: about 30% of housing stock in BC is owned by Canadians who own multiple properties. While the tax aims to curb speculation of any sort, there are differing tax rates according to if the homeowner pays the majority of their taxes in Canada or not.
So did the tax do what it was supposed to? In short, yes, at least to some degree. According to an independent analysis by Tsur Somerville and Jake Wetzel, the tax increased the number of rental units and helped narrow the affordability gap.
The tax policy was first applied to urban areas that were experiencing near-zero vacancy rates and housing prices that were very high compared to local incomes. The BC government recently expanded the tax to 13 new communities, bringing the total number to 59. Homeowners in these designated areas are required to make a speculation and vacancy declaration every year so the Government can keep track of how properties are being used, and which ones can be taxed.
The communities that were added to the list this year, in January 2024, will be required to make their first declaration in January 2025 based on their home occupancy for 2024.
If you own a home in one of the designated areas of BC and your home is vacant or is empty more than 6 months in a year, you will be required to pay the Speculation and Vacancy Tax on that property. Regardless of whether you live in your home full-time, rent it out, or it is vacant or empty for more than six months of the year, if you live in one of the designated areas, you are required to submit a declaration every year. If the property has more than one owner, each owner is required to submit a declaration. The declaration is due by the end of March, and if applicable, the tax is due at the beginning of July.
The tax is applied as follows:
If you do have to pay, there are some tax credits that may benefit you depending on if you are a BC resident, foreign owner/satellite family or a non-resident.
There are also a number of exemptions from the tax, as outlined in the Speculation and Vacancy Act, including if the home is a primary residence, if the home has a long-term tenant or life events such as divorce.
The BC Speculation and Vacancy Tax is separate from, and in addition to a couple of other vacancy taxes you may be required to pay. Vancouver homeowners may need to pay The Empty Homes Tax and possibly, as well, a federal tax on underused or vacant housing called the Underused Housing Tax.
With the ongoing challenges to housing affordability, the Speculation and Vacancy Tax is likely to continue for a while. Will this impact your decision to buy a second home, perhaps a vacation home? Give us a call and we can discuss its effect on you.