Canada is serious about tackling real estate speculators… just not anytime soon. Just hours before the Oct 31st vacant home filings were due, the deadline was delayed by six months. The last minute change is the second extension, and delays the vacant home count. It’s quickly becoming a trend for policymakers to publicly pass aggressive housing policy, then undermine that policy during the execution phase.
Canada’s Underused Housing Tax (UHT)
In Canada, the Federal vacant home tax is officially called the Underused Housing Tax (UHT). It requires owners of vacant and underused land to pay a 1% tax on the assessment value. It’s in addition to municipal or provincial vacant home taxes, like the one in Vancouver. The goal is to restore efficient use to property markets, exploited by investors.
Efficient use is an odd term that may require further explination. It sounds like a useless term thrown around by guys that count their kid’s age in quarterly filings, no? Canadian property values are high growth, and have unusually low property tax rates. For example, Toronto’s tax rate is about a third of the rate of a similarly sized US city like Houston. It’s possible due to taxpayers picking up the rest of the tax via Federal and provincial taxes. The relatively low carrying costs makes Canadian real estate prime for hoarding.
That’s where a vacant home tax comes in. Instead of taxpayer subsidized investor hoarding, they’re hit with a penalty. This penalty helps offset the inefficiency from low rates without hitting families. If properly implemented, it can be an essential tool for restoring a healthy market.
Canada Really Doesn’t Want To Collect A Vacant Home Tax
Canada never fails to remind the public that real estate investors own this country. A few hours prior to the Oct 31, 2023 vacant home filing deadline, an extension was issued. The Minister of National Revenue pushed the deadline to Apr 30, 2024. That’s the second extension, delaying filings by a full year since originally planned.
Yes, a second deadline extension. The first extension was issued months prior to the May 1st deadline. At the time, they said the amount of time they had given people was insufficient. It was very different from the last minute extension issued yesterday.
Delaying a deadline a few months in advance demonstrates feasibility issues. A few hours? That most likely means they didn’t get a suitable response, potentially indicating more vacant homes than expected. By delaying the deadline, Canada is also conveniently extending its vacant home count.
Delaying also helps to extend the liquidity window, and minimize the problem. Kind of like when corrupt countries have to implement beneficial ownership tracking. They’ll often provide several warnings and delays to help plutocrats liquidate or hide assets. This helps to cook the books on data, minimizing the size of the problem to the public. There’s no money laundering in North Korea, just like there’s no vacant homes in Canada. They’ll both prove critics wrong, just give them a few months… or maybe a few years.
Policymakers undermining their own aggressive housing policy shows how serious they are. It’s also turning into a trend after the non-resident speculation tax. Just 86 days after passing the law publicly, policymakers quietly eroded the policy with exemptions. Amongst the exemptions was one allowing non-resident buyers of vacant land for development. However, with no required development timeline, it was just a gift to foreign speculators.