Canada Isn’t Keen On Foreign Buyer and Vacancy Taxes After US Warns Retaliation

Canadian politicians promoted a number of housing affordability measures during their campaign. The ones played up the most were vacancy taxes and non-resident speculation measures. Now that they’re in office, they aren’t so keen on actually implementing any of them. This might be due to a piece of paper buried pre-election — a threat of reciprocal measures from the US. Parliament is now trying to balance the interests of Snowbirds with second homes, and Millennials buying their first. From the way debates are going, Team Second Home is crushing Millennials.

Canadian Politicians Promise Vacancy Tax, Foreign Buyer Ban 

During the election, major political parties promised vacancy taxes and/or non-resident speculation measures. The combination of measures ensures non-residents are taxed perpetually for non-use of housing. In addition, a “temporary” ban on non-resident purchases for two years was also made. Those promises appear to have been made without any real intention of execution. 

US Congressman Threatens Retaliation If Canada Taxes Americans

Before the election, the US threatened retaliation if those measures applied to Americans. It turns out back in May, Representative Brian Higgins notified Canada of this issue. In particular, the congressman wasn’t thrilled about the 1% annual tax on vacant property.

Despite knowing the threat was made, politicians campaigned on the promise to implement the taxes. Now that it’s time to implement them, the consideration of “trade partners” is presenting a hurdle. This threatens to water down promised measures into little more than minor inconveniences.

Canada Is Weakening Non-Resident and Vacancy Measures   

The vacancy tax is proposed as a part of Bill C-8, which opposition tried to tack on the non-resident ban. In the debate it’s become unclear if anyone knows what they promised, or what the terms mean.

In one debate, a member of parliament for the party that won on the promise of a vacant home tax, struggled to understand the term “vacant.” They sought to clarify that a vacation home isn’t vacant. They also didn’t think it was fair to tax a home that’s been in a family for generations. This doesn’t just imply a lack of understanding of the tax mechanics, but also makes it ineffective for regions that may need it. 

Recently “resort towns” have become full-time destinations for Millennials. In fact, these small cities lead for population and price growth. The trend is driven primarily by the fact few Millennials can afford the City now. If you feel the need to eliminate the upward pressure on home prices due to vacant housing, the places with the highest price growth might be a priority to start. 

In addition, this week an amendment was proposed to add a non-resident ban to Bill C-8. After all, the promise was an “immediate” and temporary ban that was urgently needed according to lawmakers. The amendment was rejected, with several members citing trade partner concerns.

Few federal politicians appear to be familiar with the promises they’re making and why they made them. Completely absent is any understanding of  the mechanics behind the proposals. Of course, in a country where a Minister of Middle Class Prosperity can’t define the middle class, ideas are valued more than execution. What’s that? The Minister of Middle Class Prosperity’s role was abolished? Shocked.

18 Comments

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  • Yasmin 9 months ago

    Waiting for it: “The vacant homes will balance themselves.”

  • Quon 9 months ago

    $2 million “starter homes” in Vancouver, that need major renos to get back into shape. Where’s a meteor when you need it?

    • Balladu 9 months ago

      Or those Russian nukes.
      Or a flood to reset things.

      I’m stuck in Toronto. I’m making better money than most, I could afford to buy, but not anything remotely liveable, certainly not anything that would give me Space for a family, or that wouldn’t make me feel horrifically financially insecure and downright uncomfortable.

      If this is a best place to live on this world, burn down the world. It’s time to start over

  • Mike Pessoa 9 months ago

    I watched this debate and the funniest part is by far when Yvan Baker says it’s a supply issue primarily, NOT REALIZING VACANT HOMES ARE SUPPLY.

    Holy bejesus, where do we get these people from? The point is supply can’t satisfy demand if you’re catering to investors AND end users. There’s a reason the “shortage” has investors as the largest group of buyers.

    • Folks Folks Folks 9 months ago

      Etobicoke. 2 Bros is the Canada’s Library of Alexandria, folks.

  • Boomie McBoomerson 9 months ago

    This country was founded on the right for Boomers to have a second home, while paying no taxes on their first one, getting subsidized property rates, and having their property taxes subsidized by taxpayers. Anyone who argues otherwise should have their citizenship revoked.

    • SH 9 months ago

      At this point, I suspect many Canadian Millennials would be all too happy to hand over their Canadian citizenship.

  • Dennis_K 9 months ago

    I’ve thought about this ‘Snowbird’ issue before, and think it can be effectively managed through a ‘parity arrangement’ with whatever foreign country we wish (in this case, the USA specifically). At a federal level, perhaps under USMCA, we can allow ONE named US citizen (and I do mean citizen — i.e. full-time, passport-carrying, annual tax-paying citizen) to own ONE single-family residential dwelling in Canada, provided that the US allows ONE named Canadian citizen (of same definition) to own ONE single-family residential dwelling in the USA, with the market values of all properties in aggregate being within, say 5% of each other. If the balance in values breaches this margin, then no one is allowed to buy (even if there’s parity in the number of pending Canada / US buyers) until it goes below the threshold (or someone sells in order to bring the aggregate values closer together). It shouldn’t matter ‘where’ the dwellings are owned, or even the exact configuration — i.e. downtown condos, suburban homes, country cabins, etc., just as long as the definition of single-family residential dwelling (for the purposes of the parity arrangement) are the same on both sides of the border, the one-to-one named individual ownership ratio is maintained, in addition to the aggregate value on both sides of the border being within a certain minimal percentage.

    I think Representative Higgins would be amenable to this. It’s simply a quid pro quo arrangement.

    As far as vacancy taxation goes, I don’t think it’s workable under a federal regime. That said, I do believe that each municipality should be allowed to impose a vacancy tax, depending on the housing needs of it’s populace, which should be reflected by the local (or near-regional) full-time labour market. And ‘vacancy’, in respect of single-family residential dwellings, would be up to the municipality to decide how to define, again, based on the needs of the local working populace. It shouldn’t be based on citizenship — it should be used as an incentive for ‘best use’ according to community needs. This measure wouldn’t be punitive (nor should it be retaliatory) — each area (and country for that matter) should be able to provide rules that helps to ensure that their lands are used to the benefit of it’s local populace first. I would expect all levels of US governments (whether federal, state or municipal) to do the same — you need to safeguard your lands for your people first — it’s not meant to be exclusionary; it’s just the way it should be.

  • JM 9 months ago

    Ok, come-on, this article’s a bit weak. If the politicians were concerned about American retaliation and actually serious about helping out the average, non-homeowning Canadian, they could easily amend legislation to say ‘doesn’t include American citizens’. Easy. Too many snowbirds down south too. I’m neither a snowbird nor an American so could care less about the USA but that’s the easy solution., and avoids any NAFTA (or whatever its called now) challenges.

    Like you’ve noted though, our Politicians of all stripes are liars and thieves, just sticking their neck out for their property and vaction-home owning selves and friends. Meanwhile, disparity in the country continues to grow and enrich those with ‘family homes and vacation homes that have been in the family for generations….’

    • Patiently Waiting 9 months ago

      Apparently it’s not all politicians. I was surprised to come across this when I was searching “Trudeau ban on foreign buyers”:
      https://www.ourcommons.ca/members/en/votes/43/2/135?view=member

      Of the major political parties only one Liberal voted Yea to the motion. Clearly, it’s the Liberals that are the problem. They are finding every excuse to leave things as they are and don’t care how it hurts the middle class.

  • Kate 9 months ago

    New Zealand banned foreign owners but Australians and Singaporeans are OK because of free trade deals. We could try to pull the same stunt. However, our Feds always kick the can down the road, so, as usual, nothing will happen except hot air.

  • SH 9 months ago

    In case it wasn’t clear (Stephen doesn’t explicitly state it above), the Liberals just blocked their own election promise to ban foreign buying for 2 years. That proposal is now dead. The Conservatives and NDP members on the committee voted to uphold the ban. The Liberals, plus the one Bloc member on the committee, shot it down. The vote was 6 members opposed, 5 in favour.

    The Liberals, as usual, put the interests of foreign speculators and (as noted above) wealthy Boomers ahead of the interests of poor and middle-class young Canadian citizens.

    • Trader Jim 9 months ago

      One of the key reasons I like BD is they don’t have a clear political party bias. This could have easily been a “rip on the Libs” piece in Post Media, but they chose not to discuss it at a high level so the concern was placed above the politician.

      Though IIRC Stephen isn’t a huge fan of vacancy taxes despite being in every gov vacant tax report, he just sees this as a compromise for inefficient capital allocation. i.e. higher rates, reduced income taxes, and high property taxes so the Fed subsidies from other regions aren’t used to repair roads in Montreal, etc.

  • Agent bob 9 months ago

    I think Americans should be excluded from the vacancy tax. Most Americans at this point would never buy in Canada anyway. It’s too expensive.
    However, the vacancy tax on every other nationality should be much higher than 1%; this amount is ineffective. Perhaps 5% would be more appropriate.
    Also, it is vital to implement the 2 year moratorium on non residents. They are also partly responsible for the increase in prices and probably own a lot of the 1.4 million vacant homes in Canada.

  • Ron Bruce 9 months ago

    1% annual tax on vacant property. Let’s get real. Foreign investment, and not just from the USA, into homes and property, is crippling the economy by investing in buildings producing nothing and pushing those workers who are paying real taxes into the streets. This letter sounds like an ultimatum from the Kremlin to Ukraine. Grifters in Congress from either Party (Hatfields or the McCoys) have nothing better to do.
    What Canadians should worry about is 300,000 residents in Hong Kong with Canadian citizenship papers who never paid a dime in 150 years for infrastructure (i.e. roads, bridges, military, hospitals, schools, universities, etc, etc, etc). Why not peel back the covers to see how this could happen. Who is paying off the people in the Canadian Immigration Office to achieve access? Criminal Code bribery offences are punishable by fines in the discretion of the court and maximum jail terms ranging between 5 to 14 years. Offences under the CFPOA are subject to a fine indiscretion of the court and imprisonment of up to 14 years.

  • Scott 9 months ago

    Our politicians really are as dumb as f*#k. Florida and Arizona are huge state for votes. If Higgins wants to destroy the those economy, we should let him. Floridians will chase him out of town for scaring away the snowbirds….

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