Vancouver Empty Homes Tax Increase | Canadian Real Investment Centre (HK)

Vancouver Empty Homes Tax Increase

December 16, 2020

Published: Dec 16, 2020

On November 25th 2020 the City Council of Vancouver instructed City staff to increase the Empty Homes Tax (EHT) from 1.25% to 3% for the following tax year. The tax increase is intended to encourage owners of vacant properties to list them on the rental market.

The initial EHT tax was introduced in 2017 and has since increased twice, in 2019 from 1% to 1.25% and again last week from 1.25% to 3%. The current EHT rate of 1.25% will remain in place for the remainder of the 2020 tax reference year, which ends February 2nd, 2021, afterwards the new 3% EHT will come into effect.

In the coming weeks, each residential property will be required to declare the status of their property and can do so via the City of Vancouver’s website or via mail upon receiving instructions currently being mailed out to all property owners.

According to the city of Vancouver, since the tax’s inauguration there has been a reduction of 25% in the number of vacant properties between 2017 and 2019. Of the 1,989 properties declared vacant in 2018, 41% were converted to rented status last year. In addition, the EHT has allowed the municipal government to raise over CAD 60 million in revenue to finance new affordable housing programs.

The main question now is what will be the impact of this increase in EHT tax? And how does it affect HK-based investors?

The answers are straightforward.

  1. If you own an investment property which is currently rented, or if you have the intent to rent it, then you are not impacted.
  2. If you intend to leave the property vacant for more than 6 months a year, there is no other recourse then to pay the 3% tax since the penalties for false declarations are costly. False property status declarations may result in fines of up to $10,000 per day of non-compliance, in addition to payment of the tax.

Vacant properties tend to be divided in two groups. First, high-end luxury properties whose owners prefer to leave the property vacant for self-use or do not want their property tenanted. And second, future owner-occupiers currently residing abroad who have the intention of living in their property upon their return to Vancouver. Hong Kong-based investors mostly fall into these categories.

In conclusion, the only paths to avoid paying this tax are either buying a property in areas outside the City of Vancouver’s boundaries (such as Richmond, Burnaby, or Coquitlam) where the EHT does to apply or renting the property. Please contact us at info@creichk.com or call us at +852 5226 2946 if you would like assistance in our property management services.