Empty Homes Tax vs Speculation and Vacancy Tax. Do you know the difference?

In the Summer 2019 edition of The Scrivener, BC Notary Andrea Agnoloni, CPA, CGA, provided an excellent overview of the many taxes that impact the purchase, sale, and holding of real estate properties.

Those include the Goods and Services Tax (GST) that is payable on newly constructed properties; the Property Transfer Tax that applies to both new and resale transactions; property taxes that are generally paid annually to the municipality where the property is located; school taxes, the Foreign Buyers Tax initially brought in by the Liberal government but increased by the NDP; and some new taxes brought in by the City of Vancouver and the current BC Government.

The latter include the so-called Empty Homes Tax (EHT) that applies to properties within the City of Vancouver; the so-called Additional School Tax; and the so-called BC Speculation and Vacancy Tax that applies to “vacant” properties in many parts of the province.

The stated purpose of both the Empty Homes Tax and Speculation and Vacancy Tax is to encourage owners of empty dwellings (if they are empty, they cannot be homes) to rent out their properties. 

I don’t think you should expect those taxes to significantly increase the supply of affordable rental housing in Vancouver or elsewhere in the province but they can impact the conveyancing of a residential property. Let me explain why. 

Speculation and Vacancy Tax

According to SFU Assistant Professor Josh Gordon, who along with UBC professor Tom Davidoff claim to be the “architects” of this new provincial tax, its primary purpose has been missed in the media and disregarded by critics.

So what is its main purpose? To tax “millionaire” satellite households whose owners are living in British Columbia, whose income is earned abroad, and who are dodging their income tax responsibilities, regardless of whether or not their property is vacant.

So, despite its name, according to Gordon, the Speculation and Vacancy Tax is not intended to catch real estate speculators or to turn empty homes into rental accommodation. Rather, it is to collect money from households that are not paying their fair share of income tax. Yes, income tax.

In mid-September, BC Finance Minister Carole James held a press conference to report on the first year of the Speculation and Vacancy Tax. She said it is working as intended.


The Government has collected $115 million from the tax so far and is forecasting revenue of $185 million in 2019/2020 that is earmarked for affordable housing initiatives. A total of 11,783 homeowners are paying the tax.

Of those paying the tax, according to James, few are BC residents. Only 0.2 per cent of British Columbia residents are paying the tax.

While James kept referring to those paying the tax as speculators, there is not really any proof of that. From my experience, many of those paying the tax are second-home owners. Faced with the cumulative impact of this tax, along with the EHT for those living in Vancouver, and in some cases the Additional School Tax, these second-home owners are now seriously considering selling their properties to other owners-occupiers and possibly renting a property themselves. If they do, they most certainly will not be freeing up rental properties.

At her press conference, James credited the tax with helping to reduce home prices across Metro Vancouver by 8 per cent. Unfortunately, she could not provide any data to back that up. Similarly, she could not provide any data on how many homes have been rented out. Maybe next year, she said.

Vancouver’s Empty Homes Tax

The EHT was the first tax of its kind in North America. Introduced in November 2016, it is an annual tax on empty and “underutilized” residential properties in the City of Vancouver. Dwellings or land, yes land, deemed to be empty or vacant, are subject to a tax of 1 per cent of the property’s assessed taxable value.

The EHT has now been applied annually since January 1, 2017. Most residential properties are not subject to the tax, including principal residences or properties rented out for at least 6 months of the year or homes eligible for 1 of 8 exemptions as set out in the bylaw.

As previously stated, the goal of the EHT was to return empty or underutilized properties to use as long-term rental homes for people who live and work in Vancouver. All net revenues raised from the tax would be used only for the purposes of initiatives respecting affordable housing.

When this tax was first proposed, we were led to believe there were anywhere between 10,000 to 25,000 empty homes that could be brought into the rental market. According to the city, the number of homes declared vacant, without valid reason, was 1085 in 2017 and 922 in 2018—525 properties were declared vacant for both years.

The City expected to receive $38 million from the vacant properties. That equates to an average of $41,215 that equates to an average $4.1 million in property. Even if those property owners could be forced to rent their homes, they are not going to be affordable rentals.

So how many properties did return to the rental market? According to a City staff report, a significant number of formerly vacant units returned to the rental stock.

How many?

One hundred seventeen. Yes, 117.

While I and many others can understand why the City would want to encourage owners of empty apartments and houses to rent them out, one of my major concerns with the EHT is it applies to many people just because they are fortunate enough to own second homes in Vancouver. They include wealthy Americans who live in the city for 3 months during the summer or Albertans whose children are studying at UBC and want to keep a small apartment downtown for when they visit.

They also include the Sunshine Coast doctor who volunteers in Vancouver and the midwife who lives on Saltspring Island but keeps a small condo in Vancouver for when she’s working.

My concern is that their properties are not empty. They are fully furnished homes that are lived in, albeit for less than 6 months a year. In most instances, it is not feasible to rent them out when the homeowner is away, except perhaps as an AirBNB or other form of very short-term accommodation that is generally no longer allowed in Vancouver.

While many people caught in this situation have been urging the City to make changes to this tax to exclude legitimate second-home owners, since their homes are not empty, instead the City made only a few minor bylaw amendments for the 2019 tax year.

As an aside, while much fanfare is given to how much money is being collected by those taxes, we are rarely told how much the programs are costing to administer.

People should be aware of a fundamental difference between the provincial and city “vacancy” taxes. The provincial Speculation and Vacancy Tax is levied on individual property owners as opposed to the EHT that is a tax on the actual property.

For that reason, when buying or selling a property in Vancouver, you should be very careful to ensure there is no outstanding EHT payable or likely to be payable. That can be difficult since the City can audit a property even after it has been sold.

Depending on when the sale occurs, the purchaser should therefore include language in the purchase and sale agreement requiring the vendor to submit the EHT declaration . . . or obtain evidence the declaration has been submitted and that no outstanding EHT is or may be payable.


Michael Geller is a Vancouver architect, planner, developer, and adjunct professor at Simon Fraser University with a longstanding interest in housing affordability. He has been critical of the city and provincial vacancy taxes since their inception.


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