Friday, July 22, 2022

At a glance (4 minute read)

  • The report claims 20,000 condominiums have been added to the rental market since 2018.
  • The tax will be extended to Lions Bay, Squamish, Duncan, Ladysmith, Lake Cowichan and North Cowichan starting January 2023.

More than 20,000 condominiums have been added to the rental market as a result of BC’s Speculation and Vacancy Tax (SVT) according to a newly released report from the BC Ministry of Finance.

The report which examines SVT data from 2018 to 2020 was prepared by University of BC real estate finance professor Dr. Tsur Somerville and analyst Dr. Jake Wetzel.

The SVT, implemented in 2018, is an annual tax based on how owners use residential properties in major urban areas in BC. It was designed to:

  • curb speculation;
  • encourage empty homes to return to the market in urban areas with near-zero vacancy rates; and
  • ensure foreign owners and those with primarily foreign income contribute fairly to BC’s tax system.

The SVT is intended to apply to vacant properties being used as occasional homes, held as investments, or occupied by owners who don’t pay income tax in BC but benefit from services and amenities.

SVT taxable areas

  • Metro Vancouver Regional District.
  • Capital Regional District.
  • City of Abbotsford.
  • District of Mission.
  • City of Chilliwack.
  • City of Kelowna.
  • City of Nanaimo.
  • District of Lantzville.

On July 20, 2022, the SVT was extended to the municipalities of Lions Bay, Squamish, Duncan, Ladysmith, Lake Cowichan and North Cowichan.

The tax will take effect in the new communities in January 2023, meaning home owners will have to declare their status for the first time in January 2024. Exemptions are available for primary residences, properties with a long-term tenant, and other circumstances.

SVT rate

As a transition measure, in 2018 the tax rate was set at 0.5 per cent of a residential property’s assessed value for all owners.

For 2019 and subsequent years, the rate:

  • remained at 0.5% for Canadian citizens or permanent residents not members of a satellite family; and
  • increased to 2% for foreign owners and satellite families.

The SVT applies based on ownership as of December 31 each year. 

Who pays?

The tax payable by an owner is based on the use of the property, the owner’s interest in the property, the value of the property and the tax rate that applies. 

Revenue collected

For the 2018, 2019 and 2020 tax years, the province collected approximately $231 million in SVT revenues.

Foreign owners and satellite families paid an average of five times more SVT than BC residents. 

Foreign investment

The data examined in this report helps determine the amount of foreign wealth in the housing market, from both foreign buyers and those who have citizenship and but earn their income outside Canada, known as satellite families. 

SVT Revenue by Owner Type: 2018 to 2020 (millions)

 

Owner type

2018

2019

2020

Total

BC Resident

$6.2

$5.6

$11.2

$23

Other Canadian

$5.5

$5.3

$11.2

$23

Foreign Owner

$25.6

$34.7

$25.6

$85.0

Satellite Families

$18.6

$26.2

$25.6

$70.4

Other

$1.4

$2.7

$4.9

$9

Undeclared

$7.4

$11.4

$7.6

$26.4

Total

$64.7

$85.8

$80.6

$231.1

SVT Revenue by Region: 2018 to 2020 (millions)

 

Regional District

2018

2019

2020

Total

Revenue by Regional District (%)

Metro Vancouver

$55.7

$71.8

$65.5

$193.0

84%

Capital

$4.3

$7.4

$7.2

$18.9

8%

Central Okanagan

$3.5

$4.7

$4.6

$12.8

6%

Fraser Valley

$0.6

$1.1

$2.2

$3.9

2%

Nanaimo

$0.6

$0.8

$1.1

$2.5

1%

Total

$64.7

$85.8

$80.6

$231.1

100

Similar taxes

The City of Vancouver implemented an Empty Homes Tax in 2017. Owners of empty homes are taxed at a rate of three per cent which will increase to five per cent in 2023.

The federal government is bringing in an annual one per cent Underused Housing Tax (UHT) on the value of non-resident, non-Canadian owned residential real estate that’s considered to be vacant or underused, effective January 1, 2022. It should be noted that while the UHT Act is now in force, some details of the tax remain to be fleshed out by regulation, such as prescribed properties to be included or excluded from the tax and certain prescribed persons to be treated as owners for purposes of the rules.

Read the report: An Assessment of the Effectiveness of the Speculation and Vacancy Tax Act in Addressing Rental and Ownership Affordability and Foreign Investment in Housing Report to the British Columbia Ministry of Finance. Note: opens 160-page pdf. Report begins on page 35.