Western Canada: When vacant-home taxes target the wrong people

Good morning. Wendy Cox in Vancouver today.

As housing prices skyrocketed in Vancouver and Toronto in recent years, the hunt for what or who is to blame intensified. Wealthy foreign investors buying up real estate like Monopoly pieces in these cities and then leaving them empty became easy villains, even if the data didn’t really support that idea.

Still, the empty-homes tax first implemented in Vancouver in 2017 was introduced with general support. The rate started at 1 per cent of a property’s value, jumped to 3 per cent in 2022 and will rise to 5 per cent next year. In 2018, the provincial government introduced its own vacant-homes tax and this year, has expanded its reach beyond major centres. As of next year, it will apply in most of the Lower Mainland and much of Vancouver Island, as well as in Kelowna and West Kelowna.

Canada Mortgage and Housing data indicated the tax is working in Vancouver, prompting owners either to live in their units or rent them out. Other governments took note: By the middle of next month, Toronto residents will have to declare whether they live in their properties. Those who do not will pay one per cent of the assessed value of the property in tax. The federal government introduced its own version earlier this year. The one-per-cent levy is imposed on properties that are considered an “unproductive use of Canadian housing,” and owned by non-resident non-Canadians.

Inevitably, though, the taxes ensnare people whose profile isn’t at all like the foreign real-estate hogs depicted in the introduction of such policies. Frances Bula wrote about a couple of those cases today.

Hani Eskandari, an electrical engineer, and his scientist wife were ordered by the City of Vancouver to pay $17,000 in empty-homes tax for 2020. Mr. Eskandari’s parents were actually living in the house. They had newly arrived from Iran and were awaiting a move into a pre-sale condo. They stayed in Mr. Eskandari’s house for seven months while Mr. Eskandari waited to get a demolition permit for it as part of a plan to completely rebuild. In the meantime, he and his wife were living in a downtown apartment.

City of Vancouver bureaucrats simply wouldn’t believe anything Mr. Eskandari sent in as proof that the house was occupied. He had sworn affadavits; he sent in copies of payments for utilities; he had copies of credit-card payments from their account showing they had shopped at local stores. He also had neighbours willing to testify his parents lived there.

But the utility bills weren’t in his parents’ names and Mr. Eskandari figured he was headed to court. Last month, the city finally accepted his appeal and his case was over.

It hasn’t worked that way for Steve McClure. He had been renting out his Kitsilano apartment to his niece while he and his wife lived in Japan. But he got charged the tax for 2020 because his niece, who was attending UBC, didn’t stay as long as originally planned during the pandemic. The apartment was only occupied eight months of the year, not good enough for city officials. He appealed and won back the $7,870 he was assessed.

But then he was told he was going to get charged again in 2021 because at the last minute, his niece decided not to stay there and he did not find another tenant in time to avoid a $19,000 penalty.

This year, he moved into the condo for seven months in an effort to avoid a repeat of the problem.

“I’m at my wits’ end. I’m just a guy who’s trying to re-establish himself in the city of his birth but who doesn’t fit into the neat, over-simplified categories laid out in this bylaw,” he said. “This is my home and always has been, despite my having lived in Japan for many years. I am not a carpetbagger. I am not a property speculator.”

Mr. McClure is still working to have his penalties addressed through the appeal process.

Tax-law specialists say the popular taxes are overly crude and prone to capturing people who don’t fit the stereotype of the property speculator. To add to the burden, anyone who simply files late is considered to be guilty and is required to pay the tax.

Noah Sarna, a lawyer with Thorsteinssons, a Canadian firm specializing in tax law, said the governments imposing the tax are ignoring the pitfalls and run the risk of penalizing innocent people.

Said a frustrated Mr. Eskandari: “I totally understand the logic of this law. The intention is right. But the interpretation of the situation is wrong,”