Steve McClure has appealed the vacancy tax on his Vancouver condo twice, winning back $7,870 he was taxed in 2020.DARRYL DYCK/The Globe and Mail
Hani Eskandari understands all the reasons Vancouver decided to create an empty-homes tax. He’s no property-flipper or investor wheeler-dealer. He’s an electrical engineer and his wife is a scientist. Both are just trying to have a regular life in the city.
But Mr. Eskandari was told earlier this year that he owed $17,000 in empty-homes tax for 2020 on a house he and his wife own near Main and 25th because the city was unwilling to accept the proof he was providing that his parents had lived at the house.
“I totally understand the logic of this law. The intention is right. But the interpretation of the situation is wrong,” said a frustrated Mr. Eskandari.
He is one of dozens of people, possibly hundreds, in the city who have found themselves caught in the bureaucratic brambles of a precedent-setting tax law that many have complained is too rigid, too broad and too punitive. It’s a law that many cities in Canada are copying, which means similar problems could soon be cropping up in Toronto, Ottawa and elsewhere.
For the sake of their financial future, young people should leave Toronto and Vancouver
That’s the warning from tax-law specialists who say there are many well-meaning owners who are getting caught in audits because the popular new speculation and empty-homes taxes being brought in by many governments are overly crude. To add to the burden, anyone who simply files late is considered to be guilty and is required to pay the tax.
“In my view, the implementation of these taxes reflects a simplistic overconfidence – an apparent unawareness of the pitfalls that other jurisdictions have encountered with similar taxes,” says a summary of the problems with these new programs done by Noah Sarna, a lawyer with Thorsteinssons, a Canadian firm specializing in tax law.
“The Ontario regimes fail to identify and prevent, among other issues, the vulnerability of specific types of homeowners who, for no compelling policy reason, are likely to be assessed the tax. These problems will be felt more acutely in the coming years as audits widen, the amounts of tax levied inevitably increase, and other local governments adopt similar taxes of their own.”
That’s what happened with Mr. Eskandari, who got caught in a routine audit, the kind that can catch many because the city’s policy is to do broad audits – 4 per cent of all properties – rather than more targeted ones based on overtly suspicious circumstances or complaints.
City officials just wouldn’t believe anything he sent as proof to demonstrate that his parents, newly arrived from Iran and awaiting a move into their pre-sale condo at Brentwood, had stayed in the house for seven months while Mr. Eskandari was waiting to get a demolition permit for it as part of a plan to completely rebuild. (He and his wife had decamped to a West End apartment for that part of the process.)
The neighbours were willing to testify his parents had lived there. He had sworn affidavits. He sent in copies of payments for utilities showing that they had come from his parents’ bank accounts. He had copies of credit-card payments from their account showing they had shopped at local stores.
None of that was good enough because the utility bills weren’t in their names, which everyone had thought too onerous a process for what was always intended as a temporary stay, and Mr. Eskandari was resigning himself to having to fight the case in court – something likely to cost him almost as much as the tax.
Nearby, another Vancouverite was having a similar problem.
Steve McClure thought he had done the right thing by keeping his Kitsilano apartment, first bought in 2015, rented out during the times when he and his wife were living in Japan. Mr. McClure, a freelance writer and editor, had rented it in recent years to his niece who was going to the University of British Columbia.
Like Mr. Eskandari, he can understand why Vancouver created an empty-homes tax.
“In broad, philosophical terms, it kind of makes sense.” But, he adds, “I think it’s poorly drafted and unnecessarily draconian and inflexible.”
First, he got charged the tax for 2020 because his niece didn’t stay as long as originally planned at the apartment – the university wasn’t even holding classes in person during that stage of the pandemic. So, the apartment was only occupied eight months of the year – five by him, three by his niece. That wasn’t good enough for city officials, to the surprise of Mr. McClure and others who have had the impression that anything occupied for more than six months is exempt.
He appealed that and won back his $7,870.
Then he got told that he was going to get charged again in 2021 because, at the last minute, his niece had again decided not to stay there, too late for him to find someone else reliable. This time, the bill was going to be $19,000 and change because the city had raised the rate.
He tried a personal plea to the city.
“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. This year I have transferred my tax residency to Canada, signed up for the MSP, reactivated my BC driver’s licence, etc. And I’m staying here in the condo for seven months. Maybe I should have done all that last year; but hindsight is 20/20, isn’t it? I’m committed to living in Vancouver. 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.”
That hasn’t worked so far, although he’s still working on appeals. (Mr. McClure was also charged the speculation tax by the province in 2021, but the constituency assistant for his local MLA, David Eby, is working with him to resolve that.)
Mr. Eskandari’s appeal was eventually accepted last month. Mr. McClure’s hasn’t been and is possibly going to be presented by the local Unjust Property Tax Coalition to Vancouver’s new council.
Empty home taxes won’t solve Canada’s housing problems
The coalition has done a lot of work to spell out how Vancouver’s (and subsequently other Canadian cities’) approach to a vacancy tax is unusual.
Its research shows that many Ontario cities are copying Vancouver’s language, which is very vague and broad about what “vacancy” means. In the U.S., it more often targets properties that have been truly abandoned, not places that are lived in part-time and are well kept up by their owners.
“Generally speaking, the U.S. vacancy taxes would exclude from the vacant category properties such as those owned by members of our group,” the coalition has concluded after looking at a couple dozen cities and states.
Vancouver’s new council will be dominated by the ABC party, which promised in its platform to look at the unintended consequences of the tax.
That’s something long-time property developer and consultant Michael Geller is hoping for.
Like many, he thinks the arbitrary rules have unfairly penalized many, like an owner he is trying to help out who has been told repeatedly over 10 years by city staff to wait for various rezonings and area plans the city is working through so that he can apply to build a small apartment building on three neighbouring lots he owns.
He waited and waited, as told to by staff. Now he’s being told he will be charged the empty-homes tax for 2019 and 2020, at a cost of potentially $50,000 a year.
(He’s in a common category of people caught by the tax – people waiting to do development.)
“The city needs the equivalent of an ombudsman,” said Mr. Geller. “There’s no doubt where there are all sorts of situations where this is not about people who are deliberately keeping their units empty, but they are being charged the tax anyways.”