The Canadian Underused Housing Tax (UHT) was introduced January 1, 2023 and aimed to tackle the issue of housing affordability and availability by targeting properties that are deemed underused. In Whistler, where we see a large portion on the resorts dwellings set aside for nightly rental, with the non resident owners potentially only using it a few weeks out of the year, it’s been met with skepticism.

What is the Underused Housing Tax?

The UHT is a tax levied at a rate of 1% of a property’s value on residential properties that are considered underused. This tax applies primarily to non-residents and owners of multiple properties who do not occupy or rent out their properties regularly. The goal is to encourage property owners to either use their properties more effectively or sell them, thereby increasing the supply of housing available to residents.

Purpose of the UHT

The UHT was introduced as part of a broader set of measures to address Canada’s housing crisis. Its primary objectives are:

1. Increasing Housing Supply: By discouraging property hoarding, the UHT aims to make more homes available for sale or rent, helping to alleviate supply shortages in high-demand areas.
2. Improving Affordability: The tax seeks to mitigate the impact of vacant and underused properties on housing prices. By increasing the availability of homes, the UHT is intended to make housing more affordable for local buyers and renters.
3. Encouraging Proper Use: The UHT provides an incentive for property owners to either occupy their homes, rent them out, or sell them, rather than leaving them vacant.

Implementation Timeline

The UHT was officially implemented on January 1, 2023. Property owners were required to report their property’s usage for the 2023 tax year, with returns now due by October 31, 2024. The extension provides additional time for property owners to ensure they accurately report their property’s usage and comply with the tax requirements.

Exemptions and Adjustments

Several exemptions and adjustments apply to the UHT:

• Primary Residence Exemption: Properties used as the owner’s primary residence are exempt from the tax.
• Rental Properties: Properties rented out for at least six months of the year generally qualify for an exemption.
• Other Circumstances: Additional exemptions may apply, such as properties occupied by family members or used for charitable purposes.

Impact on the Real Estate Market

The introduction of the UHT has already begun to affect the real estate market, particularly in areas like Whistler where vacation homes and investment properties are common. Here’s a look at how the UHT is shaping the market:

Immediate Impact

• Price Adjustments: Some property owners have adjusted their asking prices in response to the UHT. Those who previously kept properties off the market or used them sporadically are now more motivated to sell, which has led to increased inventory and potential price reductions.
• Increased Listings: The UHT has prompted a rise in property listings as owners seek to avoid the tax. This increase in supply has the potential to moderate price growth or even result in price declines in the short term.

Medium to Long-Term Effects

• Market Stabilization: As the market adjusts to the new tax, there may be a stabilization in property values. With more properties becoming available, supply and demand dynamics could help balance prices and make housing more affordable over time.
• Shifts in Buyer Behavior: Prospective buyers may become more strategic, factoring in the UHT and other market conditions into their decisions. This cautious approach could slow down price increases and impact overall market activity.
• Rental Market Influence: The UHT may also affect rental markets. Property owners who previously used their homes for vacation rentals might switch to long-term rentals, increasing the supply of rental properties and potentially easing rental prices.

Regional Variations

The impact of the UHT can vary based on local market conditions:

• High-Demand Areas: In high-demand regions like Whistler, the UHT could have a more pronounced effect. Increased property listings might lead to a temporary decrease in prices, but the long-term impact will depend on how the market adjusts.
• Local Factors: The overall effect on property values will be influenced by local supply and demand dynamics, economic factors, and other housing policies in place.

Looking Ahead

The UHT is part of Canada’s broader strategy to address housing challenges and ensure that housing remains accessible and affordable for residents. While the initial impact on real estate prices may be noticeable, the long-term effects will depend on how well the market adapts to these changes and how the UHT interacts with other factors influencing the housing sector.

As the UHT continues to be implemented, property owners, buyers, and renters in Whistler and other affected areas should stay informed about how this tax might influence their real estate decisions and the overall market. The UHT represents a significant shift in housing policy, aiming to balance the market and provide more opportunities for local residents.

If you or friends have questions on the Whistler Real Estate market, please connect – I am here to help.

Nick Swinburne