Testing the murky legal waters of an urban empty homes tax

Using taxation as an instrument of social policy is hardly new. In fact, the intent of a lot of taxes is to achieve the happy result (for government anyway) of both raising revenue and influencing behaviour. And so it is with the current proposal to tax empty homes.

Taxing empty homes seems to be uncharted territory in Canada, with much discussion but little or no implementation. However, similar taxes have been used elsewhere to control investment or expand the availability of rental housing.

For example, Camden, a borough in London, relied on its governing statute to impose a tax on homes that have been vacant for more than two years. Enforcement and collection has apparently included the inspection of tax records, site inspections and even (shiver) a snitch-line. Camden has allegedly converted more than 170 properties from empty to occupied in three years. Other London boroughs might be following suit.

France has apparently imposed a tax on empty homes in towns and cities with populations over 50,000. Melbourne, Australia, is apparently considering its own tax.

Experience in B.C. tells us that not everyone will welcome a new tax. So could a tax on empty homes be challenged and, if so, what might a B.C. court have to say about it?

First, much would depend on whether the tax laws state clearly enough when a home is or is not to be considered empty. For example, a home will presumably need to be unoccupied for a minimum time to qualify as empty because no one politician in his or her right mind would want to penalize a hard-working taxpayer for taking a holiday or renovating a kitchen. Seriously though, figuring out and saying with clarity what sorts of occupancy or periods of occupancy would lead to a home not being considered empty will be a challenge. And if the parameters of the tax are unclear, its validity could be open to question.

Second, the tax could be challenged as an unlawful constraint on a person’s right to deal freely with his or her property. However, property rights are not enshrined in the Charter, and the rights we have do not guarantee that property ownership will come without a cost. We all have to pay property taxes, and zoning bylaws legitimately limit the uses we can make of our property. The Residential Tenancy Act and human rights codes restrict our ability to choose renters and buyers, terminate tenancy agreements or increase rents. Governments can expropriate if they wish (and don’t get me started on strata bylaws…).

In any event, the idea that we somehow have an untrammelled right to use and enjoy our property as we see fit is wishful thinking (or unwished for thinking, depending on your perspective), and I doubt that a court would see a tax on empty homes as much different from all the other taxes or restrictions we have to cope with if we choose to own property.

Third, the tax could be questioned on constitutional grounds because, given the demographic realities of the Vancouver real estate market, its effect will be disproportionately felt by a particular group. However, a court would almost certainly regard this as coincidental and not a driving force behind the tax.

Fourth, privacy rights might rear their head and the tax could be challenged if its collection involves an alleged violation of a taxpayer’s privacy rights through some hideous mix of surveillance, snooping and information gathering. Canadian courts have tended to regard privacy rights as a Charter value, and if a court decides that the collection of the tax infringes that value it could decide not to uphold it. However, much would depend on the wording of the tax laws and how they are enforced.

Fifth, the process by which the tax is adopted could be challenged if, for example, there is reason to believe that the City of Vancouver exceeded its powers in imposing the tax. This would more likely be an issue if the city were to impose a tax or similar charge unilaterally without specific authority from the legislature.

At the end of the day, I suspect that a tax on empty homes would survive legal challenge with relative ease. And, of course, as with most taxes, the tax would probably be with us long after empty homes have ceased to be a political hot potato. 

D.  John Goundrey is a partner at the Vancouver law firm of Alexander Holburn Beaudin + Lang LLP whose practice involves property law