Vacancy Tax/Empty Homes Tax – Five Suggested Areas for Improvement

Published by Noah Sarna & Zheting Su


In 2017, the City of Vancouver introduced its annual residential vacancy tax (or “empty homes tax”). At that time, the tax rate was 1% of the assessed value of a subject property. The governing statute and administration program were relatively simpler than more substantial taxes like income tax and GST/HST. However, the City has steadily increased the tax rate over the years. On January 1, 2023, it will hit 5%. This equals the rate of the federal GST and the highest rate of the province’s property transfer tax. Crucially, however, those are largely one-time taxes imposed on homeowners (e.g., when buying or selling a home). By being levied annually, and not having regard to cost, the consequences to the annual vacancy tax can thus be significantly greater.

The sophistication of the vacancy tax has not evolved at the same pace as its rate.  This raises questions over what should be improved upon in the legislation, administration, and enforcement of the vacancy tax. Though not an exhaustive list, the following are five suggestions.

Areas for Improvement

  1. Improving transparency and flexibility in audit and appeals processes

The audit and appeals processes need critical examination. There are several aspects which should be addressed as a priority.

  • The audit and appeals processes are fairly rigid. Auditors and “review officers” (i.e. appeals officers) are often explicit that they follow a checklist of specific supporting documentation before allowing relief from the tax. This fails to acknowledge that the Vacancy Tax By-Law No. 11674 (the “Bylaw”) does not prescribe a check-the-box approach to qualification. Owners are faced with a myriad of different circumstances that dictate the type of evidence available. A fair administration system should account for this.
  • Auditors and review officers often send very brief letters that provide vague and seemingly templated explanations for a decision. This is problematic because owners cannot meaningfully respond without knowing the basis for a tax assessment. This issue has been present for many years. In fact, in a 2019 judicial review application, the City acknowledged that the decisions of the auditor and review officer at issue “did not meet the requirements of procedural fairness”.[1] In lieu of continuing this approach, City officials should be instructed to provide detailed reasoning for each of their determinations.
  • The City usually does not disclose the name or contact information of the auditor or review officer. In any audit or administrative appeal, having direct contact with the decision maker is extremely valuable. Oral discussions can significantly reduce the time required to arrive at a resolution. As a result, the City’s audit and appeals process feel unnecessarily impersonal and disingenuous for taxpayers. Having direct contact with the auditor or review officer will improve owners’ audit and appeals experience.
  • The same comment applies to the second stage of the appeals process – namely the appeal to the review panel. The panel, comprised of independent adjudicators, receives a submission by the owner and a copy of the audit and appeals files from the City. The panel evaluates whether the review officer’s decision was correct and produces a brief summary of the decision. The panel provides no opportunity for two-way communication.
  1. Trial instead of judicial review

This is the sole tax where an assessment can only be challenged in court through a judicial review application. Determinations are evaluated by the court mostly on a standard of reasonableness rather than correctness. All other taxes, once being appealed to court, do not get considered by way of a judicial review. At a rate of 5%, an assessment should not merely be reasonable – it should be correct. The fairness of the appeal process would be greatly improved by amending the Bylaw so that further appeals to court are trial de novo.

  1. Construction/renovation exemption

This exemption includes the requirement that the City issue a permit for the work by July 1 of the relevant year. The inclusion of the July 1 deadline is seemingly arbitrary and can easily lead to inequitable results. Delays in the issuance of a permit can be, and frequently are, attributable to the City. Such delays, regardless of the source, imperil a homeowner’s ability to claim the exemption.

A further difficulty is that properties awaiting development permits can be either unhabitable or difficult to rent. Tenants are reasonably reluctant to move into properties that they may soon need to move out of, and, likewise, landlords do not want to sign year-long leases while expecting a development permit. The exemption should be modified to remove arbitrary restrictions and instead provide relief for all owners of properties under construction acting in good faith.   The provincial speculation and vacancy tax contains a relatively useful parallel exemption that the City should import into the Bylaw.

  1. The sale exemption

The existing exemption generally relieves the tax for a year of ownership change. The underlying policy is to allow for any periods of vacancy immediately before or after the conveyance. The exemption should be broadened.

In particular, the exemption should be extended to apply to any year prior to the conveyance. As the Bylaw is currently drafted, a new owner could inherit the prior owner’s outstanding tax liability, even if it has not yet been assessed. Thus, buyers often insist on holdbacks – the amount of which will necessarily increase with the rate hike. From a policy perspective, there is no reason why a buyer should be responsible for a vendor’s vacancy tax liabilities. This problem can be remedied by extinguishing the historical liability for any new owner.

  1. Remission orders

The City does not have any publicly known channels to submit a remission order request. Such a request is technically available pursuant to section 19 of the province’s Financial Administration Act. The purpose of remission orders is to provide relief from tax in instances where there are just and equitable grounds for tax debt relief (e.g. undue hardship) and where the tax applies in an unintended manner. The remission order process recognizes that lawmakers cannot anticipate every scenario in which the tax might apply inappropriately, and that some instances merit the cancellation of a tax debt for compelling reasons relating to fairness and justice. Creating a clear and publicly-announced remission order channel now for the vacancy tax will facilitate an equitable administration of the Bylaw.


Vacancy taxes are relatively new in concept and the City understandably has a limited budget. Accordingly, shortfalls in the legislation and hiccups in the administration of the tax are inevitable. However, it has already been five years since the tax’s inception and many endemic problems remain. With the tax rate being increased, hopefully the scheme of the Bylaw and its administration can equally improve.

[1] He v Vancouver (City), 2019 BCSC 2246.