Real Estate

B.C. residents launch lawsuit against province’s speculation tax

Oak Bay, B.C. Photo by Shutterstock/2009fotofriends

Last week, six B.C. residents filed a lawsuit against the province’s Speculation and Vacancy Tax, challenging it in B.C. Supreme Court. The tax, imposed in November 2018, is intended to limit speculators purchasing property in B.C. for investment purposes that drive up housing prices. But some B.C. home- and cottage owners are feeling the effects, paying an additional tax on certain primary and secondary residences.

“The tax is quite divisive and discriminatory, and just arbitrary,” says Kailin Che, a lawyer with Lawrence Wong and Associates in Vancouver, who is handling the case pro bono. “It’s really not connected to its purported objective.”

In order to regulate speculators, the tax is targeting foreign owners and non-B.C. residents, property owners who earn the majority of their income outside of Canada, and people who own a secondary residence that sits vacant for more than six months—an exemption is made if the property is rented to a tenant, but tenants cannot be family members and the rental period cannot be less than 30 days. Between 2018 and 2019, the tax has earned the B.C. government $115 million in revenue.

The plaintiff leading the case against the tax is Denise Simpson, 72. She’s lived in her bright yellow clapboard house outside of Victoria since she was five and is now at risk of losing it. Under the tax’s legislation, she and her husband, Robert, 93, who split their time between Texas and B.C., are classified as a “satellite family.”

“They’re being taxed due to Robert’s American citizenship,” Che says. As a U.S. war veteran, Robert receives pension payments from the U.S. government, making up the majority of the couple’s income.

The tax stipulates that foreign owners and satellite families must pay two per cent of the property’s value, while Canadian citizens with a residence that doesn’t meet the exemptions must pay 0.5 per cent. This means the Simpsons are required to pay an additional $6,000 in taxes (based on the assessed value of their home), an expense they say they can’t afford.

B.C.’s cabin country is also being hit. As reported earlier by Cottage Life, cottage owners in the village of Belcarra on the outskirts of Vancouver are being forced to pay as much as $5,000 in tax because of the fact that their cabins sit empty during the winter. “Even Canadians who have inherited family cottages from decades ago, like the 1930s…they’re caught in this too,” Che says. This includes out-of-province Canadians, such as Albertans who own cabins in Kelowna.

To mitigate the effects of the tax, the government does offer a $2,000 tax credit on secondary properties to B.C. owners. But often this isn’t enough to cover the entire tax.

As the case against the tax waits for its time in court, Che says it continues to pick up steam, receiving crowdfunding from people all across Canada. “People have contributed financially from Ontario and Alberta. It’s a real community effort because it affects a lot of people in Canada.”

Between 30 and 40 new plaintiffs have come forward since the lawsuit was first filed, and Che expects the number to continue to grow. “The bigger the cause,” she says, “the more effective it is in terms of challenging the constitutionality of the legislation.”

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