It’s been two years since the federal government rolled out its underused housing tax (UHT), a one-per-cent tax on vacant or underused housing that generally applies to foreign owners, and despite extensive lobbying from local and elected officials, an exemption for Whistler doesn’t seem likely anytime soon.
As previously reported by Pique, local realtor Dave Brown testified in April at a finance committee meeting in Ottawa, telling legislators how the UHT is driving foreign investment away from Whistler. Following that, momentum had been building towards a possible exemption, including a support letter signed by Sea to Sky MP Patrick Weiler and other MPs.
“With a new finance minister in place, decisions like these on the UHT will have to be reviewed again by the minister in the lead up to Budget 2025. I’ll be making the case again for the exemption to Minister [Dominic] LeBlanc and I’m hopeful he’ll be amenable to a change," said Weiler in a statement.
A tax on foreign property owners who do not make their home adequately available for housing, the UHT is one lever Ottawa has pulled on to address Canada’s affordable housing crisis. But, considering the tax also applies to properties specifically zoned for tourist accommodation, in a resort town like Whistler, it is having unintended consequences.
“Whistler has been built with foreign investment and many of these investors believe it is unjust that they are subject to a vacancy tax that does not recognize the intended use of the property to drive short-term tourist visits,” said local Theresa Walterhouse, partner at accounting firm, BDO Canada. “In my view, it has a serious negative impact on Canada’s brand.”
To be exempt from the tax, foreign owners must spend a minimum of 28 days in the property. An owner’s spouse can also count towards that minimum stay, but not an owner’s children or other family. If there are multiple owners, each individual must spend the minimum 28 days in the property.
“Secondary owners from outside of Canada will come for a week or two and usually not much more, because they have a life and work and can’t come for 28 days,” said Brown.
While Phase 1 owners are more likely to accommodate the 28-day minimum, Phase 2 owners have added barriers to overcome with the UHT. Much more restrictive than Phase 1, Phase 2 properties, typically commercial units located in resort hotel complexes such as The Four Seasons, The Westin, and The Pan Pacific, limit owner usage to 28 days in summer and 28 days in winter. Owners must book their personal use days in advance, with the property going back into the integrated rental pool, managed by a strata or rental management company, the rest of the time.
“One of the challenges is people who buy in the hotel properties are less likely to want to use it 28 days—and the hotels don’t want then to use their full personal allotment,” explained Walterhouse. “The hotels say you can use it 28 days every six months … but if every owner in [those hotels] took advantage of using it 28 days personally, then they wouldn’t have enough inventory for visitors.”
The issue is how the Canada Revenue Agency defines “residential” in its application of the UHT, argued Chris Vick, GM of the Hilton Whistler Resort & Spa, in one of about a dozen letters Tourism Whistler gathered this fall from member businesses that were shared with Weiler.
“By everyone in the world’s definition, we are a hotel. But because our ownership structure is a strata and our rooms have kitchenettes, the CRA classifies us a ‘residential property,’ making our unit owners subject to UHT,” he wrote. “Our community, like many resort communities, has worked hard to establish the balance between residential properties and nightly accommodation properties and has robust mechanisms in place to differentiate their use. We need a CRA interpretation of UHT that recognizes those differences.”
The letters from Tourism Whistler members detail how the UHT has pushed prospective buyers away from the resort, and, in other cases, led to owners selling their Whistler units.
“The UHT imposes a significant financial burden on homeowners and undermines the economic viability of vacation rental properties,” wrote Damian Saw, CEO of vacation rental company Whistler Platinum, in his letter.
Saw went on to explain how the UHT can consume up to 60 per cent of a homeowner’s gross rental, and once other expenses such as property taxes, strata fees, and utilities are factored in, many foreign-owned properties become “financially unsustainable.”
Whistler Platinum reported a 22-per-cent increase in owner nights last year, as owners upped their personal use to 28 days. The company also noted 10 per cent of its non-Canadian homeowners have listed their properties for sale due to the UHT, with more considering the same. Due to the revenue lost from the sale of three such units in 2023, Whistler Platinum said it has been forced to reduce its workforce and plans to hire two fewer employees this year.
“This is depleting some of our tourist inventory and causing some businesses additional challenges,” said Barrett Fisher, president and CEO of Tourism Whistler. “I think this tax makes sense in residential communities, but it does not make sense in tourist-zoned accommodation.”
The tax is unfairly penalizing a group that is a significant part of Whistler’s economic engine, Walterhouse said.
“These foreign owners, we want to keep in mind that they are presold Whistler tourists,” she said. “The foreign owners come here from overseas, more long-haul travel, and they’re going to spend a lot more tourist dollars in our economy than someone getting in their car from Vancouver.
“We’ve kind of slapped them in the face a bit by having them subject to this tax.”
On Monday, Dec. 16, federal finance minister Chrystia Freeland resigned from her post as finance minister just as she was set to deliver the government’s fall economic statement, adding more disarray to the Liberals’ already chaotic re-election bid. Prime Minister Justin Trudeau handpicked longtime ally Dominic LeBlanc as her replacement.
