International Trade Committee on June 5th, 2023

[Dr. Thomas Davidoff]

I can speak to exemptions if you provide them to me. I just do not have the thorough administrative knowledge of this. I was asked to testify Friday. I can't itemize them for you. I'm happy to respond to itemization by your committee.

What I can talk about is the impact on affordability of, one, our existing tax system and, two, what we've seen in British Columbia.

There is no question that the speculation and vacancy taxes have improved affordability relative to doing nothing. They've raised revenue for the province, which means a lower tax burden or more tax benefits for provincial residents, and they have added homes to the housing stock. There may have been some adverse effects on tourism, but I haven't seen that documented. That's the impact on affordability.

In terms of exemptions, I would just repeat what I said. There is a potential trade-off between tourism and housing affordability, and the question is where you draw the line. You have to draw the line somewhere, unless you have partial exemptions so that the rate declines as you get more and more rural.

You're probably going to draw lines, and those lines are informed, but they will be arbitrary. Whenever you have a line, there is going to be horizontal inequality between people on one side of the line in a rural area that's not subject to the tax or that gets the 28-day exemption versus someone who's declared urban, which is the natural point where you don't want temporary housing, so they don't get the 28-day exemption.

[Terry Sheehan, Liberal, Sault Ste. Marie, ON]

Thanks for that.

I guess my question would be to Richard.

You've talked about your clients. On average, what is the length of stay in Canada for your clients? How many American clients do you have, and what would you say the lengths of their stays are?

[Richard Halinda]

You're asking for confidential information.

I'm only kidding.

How many clients do I have? I have hundreds. What is their length of stay? Many are from May 24 to Labour Day. They're here all summer. They come with their families. They come with their kids. They come with their grandparents. I can tell you that I have hundreds of U.S. clients who have never spent a fourth of July in the United States, except for the two years during COVID when they weren't allowed to cross this border. That's how important and how intertwined these people are in our community. Even on their holiday, they're here in Canada. They're not back in the U.S.

They spend a lot of time here. Again, they bought these places not as passive income or as some place to park their money. They came to use them, raise their kids here and raise their grandkids here. They are such an integral part of our community. I just can't stress that enough, and that's why this act.... Again, you've brushed too broadly, but this can be fixed. We need to fix this.

[The Vice-Chair, Conservative, Kyle Seeback]

I have to interrupt. We're now over time.

We'll turn to Mr. Savard-Tremblay for two and a half minutes.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you, Mr. Chair.

Mr. Halinda, I think one of the problems with this type of measure is the lack of consultation and transparency in political decision-making. You said that you had discussions with the government about this.

Budget 2021 announced the implementation of a potential property tax of this type, and the consultations took over four months. Were you involved in that?

[Richard Halinda]

I'm not aware of any consultations. I've not participated in any yet. The only ones I've had were when I've called somebody else.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

If I understand correctly, you were not involved in the consultations that took place from August 6 to December 2, 2021. You had absolutely no knowledge of those consultations. You were not asked or consulted, despite your expertise in this area. Is that correct?

[Richard Halinda]

No, I wasn't. No.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Very good, thank you.

It is terrible, but I have only one minute left in what is probably my last turn. Would you like to add anything?

[Richard Halinda]

I'd be more than happy to work with this committee. I've spent a lot of time on this. I've talked to many people at CRA, right to the top. I do tax work. I think I know what the government's trying to do. Again, there's a noble cause to this act, and I support it. It's just that the implementation has created this collateral damage that doesn't need to happen. We need to do something about that. I'm happy to work with all of you on this.

I'm happy that you're taking the time to look into this matter. I really am, because I was getting frustrated. Was anybody going to listen? I applaud all of you for taking this on, and I'll help with whatever I can.

[The Vice-Chair, Conservative, Kyle Seeback]

As Dr. Frasier Crane would say, “I'm listening.”

We'll now go to Mr. Cannings for two and a half minutes.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.

I'm going to turn to Mr. Davidoff. Again, I want to bring up the B.C. speculation and vacancy tax, and whether that model of applying it in certain urban areas would work in this underused housing tax situation across Canada.

How has that worked in British Columbia? I know that next year they are adding some areas to it—in southern Vancouver Island, for instance. It seems to be adaptive management.

How would that fit with this federal tax? Could that be a model we could consider?

[Dr. Thomas Davidoff]

I believe it could be applied here, of course. As I mentioned, there are a lot of ways. The central issue is that, generally speaking in Canada, particularly in the expensive markets—and you could demarcate expensive markets—property is undertaxed, and working for a living and buying and selling goods and services is overtaxed. That's a serious problem and it contributes, of course, to housing affordability.

In British Columbia, you're mapped in or you're mapped out. It's not partial. You're either subject to the speculation and vacancy tax or you're not. As you mentioned, Kelowna was a controversial case. I have not heard of significant problems with the tourism industry. You would know better than I, but I'm not aware of studies that show the SVT in B.C. has hammered badly the vacation industry there.

You have, of course, a trade-off, because, in many places, there's a local economy that's hindered, as you say, by the inability of locals to find work. Even in Salt Spring Island, where I visited with my wife, it's extremely hard for locals to find work, even though it's entirely a vacation community.

I'm just not aware of places that have been mapped in where there have been problems. Could there have been places that were mapped in and all of a sudden tourism died? You know, you'd have to be in such a place where people are just going to leave. One important point is that, yes, it's sad for the Americans, but what's going to happen? The houses won't become vacant. They might fall in value, but you probably won't have any vacancy.

The real economic concern would be vacancy and no more tourism. You'd have to be in a place that's marginally tourist acceptable, where there are many Americans. My guess is that there's a very small set of places where that would be the concern.

[The Vice-Chair, Conservative, Kyle Seeback]

That's time.

We have the congressman waiting, so to try to get us on time, I'm going to have these rounds reduced down to three minutes.

We'll go to Ms. Gladu for three minutes, and then we'll go to Ms. Dhillon for three minutes.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

Thank you, Chair.

Thank you to the witnesses for being here today.

My area is Sarnia—Lambton. It's on the border, and there are beautiful communities where people from the U.S. have bought cottages in Brights Grove, Port Lambton, Sombra and Ipperwash.

I think, although the intention of this regulation was noble—we're trying to solve an affordable housing crisis that's come on since 2015—the way it was implemented is a problem, so I would say two things. The first solution I can see is that there should be a grandfathering. These people who have owned properties for years and years that have passed down through generations clearly should be grandfathered. Secondly, anyone who is considered to be exempt should not even have to file, because it's $800 to file and it's such an aggravation.

Mr. Halinda, would you agree with that?

[Richard Halinda]

I wholeheartedly agree with that. That was one of the suggestions I made in some of the discussions I've had.

This housing crisis is a fairly new thing, but these people have owned these places for decades. They didn't cause this housing problem. It's not them, so why are we attacking them?

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

Absolutely.

Mr. Davidoff, would you also agree with that?

[Dr. Thomas Davidoff]

Let me take exception to one category that you mentioned, which is multi-generational.

We have the severe problem that there are people who can't afford a place to live. Now, on vacation communities, of course, you can raise issues, but if I inherited a lovely place on a lake from my father, who in turn, inherited it from his grandfather, I don't know why that makes me a particularly sympathetic person. Usually, when we think about who needs the government's help, we focus on people at the bottom of the income distribution who have been unfortunate.

I hate to bring this up, but multi-generational, for me, does not trigger sympathy. It triggers, “Okay, you have to pay $1,000 to $1,500 a year in tax for the house you inherited for nothing.” It's not the end of the world.

[Marilyn Gladu, Conservative, Sarnia—Lambton, ON]

Yes, and you have mentioned that you think increasing taxation on those lucky individuals who own high-value homes might be an approach that would free up revenue to create affordable housing.

Do you have other solutions that you think we ought to be putting in place to create affordable housing in places like Vancouver?

[Dr. Thomas Davidoff]

Of course, yes. The tax problem is one problem that I mentioned. The other major issue, of course, is regulation.

Something like 70% or 80% of residential land in Canada is zoned for single-family homes. Anywhere near Toronto, probably increasingly Ottawa, Montreal, obviously Vancouver, Victoria—many of our urban centres—a single-family home is just a luxury that's not affordable to 90% to 95% of the income distribution. To buy a $2-million house, you need to be earning well into the hundreds of thousands of dollars per year, and that's just not most of the income distribution.

I don't know why the federal government puts up with single-family zoning. You could defund or restrict federal funding to any municipalities or provinces that indulge in it. The market doesn't want it. Of course, you should be allowed to build a single-family home, but why you would forbid multi-family is crazy. That is probably the number one issue.

[The Vice-Chair, Conservative, Kyle Seeback]

That's our time.

We'll now turn to Ms. Dhillon for three minutes.

[Anju Dhillon, Liberal, Dorval—Lachine—LaSalle, QC]

Thank you, Mr. Chair.

I'm going to start with Mr. Davidoff.

There are a whole host of exemptions to the underused housing tax. Can you please tell us what impact this tax has on Canadian individuals and families who are in the market to buy a house in Canada at a reasonable price?

Thank you.

[Dr. Thomas Davidoff]

Right. There will be two impacts in terms of affordability—neither of them huge.

Properties owned and lightly used by people from overseas have largely been addressed in Toronto and particularly Vancouver, and, of course, foreign buyers are now banned. We're not talking about a solution to affordability. However, there are two important effects.

Number one is revenue. When the government taxes and the Americans or other nationalities pay these taxes, that's free money to Canada. Of course, that's unless there's reciprocity in taxes, which you've talked about, with the Government of the U.S. punitively retaliating. As I mentioned, and I think this is important, that retaliation used to exist in the sense that Canadians weren't eligible for property tax deductions from their income taxes. I do think it would be a bit silly for the U.S. to retaliate on those grounds.

The second point, of course, is properties that are restored to occupancy by permanent residents of the home when they're vacated by people who own vacation homes. Vacation homes are, of course, desirable in some districts where communities are reliant on vacationers, but in other communities we want, ideally, homes to be occupied by people who form part of the tax base. That's an efficiency issue as well as an equity one.

[Anju Dhillon, Liberal, Dorval—Lachine—LaSalle, QC]

For the second part of my question, we spoke about seasonal properties and locations as part of the exemptions. How common do you think it would be for a property owner to miss all of these exemptions?

[Dr. Thomas Davidoff]

I have not done an estimate of how many properties would be subject to the tax. I just don't have that. I don't know if that would be easily done, but it's a good question.