Evidence of meeting #70 for International Trade in the 44th Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was uht.
A recording is available from Parliament.
Executive Director, United States, Department of Foreign Affairs, Trade and Development
I don't want to speculate about U.S. administration intentions, but they haven't raised it.
Liberal
Chandra Arya Liberal Nepean, ON
Ms. Riddell, foreign nationals don't have to file any tax returns unless they earn income while in Canada. For the foreign owners of the properties that become applicable under the UHT, is this the only time, for this purpose, that they have to file their taxes. Is this correct?
Director, Real Property and Financial Institutions, Sales Tax Division, Tax Policy Branch, Department of Finance
Yes, but they're not filing an income tax return. They're filing the UHT return only.
Liberal
Expert Advisor, Sales Tax Division, Tax Policy Branch, Department of Finance
If I may make a clarification, if the foreign-owned property is generating income, obviously they'll be filing a T1.
Liberal
Chandra Arya Liberal Nepean, ON
Yes, I understand.
If we assume that none of them were exempt from that 28-day stay rule, how many properties across Canada will fall under this?
Director, Real Property and Financial Institutions, Sales Tax Division, Tax Policy Branch, Department of Finance
I'm trying to look for the exact number.
Expert Advisor, Sales Tax Division, Tax Policy Branch, Department of Finance
I can take the question.
Director, Real Property and Financial Institutions, Sales Tax Division, Tax Policy Branch, Department of Finance
Yes.
Expert Advisor, Sales Tax Division, Tax Policy Branch, Department of Finance
The revenue projection for the UHT is based on approximately 30,000 to 35,000 properties being subject to the tax.
Liberal
Chandra Arya Liberal Nepean, ON
That's subject to the tax. You've also estimated that part of them will get exempted under this 28-day stay rule. Is that correct?
Expert Advisor, Sales Tax Division, Tax Policy Branch, Department of Finance
The UHT revenue projections are based on a total of 3% of the Canadian residential property world being owned by owners who are subject to this tax. The tax would apply to approximately 10% of that 3%.
Liberal
The Chair Liberal Judy Sgro
I'm sorry, Mr. Arya. Time is up.
To the witnesses, thank you for appearing today. I think you have supplied us with some very valuable information. Thank you very much.
We will suspend for a minute in order for our other panel to come on.
Liberal
The Chair Liberal Judy Sgro
We're back.
We have with us, as individuals, Mr. Robert Ketteman, homeowner; Mayor Wayne Redekop from the town of Fort Erie; and Laurie Wright, homeowner.
Mr. Ketteman, we're having problems. Apparently we can hear you but not see you. I will turn the floor over to you for five minutes, please.
Robert Ketteman Homeowner, As an Individual
That's perfect. Thank you.
Can you hear me now?
Homeowner, As an Individual
Good afternoon, everybody. My name is Rob Ketteman.
Thank you for allowing me to address the committee on the subject of the underused housing tax.
I'm an American whose family has owned a cottage in Crystal Beach, near Fort Erie, Ontario, since 1913. Fort Erie is located directly across the Niagara River from Buffalo, New York. The identity of these two communities has been defined by the extensive populations of families who have deep roots on both sides of the border—so deep in fact, that the bike trail that runs 20 miles from Port Colborne, Ontario to the Peace Bridge border crossing is called the Friendship Trail. “Friendship” refers to the relationship between our two countries.
My wife, Gloria, and I still own one of the cottages that were purchased by my great-great-grandmother in 1927. We live in our cottage for about four months during the summer and use it extensively on weekends throughout the year. My family has been an integral part of the Crystal Beach community for six generations. Each time the cottage has been transferred to the next generation, we have paid a significant capital gains tax to the CRA, and we continue to contribute tens of thousands of dollars every year to the local economy.
Despite this, we have now become a target of the underused housing tax, which has been publicly touted as designed to “take steps to ensure that foreign, non-residents, who simply use Canada as a place to passively store their wealth and housing, pay their fair share.”
Minister of Finance Chrystia Freeland said, “We will prevent foreign buyers from parking their money in Canada by buying up homes. We will make sure that houses are being used as homes, rather than as commodities to be traded.”
Certainly, we support the Canadian government's efforts to address the problem of foreign investors exploiting the Canadian real estate market exclusively for financial gain. However, this legislation is carelessly and unfairly including American cottage owners like us, who actively use their properties and were not cited as the reason for this new law. Honestly, this feels discriminatory, punitive and abusive. Our cottage is a home for us. It's arguably more of a home to my family than any home we've ever owned in the U.S. Applying this tax to us is not in the spirit of the relationship that our two countries have enjoyed for well over a century.
The problem is the exemptions. They're short-sighted and inequitable. They offer an exemption only for a portion of property owners, who should not even be subject to this tax in the first place. More specifically, vacation properties that are located in certain postal codes that have a higher population density than others are not exempt from paying this tax. Whether the property is located in a certain postal code has no bearing on how the owner actually uses their residence.
Why should we be required to pay this tax, when we actively stay on our property for 120 days each year, while someone whose property is not used nearly as much but is located two miles in a different postal code is exempt? Honestly, this sounds absurd.
Further, the house immediately next door to me is owned by a Canadian couple who live in Niagara Falls, Ontario, which is just 15 miles away. They rarely stay there. They have openly told me that they own the property only because they view it as investment that will increase in value. That's a true example of property that is underused and not lived in.
With regard to Crystal Beach, any reasonable person would not consider it as urban, despite the population density in this tiny area of only 4.4 square miles. Certainly, the property values have increased substantially here over the past few years, especially during COVID. This has been almost entirely driven by Canadian buyers from the greater Toronto area who have migrated, speculated and become absentee Airbnb landlords. The situation has not been caused by American cottage owners who have been here for many years.
We have submitted the required UHT tax form and claimed the exemption that our property is not suitable as a year-round residence. However, there's no clear definition of what this means or of the specific requirements. While our house has heat, there's no basement. There's just a crawl space over sand, where much of the plumbing is exposed to freezing temperatures, so we must shut off the water for parts of the winter. We are hopeful that this will not be scrutinized and rejected.
Being forced to pay this tax would significantly increase the cost of owning our Canadian property. In fact, the next property assessment is completed. Our annual costs will nearly triple, which will likely force us to make the heartbreaking decision to sell something that has been a central part of my family's life for over a century. It will simply become unaffordable to keep. My story is just one of hundreds in the Fort Erie area and, I would guess, thousands across Canada.
If the law does in fact continue as it is, this will be a very sad chapter in the history of this town and of our two great countries. It's likely a final chapter for many Americans, who would reluctantly choose to sell and never set foot in Canada again.
In closing, we are thankful that the committee is taking action to reconsider the impacts of this tax on border communities, and hopeful that your efforts will result in either repealing this tax on Americans, or fixing the issues that are unfairly impacting Americans who are not supposed to be the intended target. Finally, somebody is listening.
Thank you for your consideration.
Liberal
The Chair Liberal Judy Sgro
Thank you very much, Mr. Ketteman, for your comments.
We go now to Mayor Redekop, please, for up to five minutes.
Wayne Redekop Mayor, The Corporation of the Town of Fort Erie, As an Individual
Thank you very much.
My name is Wayne H. Redekop, I'm the mayor of the Town of Fort Erie, and have been for nearly 18 of the past 25 years. I grew up in Fort Erie and have lived there for my entire life, with the exception of when I pursued my education. I'm a lawyer by profession and practised law for nearly 46 years. One of my summer jobs for four years as a student was as a customs officer at the Peace Bridge, which connects Fort Erie with Buffalo, New York. I served with the board of trustees of D'Youville College—now a university—in Buffalo, New York, between 2007 and 2015, the last two years as chairman of the board. I'm very familiar with my community and the dynamic of the Canada-United States border as it relates to people and trade.
One of my grandmothers was born in the United States, in Buffalo, New York. I can trace my ancestry through my American relatives back to the Mayflower. As a youth, I visited family living in western New York and associated with many Americans who spent summers with their families in Fort Erie as seasonal residents. The development of friendships and relationships continues to be the reality in what can best be described as our binational region. In fact, it is typical for many who grew up in south Niagara and western New York to have family and friends on both sides of the international border.
On February 21, 2023, I corresponded with Minister Chrystia Freeland on the underused housing tax. I did so because there are approximately 900 properties in Fort Erie that are owned by United States residents or citizens; that number constitutes about 6% of the housing stock in Fort Erie. The vast majority of those properties have been used and owned by families, some for multiple generations, as Mr. Ketteman has indicated. Some are cottages in the familiar sense; others are large homes located on Lake Erie, and all are typically used by the owners and their families as seasonal residences.
The underused housing tax is causing great anxiety, anger, disappointment and uncertainty among Fort Erie's American seasonal residents. These are individuals who are not only good friends and relatives in many cases, but also participants and supporters of local programs, activities and events. They're important customers of our local businesses. They are a vital element to the richness of life in our community. The fluidity of frequent travellers across the border between Niagara and western New York is a testament to the closeness of relationships between the people of our two countries—the greatest friends, allies and trading partners in the world. They are the living symbols of that relationship.
I understand the purpose of the tax was to prevent offshore investors from acquiring Canadian residences and taking them off the market for those in need of permanent housing. We all recognize the need for more housing units as the population of our country grows. As the tax relates to our American seasonal residents, though, it misses the mark. These seasonal residences have never been part of the community's permanent housing market and were not acquired for investment purposes. They're not owned by individuals or corporations that have no other connection to our community or expect to capitalize on the stressed housing market. They're owned by families that are considered to be part of our community in every sense.
In truth, the acquisition of housing units in Fort Erie by others who do not live in our municipality—although based in Canada—used for short-term rental purposes represents a greater challenge affecting the need for housing in our community. Perversely, the underused housing tax advantages those investors and could result in more opportunities for them to invest in property in Fort Erie and elsewhere as our American friends and relatives decide they cannot afford the new tax and choose to sell their properties, which would be incredibly unfortunate. At the expense of inadvertently punishing individuals and families who have been part of the life in our community for generations, the Government of Canada would benefit Canadian-based investors with no interest in our community other than the business opportunity. There could not be a worse result; it is a true example of an unintended consequence.
The exemptions provided for in the legislation are inadequate to provide relief for most of the Fort Erie American seasonal residents who own their own homes. Fort Erie, a municipality of 33,000 people, is part of the St. Catharines-Niagara census metropolitan area. The municipality is a mix of urban and rural areas containing several population centres that align with our urban boundaries. My understanding of the new legislation is that it provides that the seasonal homes within the urban boundaries of Fort Erie are subject to the underused housing tax, whereas those that are located outside our urban boundaries are not. That in itself highlights the unfairness regarding the tax.
I would suggest one solution to rectify this problem would be to change the exemption provision so that regardless of whether the property is inside or outside the urban boundary, the property is exempt if the owner or his or her spouse occupies the property for at least three months of the year.
The tax would then capture anyone who has acquired a house for investment or commercial purposes, while providing relief to those who use a house as a seasonal family residence. It would also defuse the simmering anger of our American neighbours, who will bear the brunt of this tax and the reporting mechanism contained in the legislation.
Many of our seasonal residents continue to have little, if any, knowledge of the reporting requirement of the tax and will be subject to extraordinary penalties for simply owning property that the federal government has classified for special taxation. Unless the federal government intends to reach out to all property owners affected by the underused housing tax, the Town of Fort Erie is willing to assist it to notify these property owners of any filing requirement or changes to the legislation and regulations.
This is an extremely important matter, not only for our seasonal residents, but also for our community.
Thank you for providing me the opportunity to address you today, and for your consideration of changes to the exemption provisions in the legislation and the need to provide clear, concise and timely information to the affected property owners.
Thank you.
Liberal
The Chair Liberal Judy Sgro
Thank you very much, Mayor Redekop.
We'll go on to Ms. Wright for up to five minutes, please.
Laurie Wright Homeowner, As an Individual
My name is Laurie Wright, and my husband Doug and I are American homeowners here in Canada. We own a single-family property along the southern shore of Ontario in Point Abino. Our home is just one of two other family properties that date back to when my family purchased here in 1905. The original farmhouse still stands on the lakefront, along with a barn and an old ice house.
I grew up spending every summer here in Canada. As a child, I didn't even realize that Canada was a different country. That's how close our border is to my hometown of Buffalo, New York.
We have three children, and my family also spends every summer here and considers our Canadian cottage our home. We support local businesses and tradesmen who work on our homes, and we eat in the local restaurants and support the local markets and farmers. I strongly believe in supporting these local businesses.
We spend almost 160 days here, from mid-May to mid-October, and now we winter in Florida. My husband and I planned our retirement to be both in Florida and here in Canada. This is why it's so upsetting that this 1% underused housing tax has been imposed on Americans in this border town. It is affecting many of my friends and family along the shoreline, and last summer we read that there was this huge housing shortage all over Canada. We understand what a large problem that is to solve.
When we were learning more and more about this new tax on foreign homeowners, we really didn't think that the intention was to tax American cottage owners along this region. It seems that there are many foreign investors who come in and buy a property that they just use to invest money here in Canada, and mostly that's in larger cities like Toronto and Vancouver. We're not those people. We consider it a privilege to spend our summers here.
As last summer went on, we learned that the law had been passed, but the details had not yet been figured out. As we learned more about this legislation, it was really kind of confusing. We had so many questions, like: How do we know if we even qualify for this? Will they send us a tax bill? There were so many vague directions and no clear answers. It was unclear how many of us summer residents this tax would affect.
As the year rolled out, we knew that we had to do something quickly to get our tax ID numbers, as rumour had it that it would be weeks before we would even receive a tax ID number.
To add to our confusion, we found out that our neighbours just across the street from us do not have to pay the 1% UHT, as they are considered rural. They live about 450 metres from my driveway, and if I understand it correctly, the qualifications are being based on the CMA census tract of St. Catharines. The homes across the street are considered rural, but my side of the street is not rural. The boundaries just didn't make any sense. I've attached a map that I think the clerk gave to the committee for reference.
I'd like to go back to our history, though, here along this shoreline, and my friendships with many Canadians that have been fostered for many years. Being from a border town like Buffalo, New York, we have Canadians who travel to our region in Ellicotville to ski and then go down to Florida in the winter as snowbirds, like my husband and me.
We see many Ontario plates all over the United States, and we see many of our Canadian friends in Florida over the winter, when they are residing in their winter residences. It's nice to have dinner with them or play a game of golf while they are in Florida, and I think our friendships really go beyond our borders.
We love our Canadian home. We consider it just that, our home, not our financial investment. We want to continue our plan of being retired here, supporting the local community and watching our children and grandchildren carry on that tradition of spending summers along the shores of Lake Erie.
The 1% UHT is not friendly to the Americans who live along this region. It's an ugly can of worms that is just not friendly at all. We hope that you understand how negatively this affects us.
Thank you to the members of Parliament, especially Tony Baldinelli, and the House of Commons for taking the time this afternoon to hear our frustrations with this tax and your consideration to fix it.
Thank you.
Liberal
The Chair Liberal Judy Sgro
Thank you very much, Ms. Wright. We're very happy to have you living in Canada as well.
We'll go to Mr. Baldinelli. If we're going to try to get a full first round, how about we do five minutes rather than six, to try to give everybody an opportunity in the first round?
Mr. Baldinelli, you have five minutes, please.
Conservative
Tony Baldinelli Conservative Niagara Falls, ON
Thank you, Madam Chair.
Thank you, Mayor Redekop and Mr. Ketteman and Ms. Wright, for attending this afternoon and sharing your stories.
I'm going to go first to Mayor Redekop.
It was interesting. We had finance officials here earlier. They started the consultation process in August 2021, essentially right before our federal election campaign, which was called on August 15.
Were your office or your staff aware of the consultation process that was being undertaken by the federal government on the UHT?
Mayor, The Corporation of the Town of Fort Erie, As an Individual
I'm going to say I had some knowledge. I'm not going to say we were provided direct notification from the government. In the world I live in, we have to keep eye on these things, so we had some understanding that this was being contemplated. I actually discounted it. I really didn't think it would come to the American seasonal residences being taxed in this fashion.
I was aware of it, but certainly not officially.