BC is set to increase its Speculation and Vacancy Tax on January 1, 2026, even as the federal government eliminates the Underused Housing Tax. This creates major questions for homeowners, investors, and anyone considering purchasing or holding a second property in West Vancouver, North Vancouver, or the broader Metro Vancouver area.While the provincial government continues to position the tax as a tool to increase housing availability, many experts are questioning whether the policy remains effective in today’s slower real estate market.WHAT IS CHANGING PROVINCIALLY?
The BC Speculation and Vacancy Tax will rise to:• 3% of assessed value for foreign owners and untaxed worldwide earners
• 1% of assessed value for Canadian citizens or permanent residents who are not untaxed worldwide earnersFrom 2019 to 2025, the rates were 2% and 0.5% respectively.The tax applies to a specific group of owners, primarily those who leave properties vacant for most of the year in designated taxable areas, including West Vancouver and North Vancouver.
HOW DOES THE PROVINCIAL TAX WORK?
The tax was originally introduced in 2018 with the stated goal of:• reducing the number of vacant homes
• increasing rental supply
• ensuring foreign owners and those with primarily foreign income contribute fairly to BC’s housing system
The BC government reports that the tax has raised more than $470 million to support affordable housing initiatives, and that an independent review found it helped add approximately 20,000 condo units to the long-term rental market between 2018 and 2020.FEDERAL POLICY IS MOVING IN THE OPPOSITE DIRECTION
The federal government is eliminating the Underused Housing Tax, a one per cent annual tax on vacant or underused residential properties owned by non-residents, as part of Budget 2025.This has sparked debate about whether provincial and federal housing policies are becoming misaligned.Some industry voices argue that if the federal government is scrapping its version of the tax due to limited effectiveness, BC should reconsider increasing its own.EXPERT OPINIONS
Opinions are divided:• Some economists question whether the speculation tax has significantly improved affordability, especially as the market has cooled, inventory has increased, and rents have stabilized.
• Others suggest the tax may function more as a wealth tax than a housing policy.
• Legal challenges continue, with questions around constitutionality and mobility rights still unresolved.In today’s market conditions, where inventory is higher and competition is lower than in previous years, it is unclear whether raising the tax will produce meaningful changes in availability or pricing.WHO WILL FEEL THE IMPACT MOST?
The increased tax will primarily affect:• owners of second homes
• foreign income households
• investors holding vacant properties
• people who must temporarily leave their homes for work or medical reasonsMany property owners have already responded by selling or renting out affected properties.WHAT THIS MEANS FOR WEST VANCOUVER AND NORTH VANCOUVER
On the North Shore, the tax has had mixed results.West Vancouver in particular has a high percentage of second homes and part-time residents, and some owners have chosen to sell or relocate rather than pay the tax. Others have entered the rental market, increasing available supply, but not necessarily affecting long-term affordability.North Vancouver has seen more direct rental conversion, especially in condominium buildings, although the impact is difficult to isolate from other market forces.IS THE TAX STILL EFFECTIVE IN 2026?
With higher inventory, slower sales activity, and flattening prices, many are questioning whether increasing the tax will meaningfully influence affordability. Some suggest that the policy may now be more symbolic than impactful, signaling action rather than addressing core issues such as non-market housing investment.FINAL THOUGHTS
The increase to the Speculation and Vacancy Tax may have less influence on affordability than originally intended, especially as the federal government moves in the opposite direction. The impact will largely depend on individual property use and location.For North Shore homeowners and investors, understanding the tax changes and planning ahead will be increasingly important as policy continues to evolve.If you own a second home or an investment property and want to know how these changes could affect you, I’m always happy to provide guidance based on current market conditions in West Vancouver and North Vancouver.