The owners of second homes and a vacant lot in the City of Vancouver have lost their bid to get the city’s Empty Homes Tax struck down in B.C. Supreme Court.
Li (Lucy) Dan, Danice Macleod and Christopher Brittain advanced several arguments for why the bylaw should be declared invalid in their petition for judicial review, but Justice Palbinder Kaur Shergill rejected each one in a decision issued Friday and published online this week.
A landlord, a musician and a retired couple
Adopted in 2016, the city’s Vacancy Tax Bylaw—also known as the Empty Homes Tax—was intended to increase the supply of rental housing by taxing property owners who leave their homes vacant.
The bylaw requires property owners to submit an annual declaration of the status of their property, and imposes a tax of three per cent—up from one per cent at the time of adoption—of the property’s assessed value on those who neither live in nor rent out their properties.
There are a variety of exemptions to the bylaw, but none of them applied to the situations of Dan, Macleod and Brittain, the court heard.
According to Shergill’s decision, Dan “owns several residential properties in Vancouver and China, which she rents out to derive an income.” She lives in Vancouver.
In August 2020, she purchased a property on Marine Drive for $3.5 million. The parcel was vacant land, having previously been home to a house that had burned down and been demolished.
“Ms. Dan intended to build a new home for personal use or rental, but the surge in construction costs during the COVID-19 pandemic made development financially unfeasible,” the decision reads. “Consequently, she could neither live on the property nor rent it out, leaving her no way to avoid the Empty Homes Tax.”
Dan was required to pay the tax in 2022—when, the decision says, it amounted to a $113,000 expense for her—and in 2023. She has since begun developing the lot and now qualifies for an exemption to the tax.
Macleod is described in the decision as “a musician in her late 70s” who owns homes in Vancouver and Banff and “has split her time between them for decades.”
“Her Banff property is under a long-term lease with the federal government,” it reads.
“To maintain the lease, she must make it her principal residence. Ms. Macleod states she is emotionally attached to both properties, describing them as ‘like family,’ and finds the idea of selling either of them deeply distressing. Practical considerations also make selling difficult: her Banff home is suited to aging in place and is where she writes her music; and her Vancouver home contains decades of sentimental belongings.”
Macleod spoke in opposition to the vacancy tax bylaw when it was under consideration at city council. The court decision indicates she doesn’t want to take on the stress of being a landlord after past bad experiences. She has been avoiding the tax by having acquaintances live in her Vancouver home as a principal residence.
“A former romantic partner has been living there since 2019, which makes it emotionally painful to visit her home,” the decision reads. “Ms. Macleod describes the tax as a ‘continuous nightmare,’ causing severe psychological stress and drastically limiting her ability to use her Vancouver home as she wishes.”
Brittain and his wife are retirees in their 80s who live in Langley, according to the decision. They bought an apartment in Vancouver’s Coal Harbour neighbourhood in 2013, “intending to use it regularly as part of their lifestyle.”
“Between 2013 and early-2018, the Brittains spent three to four days per week at the apartment year-round, plus several weeks each summer,” the decision reads. “Their children also used it frequently. The apartment was fully furnished and ‘rarely empty for more than a day or two.’ Mr. Brittain viewed the apartment as a meaningful part of their lives, rather than an investment property.”
In 2018, Brittain discovered that the Empty Homes Tax would apply to his property and was “shocked and upset.”
After paying about $6,000 in the first year the tax applied, the family concluded it couldn’t afford the ongoing expense and “reluctantly” began renting the apartment out.
“Mr. Brittain avers to being dismayed by subsequent tax rate increases, which make it impossible for them to resume using the property even for a single year,” the decision reads.
“They will occasionally stay in a hotel in Vancouver but cannot afford to do so except ‘on rare occasions.’ Mr. Brittain states that the EHT has significantly altered their retirement plans, marred their quality of life, and left them longing to return to Vancouver living if the tax were lifted or exemptions applied.”
Legal arguments
While the trio of petitioners each came from different circumstances, they shared the goal of ending the Empty Homes Tax, or at least securing exemptions from it for themselves.
Though different petitioners advanced different arguments against the bylaw, there were a total of four that Shergill considered in her decision.
The petitioners argued that the city had failed to comply with the Vancouver Charter by choosing not to hold a public hearing prior to enacting the bylaw. They also argued that the city had acted unreasonably in applying the bylaw to vacant land and second homes that are used on a regular basis.
Macleod and Brittain further argued that the bylaw violated the Canadian Charter of Rights and Freedoms, specifically Section 7’s protection of the rights to life, liberty and security of the person and Section 8’s prohibition against unreasonable search and seizure.
Dan did not advance either of the Charter arguments in her petition.
Under the Vancouver Charter, the city is required to hold a public hearing before adopting any zoning bylaw.
The city did not dispute this requirement, arguing in court that its vacancy tax bylaw was not subject to the requirement because it was not a zoning bylaw.
The petitioners claimed that the bylaw qualifies as zoning-related because it “was intended and designed to, and in fact does, regulate the use and occupancy of buildings.”
Shergill disagreed with this argument, however, finding that “regulating” and “taxing” are two different things under the Vancouver Charter.
“Simply because a bylaw indirectly influences the use or occupancy of land, does not mean that it is a zoning bylaw,” the decision reads.
Likewise, when considering the argument that the bylaw was unreasonable for failing to exempt frequently used second homes, Shergill found the council’s rationale for its decision to be “transparent, intelligible and justified.”
“Crafting an effective yet fair tax is a difficult balancing act requiring consideration of many different factors,” the decision reads.
“As part of this balancing act, council decided to provide some exemptions but not others. That the council landed at a place that the petitioners believe was unfair to them does not mean that the reasoning process was flawed. It was open to council to decide where to draw the line—even if that line captured frequently used second homes.”
In a similar vein, though councillors did not discuss the rationale for subjecting vacant land to the tax during debate on the bylaw, the provincial legislation enabling the city to impose a vacancy tax was deliberately broad, according to Shergill’s decision.
“Applying the tax to vacant land is consistent with the objectives of Part XXX (of the Vancouver Charter),” the decision reads. “Part XXX was designed to address Vancouver’s housing crisis by encouraging optimal use of housing resources. Those resources include vacant land that can be developed into usable residential homes.”
With regard to the Charter challenges, the judge ruled that neither Section 7 nor Section 8 was engaged by the circumstances of the petitioners.
The Section 7 protection of the right to liberty is not impugned by tax consequences of government decisions, which courts have “repeatedly found” to be a purely economic interest, according to Shergill’s decision.
Meanwhile, Section 8’s protection against unreasonable search and seizure was not engaged because—though the bylaw gives the city the authority to enter a property without a warrant to determine occupancy for Empty Homes Tax purposes—the city has never attempted to do so with regard to either Macleod’s or Brittain’s properties.
Because of this, and because there was no ongoing investigation into either petitioner’s property that could give rise to a “cognizable threat” of a breach, the Section 8 challenge was premature, according to Shergill.
“Without evidence describing the scope, timing, or manner of any proposed entry, the court lacks a sufficient factual basis to determine whether the second home petitioners’ reasonable expectation of privacy would be intruded upon in an unconstitutional manner, or whether the statutory authorization is unreasonable in context,” the decision concludes.
Accordingly, Shergill dismissed the petition, declining to quash or invalidate the Empty Homes Tax bylaw.
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