New foreign homeowners’ tax will hurt Canada’s border community, mayor warns
The mayor of a Canadian border community warns that the federal government’s new property tax on foreign property will hurt the local economy and hurt its relationships with seasonal residents.
In a two-page letter sent Tuesday to Treasury Secretary Chrystia Freeland, Wayne Redekop, Mayor of Fort Erie, Ont. – outlined his concerns about the unintended consequences of the new tax on unused homes and called on the federal government to make changes.
“I am concerned that you and the administration do not understand the dynamics of the border that we share with the United States,” Redekop wrote.
“Fort Erie’s seasonal residents are not just good friends and relatives…they are important customers of our local businesses.”
The new tax on unused residential property came into force last year. It forces foreign homeowners to pay an annual tax of 1 percent on the value of residential properties classified as “unoccupied” or “vacant” by the Canada Revenue Agency (CRA).
The tax is intended to help cool Canada’s housing market, particularly in major cities where housing is scarce. The goal is to discourage foreign investors from parking their money in residential properties that end up vacant.
While the tax offers significant exemptions for seasonal property owners, they apply broadly to rural and vacation communities.
Some cottages in more populated regions are not eligible. These regions include parts of southern Ontario such as the Crystal Beach area of Fort Erie.
Since there are some cottages in the St. Catharines-Niagara Metropolitan Census Area, they are not exempt from the tax.
“I can assure you that the tax is causing great anxiety, anger, disappointment and uncertainty among our seasonal residents,” Redekop wrote in the letter. “You add an important element to the richness of life in our community.”
Government sticks to politics
The tax has prompted political threats of retaliation against Canadians who own property in the US. But Ottawa is sticking to politics for now.
“Our government was elected on a platform that included a national tax on non-Canadian-owned residential real estate deemed vacant or underutilized by non-residents to address concerns about the impact of foreign investment on housing costs and concerns about Canadians being pushed out of the housing market.” , said Adrienne Vaupshas, spokeswoman at Freeland’s office.
“The government will continue to monitor the impact of this measure.”
CBC News asked the Freeland bureau a series of questions about the policy last week before Redekop sent his letter.
Redekop said in that letter he understood the purpose of the tax was to “disable offshore investors from acquiring Canadian residences and keep them out of the market for those who need permanent housing.”
However, he argued that the exceptions were “insufficient” and applied unfairly.
“Our city is a mix of town and country,” wrote Redekop. “…Seasonal housing within the Fort Erie city limits is subject to the underoccupancy tax, [while] those located outside of our city limits are not.
“That alone underscores an injustice about the tax.”
Redekop said he would like to see an additional exemption based on time spent at the property. Since most American homeowners spend the spring and summer months in Canada, there should be an exception for anyone spending at least three months a year on the property.
An American lawmaker who represents dozens of these property owners told CBC News he is open to any solutions that exempt his constituents.
“If this isn’t resolved, then we need to consider some kind of action that increases the leverage that we have,” said Rep. Brian Higgins, a Democrat representing the frontier community of Buffalo, NY
A spokesman for his office said the issue was being discussed with stakeholders, the US Embassy in Canada and members of Parliament.
Redekop said many seasonal residents do not know what is expected of them under this tax. All foreign property owners, whether exempt or not, must now register with the CRA and file a return by April 30.
According to a Canadian government website, the minimum penalty for failing to file a tax return is $5,000.
“Many of our seasonal residents will have little or no knowledge of the reporting requirement,” Redekop said.
“The Treasurer of the City of Fort Erie has contacted the Canadian Revenue Agency multiple times, with no response, for information that would help us alert seasonal property owners of their obligations under this legislation.”