Underused Housing Tax, BC Canada Guide

The Underused Housing Tax (UHT) is a federal Canadian tax that was introduced as an annual 1% levy on the ownership of vacant or underused residential properties in Canada, primarily targeting non-resident, non-Canadian owners.

It took effect on January 1, 2022, under the Underused Housing Tax Act. Its goal was to discourage empty or underused homes and encourage more productive use of housing stock.

Major Change in 2026: The Tax Ends for 2025 & Later Years

As of March 26, 2026, when the Budget 2025 Implementation Act, No. 1 received royal assent, no Underused Housing Tax is payable, and no UHT return is required for the 2025 calendar year and all subsequent years.

The Act will eventually be fully repealed (effective January 1, 2035), but the practical effect is that the federal UHT regime has ended after the 2024 calendar year.

Important caveat: Obligations for the 2022, 2023, and 2024 calendar years remain fully in force. Affected owners who have not yet filed returns or paid tax for those years must still do so (with possible penalties and interest).

What “repealed effective January 1, 2035” means

The Underused Housing Tax Act (and its regulations) will be completely removed from Canadian law on that date. Until then, the Act remains in force, but only as a shell.

Governments often do this when they kill a tax. Reasons include:

• The CRA still needs legal authority to administer, audit, collect, assess penalties/interest, and handle appeals for the past years (2022, 2023, and 2024).

• Statute-of-limitations periods, court cases, and collection efforts for those earlier years can stretch out for several years.

• Keeping the Act around until 2035 gives a long, clean window for residual administrative work without leaving a permanent tax law on the books that no longer does anything.

After January 1, 2035, the Act will disappear entirely from the statute books. Any remaining enforcement issues for the old years would then be handled under general tax administration or collection rules (if any still exist by then).

Who Was Affected (While the Tax Applied)

• Affected owners (generally non-resident non-Canadians, certain foreign corporations, and some trusts or partnerships) had to file an annual return (Form UHT-2900) for each residential property they owned on December 31 of the year.

• Most Canadian citizens, permanent residents, and Canadian-controlled entities were excluded owners and did not have to file or pay (especially after expansions to the excluded-owner rules starting with the 2023 year).

Even affected owners often qualified for exemptions and paid nothing, but still had to file a return to claim the exemption.

UHT Exemptions & Categories

Based on location and limited personal use

• Vacation property located in an eligible (prescribed) area of Canada and used by the owner or their spouse/common-law partner for at least 28 days in the year (additional conditions applied starting in 2024)

Based on how the property was used / occupied

• Primary place of residence (of the owner, spouse/common-law partner, or certain children studying at a designated learning institution)

• Qualifying occupancy of at least 180 days in the calendar year (continuous periods of at least one month by qualifying occupants, such as arm’s-length tenants under a written agreement, or certain family members)

Based on the property’s availability / condition

• Newly constructed (construction not substantially completed on or before March 31 of the calendar year; or certain inventory exemptions for builders)

• Not suitable for year-round use as a place of residence

• Seasonally inaccessible (public access not maintained year-round)

• Uninhabitable for a required period because of:

  • A disaster or hazardous condition beyond the owner’s reasonable control (generally at least 60 consecutive days), or

  • A renovation (generally at least 120 consecutive days, without unreasonable delay)

• Employee accommodation located in an eligible area of Canada (available starting with the 2023 calendar year)

Based on the type of owner / ownership situation

• New owner in the calendar year (acquired the property during that year)

• Deceased individual, or their personal representative or co-owner (with conditions)

• Certain partners of a specified Canadian partnership, trustees of a specified Canadian trust, or specified Canadian corporations (mainly relevant for the 2022 calendar year under transitional rules)

The CRA published specific notices (UHTN5, UHTN6, UHTN7, UHTN9, UHTN10, UHTN11, UHTN12, UHTN13, etc.) explaining them.

How the Tax Was Calculated

The rate was 1% of the property’s taxable value, which is usually the higher of assessed value or a prescribed amount, multiplied by the owner’s ownership percentage.

Owners could elect to use fair market value instead in some cases.

Why It Matters in 2026 & Beyond

Although the federal UHT is gone for current and future years, many provinces and municipalities continue to levy their own vacancy or speculation taxes.

Examples include:

• British Columbia’s Speculation and Vacancy Tax (higher rates for foreign owners and “satellite families”)

• City of Vancouver’s Empty Homes Tax

• Okanagan communities, like:

  • City of Kelowna (included since the tax began in 2018)

  • City of West Kelowna (included since 2018)

  • District of Lake Country

  • District of Peachland

  • City of Vernon

  • District of Coldstream

  • City of Penticton

  • District of Summerland

  • Additional nearby communities such as Salmon Arm are also included.

These provincial and municipal rules operate independently of the federal UHT and can still apply significant annual costs to vacant or underused properties.

Bottom Line for Property Owners in 2026

• No federal UHT return or payment is required for the 2025 calendar year or any later years. The tax effectively ended after 2024.

• Catch up on any outstanding 2022–2024 filings if you were an affected owner. Penalties and interest can still apply for late or missing returns from those years.

• Check provincial and municipal vacancy/speculation tax rules that still apply where your property is located. These are completely separate from the federal UHT and remain in force.

  • In British Columbia this includes the Speculation and Vacancy Tax (SVT), which applies in Kelowna, West Kelowna, Lake Country, Peachland, Vernon, Coldstream, Penticton, Summerland and many other communities. 2026 rates are 1% for most Canadian owners and 3% for foreign owners/satellite families (rising to 4% in 2027).

  • Vancouver has its own Empty Homes Tax in addition to the provincial SVT.

  • Other provinces and cities may have their own versions.

• Even if you are exempt, many of these provincial/municipal taxes still require an annual declaration. Missing the declaration can trigger the full tax plus penalties.

• Keep records related to occupancy, rental agreements, renovations, or other exemption claims for any past UHT years that remain open to audit.

• Confirm your specific situation — ownership structure (individual, trust, corporation, partnership), residency status, and exact property location all matter.

For official details, refer to the Canada Revenue Agency’s Underused Housing Tax pages (canada.ca/cra-uht) for residual 2022–2024 matters, and the relevant provincial or municipal websites for ongoing vacancy taxes.

Rules around past years, penalties, and remaining obligations can be technical — consult a tax professional or the CRA if you have outstanding matters from 2022–2024.

This information is provided for general educational purposes only and is based on publicly available sources as of August 2026. It is not legal, tax, or financial advice. Tax rules are complex, subject to change, and depend on individual circumstances. Always verify current requirements directly with the Canada Revenue Agency, the British Columbia Ministry of Finance, or a qualified tax professional before making decisions or filing returns.