Underused Housing Tax
The Underused Housing Tax is a federal 1% annual tax on vacant or underused homes owned by non-resident, non-Canadian entities.
September 30, 2025
What is the Underused Housing Tax?
The Underused Housing Tax (UHT) is a federal annual 1% tax on the value of vacant or underused residential property owned by non-resident, non-Canadian individuals or corporations. Certain exemptions apply for Canadian citizens, permanent residents, and qualifying uses of the property.
Why the Underused Housing Tax Matters in Real Estate
The UHT matters in real estate because it aims to address housing supply challenges by discouraging property speculation and foreign ownership of underused homes. It also generates federal revenue and supports broader housing policy goals.
Example of the Underused Housing Tax in Action
A foreign investor owns a vacant condo in Toronto valued at $800,000. Without qualifying exemptions, they must pay $8,000 annually under the Underused Housing Tax.
Key Takeaways
- Federal tax on underused or vacant housing by non-residents.
- Set at 1% of property value annually.
- Aims to discourage speculation and improve supply.
- Exemptions available for citizens, residents, and qualifying uses.
- Applies nationwide, separate from provincial or municipal taxes.
Canadian respondents were more likely to expect an undersupply of development/redevelopment equity capital (63%) than debt capital (46%) in 2027. These are survey expectations, not measured financing volumes. Source: PwC and ULI, Emerging Trends in Real Estate 2027, pp. 136–137. Original chart.
Toronto census metropolitan area housing starts fell from 37,718 units in 2024 to 26,087 in 2025, a 30.8% decline (rounded to 31%). Starts measure construction begun, not completed homes. Source: CMHC, as cited in PwC and ULI, Emerging Trends in Real Estate 2027, p. 145. Original chart.
Illustrative calculation: a $4.5-million value ceiling versus income-based capacity of about $4.25 million at 4%, $3.62 million at 5% and $3.13 million at 6%. Assumes 50-year amortization and 1.15 debt coverage.
Source: Department of Finance missing-middle backgrounder and Budget 2026 Chapter 3, November 5, 2026. Fiscal-year funding starts are not home-completion dates.
