From the Fraser Institute

By Jake Fuss and Austin Thompson

Taxing part-time residency is no substitute for genuine housing reform, and may in fact deter investment in new housing.

A recent court decision has cleared the way for Canmore next year to impose a new “Livability Tax”—a 0.4 per cent property tax surcharge for homes left unoccupied for more than half the year. Mayor Sean Krausert called the ruling a “big win for Canmore.” But without addressing the root cause of Canmore’s housing shortage—too few new homes being built—this new tax is simply a costly distraction.

Canmore is not alone in taxing housing that is supposedly underused. Vancouver, Toronto, Ottawa and the federal government have imposed similar taxes. According to proponents, these taxes encourage part-time residents to sell or rent their properties to full-time residents. However, the evidence for this is underwhelming.

A study of Vancouver’s Empty Homes Tax found that it shifted 5,355 homes from part- to full-time residency between 2016 and 2021. While that may seem like progress, during the same five-year period construction started on more than 240,000 new homes. And despite the tax, home prices and rents continued to rise significantly. Again, because new housing construction has not kept pace with population growth, partly due to policies that discourage homebuilding such as high municipal fees, long permit approval wait times, and restrictive rules on what can be built and where—challenges that are familiar to Canmore’s homebuilders. Taxing part-time residency is no substitute for genuine housing reform, and may in fact deter investment in new housing.

Vacant home taxes are also costly for governments to administer. According to Canmore’s latest budget, it will cost $920,000 in the first year and $820,000 in the second year just to administer the Livability Tax. That amounts to between eight and nine per cent of the projected $10.3 million in annual revenue generated by the tax. By contrast, the administrative cost of ordinary property tax administration in Canada is typically about two per cent of revenue. The Livability Tax will apply to Canmore residents that occupy their housing unit for less than 183 days a year.

Crucially, the stakes of vacant home taxation are unusually high for Canmore. A study commissioned by the municipality estimates that one in four homes are likely not occupied full-time . That may increase the tax’s reach, but also its potential harm.

Why? Because deterring part-time residents is a risky proposition. The underlying assumption of the Livability Tax is that full-time residents are more valuable to the community than part-time residents. But the town council’s arbitrary 183-day threshold does not account for a resident’s contribution to Canmore’s economy or civic life. In many communities in North America, particularly in areas with wide ranges in seasonal temperatures and weather, part-time residents may help comprise the lifeblood of the community. Canmore may not realize the full cost of deterring part-time residents until they are gone.

And the Livability Tax comes on top of a recent hike in property tax rates for so-called “tourist homes,” which now pay roughly triple the standard rate. While these measures may appeal to some permanent residents, they risk deterring homebuilding and undermining Canmore’s appeal as a tourist destination.

Meanwhile, the town’s actual housing supply remains stagnant. Only 321 new homes were started in 2024. Some constraints on housing development are unavoidable given that Canmore is hemmed in by mountains and protected land. But other impediments to new housing—rooted in policy and political will—are not.

Rather than targeting part-time residents, Canmore should remove policy barriers that restrict new housing development. The recently approved Gateway and Palliser Lane projects show that relaxing municipal rules—on building heights, setbacks and parking requirements—can unlock more housing development. Building that kind of flexibility into policy and applying it more widely could go a long way toward easing the housing crunch.

If Canmore wants to improve housing affordability, it needs to build—not tax—its way there.

Jake Fuss

Director, Fiscal Studies, Fraser Institute

Austin Thompson

Senior Policy Analyst, Fraser Institute