By Sherry MacLeod
Managing Broker of Cape Breton Realty
For the past few years, the federal Underused Housing Tax (UHT) has been a regular source of confusion, frustration, and no small amount of paperwork for property owners across Canada – particularly in rural and seasonal markets like those found throughout Cape Breton and Northeastern Nova Scotia.
The tax was introduced as a 1% annual levy aimed largely at non-resident owners of vacant or underused homes. The idea was to discourage speculation and help free up housing supply. On paper, that sounded sensible enough. On the ground, however, the UHT quickly became a case study in how good intentions can get lost in complexity.
In the federal government’s most recent budget, tabled in November 2025, Ottawa quietly (thankfully) signalled that it had heard the message.
As part of Budget 2025, the federal government introduced legislation that would eliminate the Underused Housing Tax for the 2025 calendar year and beyond, and -just as importantly remove the requirement to file UHT returns for those years. Once enacted, that means no tax and no annual filing starting with 2025. YES!!!!
For most property owners, this change will first be felt in 2026, when they might otherwise have expected to file a return for the 2025 year. Instead, there will be nothing to file a rare and welcome development in the world of tax compliance. When you go to the website, it simply says
“Canada’s Underused Housing Tax (UHT) – Eliminated!”
That is a notable retreat for a policy that has been in place only a short time. It also invites a reasonable question: if the tax is already being unwound, what did we learn from it?
When paperwork takes centre stage
One of the biggest problems with the UHT was that it required significant effort even when no tax was ultimately owed. Owners had to file separate returns for each property, and missing a filing – even unintentionally could result in steep penalties.
In rural and coastal communities, this landed awkwardly. Properties here often include family cottages, inherited homes, seasonal residences, and modest houses that are not part of speculative investment strategies. Yet owners were still asked to navigate dense definitions, exemptions, and deadlines that felt far removed from everyday reality.
The predictable result was that people spent more time worrying about forms than housing outcomes. When avoiding penalties becomes the main objective, the policy itself has lost the plot.
Not the first course correction
This is not the first time Ottawa has stepped back from the UHT. Amendments enacted in 2024 already reduced filing requirements for many Canadian owners, an early admission that the original approach cast too wide a net.
Budget 2025 goes further, proposing to end the tax altogether for future years.
It is important to be clear, however, that obligations for earlier years – particularly 2022, 2023, and 2024 still remain. The repeal is forward-looking, not retroactive. Past filings still matter.
What this fixes – and what it doesn’t
Ending the Underused Housing Tax will reduce confusion and administrative burden, but it does not magically solve Canada’s housing challenges especially in rural Nova Scotia.
Here, housing pressures are driven less by speculation and more by aging housing stock, limited construction capacity, infrastructure gaps, and the difficulty of making rental and multi-unit projects financially viable in smaller markets. Those issues are not solved with complicated tax forms.
If governments want real results, the most effective tools tend to be practical ones: incentives to build, support for serviced land, realistic financing options, and policies that reflect how rural and coastal communities actually function.
A message worth sharing closer to home
Ottawa’s decision to wind down the UHT is a quiet but important acknowledgement that policies creating more paperwork than progress deserve another look.
That lesson should resonate closer to home as well.
Here in Nova Scotia, the province continues to impose non-resident taxes and barriers that discourage investment, seasonal ownership, and long-term commitment to our communities. These measures do little to increase housing supply and send an unwelcoming message to people who want to live here, retire here, or invest responsibly here.
If the federal government can recognize when a tax has missed its mark, surely the province can do the same. It is time to stop piling on paperwork and tax burden and start focusing on policies that actually help.
Ending the Underused Housing Tax is a first step. We need far more.
And one can only hope that Premier Tim Houston is watching – because Nova Scotia’s housing challenges will not be solved with more forms, more penalties, and more deterrents to investment. They will be solved with clarity, common sense, and policies that make it easier, not harder, for people to put down roots in this province.
