It appears Vancouver mayor Gregor Robertson is serious about improving housing affordability in the west coast city, proposing a new tax and steep consequences for investors who leave homes sitting empty.
Robertson has suggested a 1% tax on the total home value for owners of vacant Vancouver real estate, in addition to their annual property taxes. In a city where the majority of detached and semi-detached housing exceeds the $1-million mark, absentee owners could expect to pay around $10,000 or more annually on their housing investment. But that’s not all – homeowners who fail to report or misrepresent whether their homes are vacant could face that much in fines… per day.
Cracking Down on Empty Housing
City council is to vote on the Empty Home Tax (EHT) next week. If passed, the tax – the first of its kind in Canada – will take effect on January 1, 2017. Robertson believes the tax could effectively return 1,500 to 4,200 units to the rental market, and improve Vancouver’s rental vacancy rate from 0.6% to 3.5%.
“Vancouver is in a rental-housing crisis. The City won’t sit on the sidelines while over 20,000 empty and under-occupied properties hold back homes from renters,” he told reporters on Wednesday. According to a city-commissioned study, there are 10,800 homes sitting empty, with an additional 10,000 not fully used by their owners. The 2011 Census conducted by the Federal Government also found more than 22,000 homes are sitting empty.
“It’s absolutely unacceptable for all that housing to be treated as a commodity first – as a business holding – when housing is in such short supply,” Robertson added.
States the City of Vancouver’s website, “Low rental vacancy rates are putting stress on Vancouver’s renters, contributing to a housing crisis in our city. Homes that are left empty could be used to help reduce low vacancy rates.”
Owners Must Report Home Status
Should the tax be passed, the first round would be due on April 15, 2018. Homeowners are required to self-report to the municipal government whether their home is their principal residence, tenanted for a total of six months each year, vacant, or eligible for an exemption (Canadians who only reside in their homes for part of the year, such as snowbirds, would fall into this category). Only homes reported as vacant will be subject to the tax. Robertson adds that it won’t be applicable to most Vancouverites, instead aggressively targeting out-of-country buyers who purchase real estate solely for investment purposes.
Efforts to Improve Housing Affordability for Locals
Cracking down on foreign investment in Vancouver has been a main mandate of Robertson’s, who has introduced and supported several initiatives to give priority to local housing needs. In August, a 15% tax was implemented for all foreign buyers of Metro Vancouver real estate. Most recently, at a federal level, it was mandated that foreign buyers who do not reside in Canada the year their homes are purchased must pay full taxes on capital gains when the home is sold – a tax exemption granted to Canadian homeowners when they sell their principal residence. It was also established that only one principal residence may be claimed per family.
These changes follow scathing reports that foreign buyers are allegedly taking advantage of Canada’s lax taxation and government oversight, buying up multiple properties, claiming them as principal residences, and selling them for tax-free profit. This practice is blamed for driving British Columbia housing prices to unsustainable levels, and pricing local Vancouverites out of their own markets.
Interest in, and sales of, Vancouver’s luxury home segment have plummeted since the new rules took place, with units sold dipping 38.8% year over year in October, according to the Real Estate Board of Greater Vancouver. However, it remains to be seen whether price relief will follow, and whether rental housing supply will improve due to the new measures.
Do you think an Empty House Tax will improve rental vacancy in Vancouver? Tell us your thoughts in the comments!