Editorial: Why Latest Vacant Home Tax Idea is Not a Vacant Home Tax

Editorial: Why Latest Vacant Home Tax Idea is Not a Vacant Home Tax hero image
The latest proposal for a vacant home tax in Vancouver would include many occupied homes – and that’s why it might just work

Another week, another suggestion to help ease Vancouver’s housing affordability problem.

This week it was the team at the University of British Columbia’s Sauder School of Business, led by assistant UBC professor Thomas Davidoff and professor Tsur Somerville, who put forward a new proposal for a vacant home tax. This would be an annual surcharge of 1.5 per cent of a home’s assessed value, although the vast majority of Vancouver home owners would be able to file for exemption. So, on a home of $3 million, if you are not exempt, you’d have to pay the City an extra $45,000 a year. Leaving a million-dollar condo empty would cost you $15,000 a year. And so on (see the full proposal document below).

Another vacant home tax plan? I hear you say. Haven’t we seen those proposed before but never come to fruition?

Well, yes, we have – but this one is different. It’s one that actually stands an outside chance of being effective. And here’s why.

This is not actually a tax on vacant homes. In fact, under their proposal, some wealthy homeowners who do actually occupy their homes, even year-round occupants, would also have to pay up. (Which thankfully means that there would be no need to create an inevitably flawed vacant home registry, and have residents snitching on absent neighbours, as has been previously mooted.)

Nor is it a necessarily tax on overseas investors – some wealthy Canadians would also be on the hook. Yes, it’s true that more overseas investors than Canadians would likely be affected, but the point is that it’s not about the owner’s nationality.

No, strictly speaking, this is more a tax on wealthy homeowners of any nationality who do simply not contribute to the local economy, either by paying Canadian income taxes, or by contributing to the rental pool. Of course, this would include homeowners who leave their homes vacant and unrented, so it is largely a tax on vacant homes and overseas investors. But, as Davidoff told me, it would also include home occupants who don’t pay Canadian income tax, such as those for whom Canada is not their country of employment, or people living off private wealth.

Let’s take, for example, an overseas-employed business person who owns a Vancouver home, and mostly lives and pays income taxes in their country of employment, but whose family lives in the Vancouver property most of the time. That homeowner would not be exempt from this tax, even though the home is occupied. Nor would an owner who lives and pays taxes overseas, who has purchased a Vancouver home for their young adult children to live in while they attend local school. Nor would a person who is simply privately wealthy and lives in their property year-round but doesn’t pay any income tax.

So what about if you’re retired and not paying income tax, or simply not earning any money? Well, you are exempt if you’re of retirement age and getting a Canadian pension, or if you're a veteran. Or, if you’re a long-term contributor to the local economy, let’s say you’ve lived in that property for a number of years, you can get an exemption even if you’re not paying income tax. So that means long-term unemployed people would also be exempt, for example, as would self-employed people who don’t earn money in a particular year. But if you’re a newcomer and a homeowner and not paying income tax, it’s assumed you have some money behind you, and you’d have to cough up.

As for those people who do not live in their properties at all, there’s even an exemption available for them too – all they have to do is prove they are renting the home out on a regular basis and therefore contributing to Vancouver’s rental pool.

Davidoff said, “We're not trying to dampen investment in Vancouver; in fact if you’re an investor and you rent out your house, you don’t pay tax and you get a rent cheque. All we ask is that you are contributing to the local economy by providing rental housing."

So how much money could this bring in? Around $90 million a year, says Davidoff – “and that’s a lower-end estimate”. He believes that it would also be pretty cheap to administer, as the declaration forms would be circulated with BC Assessments every year.

And what would happen to the revenue? “There are all sorts of suggestions, but my preferred option is to share it evenly between all exempt homeowners and renters, to cut everyone in Vancouver a cheque,” Davidoff told me. “There’s nothing that helps with affordability more than money.”

Well, sure. But $150 each, if you split $90 million between Vancouver’s 600,000 people, doesn’t go far. And $150 means a lot more to a low-income family than to a multimillionaire, so surely this would spark deafening cries of unfairness.

My solution? Invest all the money in new, City-backed affordable housing programs, modelled on some of the innovative schemes being used in other countries – more on that here.

Do that, and I really think this idea, although not perfect, could actually work.

To listen to Joannah Connolly discussing the proposal with its co-author Thomas Davidoff on the Real Estate Therapist Show on Roundhouse Radio 98.3FM, click here.

Bchaf-Proposal (PDF)
Bchaf-Proposal (Text)


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