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Editorial: Will the Mayor’s Vacant Home Tax Help with Rentals and Affordability?

Joannah Connolly
June 24, 2016

The issue of homes being left vacant in Vancouver is one that has sat at the heart of the city’s wider affordability problems for some years now.

Certainly, it’s galling to see boarded-up houses and condos with darkened windows at a time when so many people are struggling to afford to buy a home in their desired neighbourhood, and when the rental vacancy rate is correspondingly at a record low.

Indeed, Vancouver Mayor Gregor Robertson has been saying for some time that he’d like to see a tax on the owners of those vacant homes to try to force the issue. However, his council hasn’t been able to do this, as implementing an increase to residential property taxes requires provincial support.

But the Mayor has now put his foot down and said enough is enough. This week, he announced on his website and to reporters outside City Hall that the City will be implementing some kind of vacant home tax, with or without the province’s help, and soon. (For the full story on that and the next steps the City intends to take, click here.)

The question is, is this a good idea? Will it work?

Now, I’m all for finding ways to get more units into the rental pool. Sure, Vancouver’s overall home vacancy rate, as far as we know from the limited studies that have been done, is not above average for a city of its size. But with rental availability so desperately short, anything that can be done to get more rental units into circulation is a good thing.

Gregor’s position is that if the new tax pushes just a third of our cited 10,800 empty homes into the market, that’s a flood of additional units that would otherwise take many years in planning and development, and would (given today’s demand) increase the rental vacancy rate to around a healthy three per cent.

That’s all great, and I sincerely hope he is right. But it’s extremely optimistic to think as many as a third of properties would go into the pool because of the new tax, whether it's a residential or a business/investment levy.

For one thing, the system requires policing. How will the City assess whether or not a home is empty for 12 months of the year (which is what they say they are going after)? Hydro usage data? That’s a highly flawed system that is easily circumvented with the use of timers or a property manager. Snitching neighbours? Hardly an equitable or reliable measure. So there could be serious problems with measuring vacancy in the first instance, and you couldn’t charge the tax unless you were sure.

It would also be very easy for people to simply occupy the unit for some periods of time, to circumvent the tax, or to have family or friends staying there.

Next, rather than enter the property into the general rental pool, if an owner does feel obliged to rent it out, many will choose short-term rental systems such as AirBnB, which the Mayor says is under separate investigation. The vast majority of Vancouver’s empty properties are condo-apartment units, not single-family homes, and would be snapped up as vacation rentals. So that still wouldn’t help our desperate long-term local renters.

Another aspect would be that if you are wealthy enough to hold a unit without needing to rent it out, you can probably afford an additional tax – so for some, it will just become the cost of doing business. Now, that money would go into the pot for City affordable housing schemes, which is a good thing – but again, it doesn’t help our renters.

Finally, there are all sorts of other reasons why people leave their homes empty. Some would love to, but aren’t allowed to, rent out their units because of strata bylaws. Others (like local agent and developer Keith Roy, my guest on this weekend’s Real Estate Therapist Show on Roundhouse Radio 98.3FM at 9am) are planning to demolish and rebuild the home, but are waiting for permits, and the existing property is unrentable and unlivable. Should such owners be charged an additional levy – on top of the massive charges they already pay the City? Of course not – so presumably there would be many exemptions.

Once you subtract all the above units from the group of empty homes in Vancouver, you’d probably be lucky to see more than a thousand or so units actually enter the regular rental pool because of the new tax. Now, these are desperately needed homes, so maybe it’s still worth it. Or maybe, with all the additional policing, bureaucracy, administration and overheads the system would need, it’s not. As mortgage expert Peter Kinch, a regular guest on the Real Estate Therapist show, said this week, it may just be a "knee-jerk policy because of the mounting pressure on politicians to just do something."

Maybe the City just needs to do a better job of improving the supply of both for-sale and rental housing for its residents. Maybe the province needs to give Property Transfer Tax breaks to Canadians. And I still think that the "vacant home" tax proposed by the UBC Sauder School of Business is a better idea, as it doesn't rely on the homes actually being vacant (click here for more on that).

Either way, it looks like Vancouver's new vacant home tax is coming in the next few months – so we’ll find out. 

Joannah Connolly
Joannah Connolly is editorial director of Glacier Real Estate, Glacier Media's real estate division. Joannah writes and curates real estate news for Glacier Media's local newspaper websites, including the Vancouver Courier, North Shore News, Burnaby Now, Tri-City News and others. She also oversees editorial content in Real Estate Weekly Homes, West Coast Condo, Western Investor and Glacier's special real estate publications. A dual Canadian-British citizen, Joannah has 22 years of journalism and editing experience in Vancouver and London, with a background in construction, architecture, healthcare and business media. Joannah has appeared on major local TV outlets as a real estate commentator, has moderated and spoken on various industry panels, and spent two years hosting the Real Estate Therapist radio show on Roundhouse Radio.