Vancouver Empty Home Tax: Better than doing Nothing or Will it make things worse?
The City of Vancouver approved a new policy which will tax home owners that keep their secondary properties vacant. Following the foreign buyer tax announced earlier, this is another effort on a municipal level to “cool” down the housing market as well as take care of the lack of affordable housing available. (http://vancouver.ca/home-property-development/empty-homes-tax.aspx)
Now normally at this point I would go into 6 factors to keep in mind about the tax, but today I think we need to better understand this. I also realize this blog is longer than usual, but this is not a small issue.
Yes there are exceptions, but no matter how you look at it, if you have a property, which is not your principal residence, and you do not inhabit it for more than 6 months of the year - you are on the hook to pay a tax.
EG. If you live mostly in Kelowna (your principal residence) and have a vacation apartment that you visit less than 6 months of the year in Vancouver - you are going to pay to keep it vacant for your personal use.
If you are a Canadian citizen and have multiple properties and your older kids casually use one of those properties on occasion, you are affected. You do have to prove yourself to fit an exemption.
I am using these examples to illustrate a point, because, this policy is not called the Foreign Owner - Vacant Home tax. It’s affects us all. The crass comments on social media and even the media reporting on foreign home owners leaving their purchases empty has forced the hands of the politicians for a quick band aid solution.
Now, this system which conservatively will cost $2.5 million of tax payers money will come into effect 2018. If history with government expenditures tells us anything, it’s that it will likely cost more. There will be a new department and paid staff, some really well no doubt, to implement and carry out the mandates of this policy
Here’s the best part - the system will rely on effective owners of these homes to identify themselves (“self-reporting”) to pay the tax for keeping their homes empty.
Failing that self-reporting success is not a 100%, (haha), The City will conduct random audits to catch the cheaters and slap them with a hefty penalty.
I fear a snitch or a suspicion will be enough to cause them to red-flag homes. Don’t even get me started on violating privacy issues if officials have the right to come into your homes to confirm their suspicions.
I do agree that we need to implement strategies to maintain a community feel in the city, however, if we really want to encourage people to rent their second homes, wouldn't incentivizing them, with some form of tax credit or rebates, not work better than penalizing people for owning more than one home? Don’t they already pay hefty property taxes, based on market value, for many services they do not use, if the home is empty, e.g. garbage pick up, schools, etc?
According to the statistics, theres are about $10’000 homes that would be impacted by the empty-home tax in Vancouver.
Here is an image of the homes available for rent in the various areas of Vancouver. Lets say even if 50% of these are not legitimate there are still more than 2500 listing. So, what is happening here? There is a 2 bedroom suite available for $600 at fraser and 49th? Will these investors have to adjust their rental rates?
I do not have a clear answer whether this is the right move as only time will tell, but I am concerned, as a citizen, in how the governments have displayed the power to ‘tax’ and use heavy handed tactics to intervene in the right to use the property and affect the value of an asset.
While governments in England and even Ontario are assisting first time buyers with rebates, in accelerating markets, why is the City of Vancouver focused on handicapping the market. It is a challenging issue and one that requires some creative out of the box thinking with long term sustainability.
Yes Vancouver is getting expensive, but it is not the most expensive city in the world. It’s a beautiful city and it’s no surprise people want to move here. I have travelled to many cities around the world, such as New York, London, Hong Kong and people adapt to finding homes outside of the city, and travelling into work. Albeit, these cities have phenomenal transit systems that service their long routes efficiently in time and costs. Maybe this is where we should focus our tax money?
So, here are 6 questions for you to think about as we wait to see what happens.
-Where will the city look at utilizing land to build this, or will they convert existing infrastructure?
-Will the government re-adjust the tax, if vacancy rates increase to a more favourable threshold?
-Do you agree there is a stigma to the phrase ‘ low-income affordable housing” and would you like to see that in your neighbourhood?
-Will the government intervene with the Residential Tenancy Act as Mayor Robertson has suggested to protect the tenants?
-Would you support your City to pursue this tax if it was to be introduced.
-If more people want to live in the city which is landlocked, would you support higher densification?
Photo cred: Michael Wolf; Honk Kong Desnsity = 6800ppl/sq km and growing