RJ Aquino: Why Vancouver needs an empty housing tax
No room for vacancies
Out-of-control housing costs, chronic transit issues, and far too many marginalized communities and voices: for all its natural beauty and advantages, Vancouver has become a stressful place to live, work, and take care of your family.
Despite the near-zero vacancy rate in Vancouver, up to one-quarter of dwelling units are unoccupied. There are many reasons why a home may be empty: some are vacation units, others are second homes, and others are properties awaiting permitting for redevelopment; some are speculative investment properties, condos, and houses that are thought of as commodities, rather than a social good.
It doesn’t matter where the owners come from: some speculative investors are Vancouver residents, while others are buyers from other parts of Canada and around the world. What matters is the effect on our city, and what we choose to do about it.
No matter the reasons for all these empty dwellings, our housing market and neighbourhoods are distorted. Housing is unaffordable for residents who cannot live near jobs and amenities. It also has a negative impact on the local economy, as businesses suffer in neighbourhoods that should be much more vibrant. Rather than streets populated with children playing, people out gardening, and families and friends out in their communities, we have—in some neighbourhoods—empty streets.
City council is reportedly looking to hire a consultant to investigate how many homes are empty, and why. It’s very late, but a necessary step: the true test of council will be what they do with the data.
We believe that the city should establish an empty dwelling levy that would double the effective property tax rate to disincentivize holding empty dwellings. Revenue generated from the empty dwelling levy will be transferred to the Vancouver Housing Authority to develop new affordable housing. Similar policies exist or are being developed in cities throughout the world.
Critics will claim that it’s too difficult to assess whether a home is empty, and that there are sometimes good reasons for a home to be empty. Of course it isn’t simple, but this is a challenge that we need to undertake. Too much is at stake: the vibrancy and livability of our city means that working people, families, seniors, and marginalized people need places to live that they can afford.
There may be thousands of units already here, just waiting. We’d like them to be occupied.
May 15, 2015 at 10:57am
More than half of the City of Vancouver's revenue comes from commercial taxes. That commercial activity is driven by resident's economic activity and employers.
When housing is left empty, it's a deadweight on the local economy. Without people who work and live in the city, it's carrying only half the load. And the city's overhead and infrastructure costs don't drop much in return.
As a result, the property taxes rate on housing that is empty for more than half the year should be at least twice the ordinary rate.
miranda da costa diaz
May 15, 2015 at 11:59am
Finally, a sensible, well-reasoned and progressive suggestion that the city ought to take seriously. There is no social. civically responsible good that ever comes from unoccupied dwellings in combination with out-of-control housing costs. That is, unless one believes that rampant speculation and the idea that houses should be investment hedges, not homes.
May 15, 2015 at 12:04pm
"We believe that the city should establish an empty dwelling levy that would double the effective property tax rate to disincentivize holding empty dwellings."
Honestly, it will need to be a lot more than that. If you drop $400K on a Condo, cash and just let it sit there. You are not going to care if your property tax is $1200 or $2400.
May 15, 2015 at 12:09pm
Looking at the apartments, homes and rooms to rent on Airbnb, you can see there's about ~350 housing units that are taken out of the rental market by holding them for short term, vacation rentals, just in East Vancouver. multiply that by the number of desirable neighbourhoods (West End, Strathcona, etc) and you'll see where many of the ersatz 'rental stock' is now.
May 15, 2015 at 12:11pm
While I understand your point of view, I fear it creates unnecessary drag on our already stretched too thin municipal services. Tax payers would end up paying more tax to chase down the absentee owners. It's like chasing our tails.
If we drill down to the real issue, we quickly find that the data collected from realtors filling out mandatory ID verification forms (FINTRAC forms) could be used to identify who is buying and selling property. That data is readily available. The data could then be used to verify the % of foreign investment, so we could have an educated debate about what to do about the sky rocketing values. As it stands the supply/demand argument is heavily skewed.
Personally from my point of view being on the inside of the RE industry, I'd like to see the following for the principal reason of levelling the playing field for local citizens. To bring back fundamentals to the market. To weed out as much dark money as possible.
- Foreign investor approval board
- Foreign investment restricted to 50 year lease instead of free hold title
- Double the Property Transfer Tax on Foreign investment
- Keep PTT for local investors
- Drop the PTT for all local buyers purchasing primary residence no matter how many properties they've bought over the years (only one principal residence per family)
I don't think that's a magic bullet, but I think it's the direction we need to go if we actually believe in the rule of law, value our citizenship & If we actually care about affordable housing.
During the election...
May 15, 2015 at 12:37pm
...we heard about standardized pint sizes from this crew. This is basically a word for word regurgitation of COPE's housing policies. Too "radical" 6 months ago? What's changed?
May 15, 2015 at 1:26pm
That's exactly what I was saying this whole time. Investors are investor foreign or not foreign. It needs an extra tax. I agree that at first it should be doubled but after that the tax should be brought up to an amount that it would be cheaper to rent out the place and pay for maintenance then to have it sit on it empty. There should also be a flip tax too. Anytime a property is sold within 2-3 year it is given an extra tax.
May 15, 2015 at 3:56pm
This will be controversial, but why not shift a larger part of municipal tax income to property taxes? In other words, increase property taxes for EVERYONE.
"We can't afford it" some people will say, but what will happen is that it will be less attractive to buy and hold, which means housing will become less expensive, which means money left over for property taxes. And taxes on items more relevant to actual residents (gas?) could be lowered. That may seem unfair to someone who already owns, but good luck to anyone who owns a $1M+ house who wants to discuss "unfair" with those trying to get into the market today.
Second controversial point: don't allow those over 55 to defer property taxes. What kind of ageist policy is that anyway? Again, try to convince anyone trying to buy how you own a $1M house but can't afford property taxes.
May 15, 2015 at 4:23pm
>> We believe that the city should establish an empty dwelling levy that would double the effective property tax rate to disincentivize holding empty dwellings. Similar policies exist or are being developed in cities throughout the world.
Those policies exist almost no where, are not that effective where they do exist (some parts of the UK), and are having major unintended consequences (landlords that can't find tenants are raising rents on existing tenants in other units to make up for the tax).
>> The true test of council will be what they do with the data.
No RJ, the true test will be what will *you* do when you find out only 0.01% of houses are empty. You called for this analysis and yet if it turns out your empty-house theory is invalid....what will you do? Eat your words? Shut up forever?
The reasons housing is un-affordable are simple. In order of importance:
1. Interest rates have been low for almost a decade now. That drives 90% of home sales...to be higher priced.
2. CMHC insurance guarantees the banks against bad debts, so the banks can lend like crazy, even when they have no money to lend.
3. The remaining 10% of sales are foreign buyers **most of whom are looking to settle down in amazing Vancouver**.
You want stats? Here's Victoria:
Given those reasons, you have two options:
1. Demand the Bank of Canada change it's target inflation rate. This will have a massive, but possibly positive effect, on the entire Canadian economy...and hit that 90% of the local real estate market. But you'd better get a serious education on monetary policy before you make this demand.
2. Change the CMHC insurance coverage on new policies. Don't guarantee banks for 100%...lower it to (e.g.) 90%. See how the housing market reacts and adjust as required.
3. Demand restrictions on foreign immigrants. Good luck with that...immigration keeps the middle class economy alive. See all those immigrant kids in the school yard? That's a huge driver of the local economy.
May 16, 2015 at 12:33am
From the candidate who said nothing of importance during the election campaign, practically ripped off the Cope housing logo, and now chimes in about Vancouver's housing crisis (ripping off Cope's policy once again, verbatim) still keeping it classy i see.