The City of Vancouver has revealed new information about a tax it plans to levy against homes that are left empty or underutilized.
The tax—which will exempt principal residences—will apply to the 2017 tax year, meaning people will have to start paying it in 2018, said Kathleen Llewellyn-Thomas, the city’s general manager of community services.
Many other specifics about the tax are still to be determined. That includes the rate of the tax, penalties for not paying it, and who exactly the tax will apply against.
At a September 14 press conference, Lewellyn-Thomas said those details will be worked out through a public consultation process. But she also shared some ideas that have been discussed by city staff.
The tax could be as low as 0.5 percent of a property’s assessed value or as high as two percent, Lewellyn-Thomas said. It will be enforced via a combination of self-declaration, a complaints process, and audits both targeted and random, she added.
Speaking alongside Lewellyn-Thomas, Mayor Gregor Robertson repeatedly emphasized that the city does not view the tax as a potential source of revenue, but rather as a tool aimed at filling empty apartments with the tenants who want to live in them.
“Vancouver is in a rental-housing crisis,” he said. “With dangerously low vacancy rates across the city that have hovered near zero for several years now. This empty homes tax is first and foremost about bringing rental homes back onto the market that are currently empty.
“That’s how we will measure our success here,” Robertson continued. “Getting our vacancy rate back up in normal levels of three-to-five percent is the goal here. We are just above zero right now and we want to make sure we get that into the healthy zone.”
Reporters at the press conference lobbed a number of hypothetical situations at Llewellyn-Thomas and the mayor.
Would the tax apply against a Vancouver snowbird’s house left empty for three months of the year while they hibernate in Florida? What about a condo owned by a Vancouver-based machine operator who spends every second month working in northern Alberta? Or an apartment rented to university students that a landlord is often forced to leave empty during the school year’s four-month summer break?
Both Lewellyn-Thomas and Robertson emphasized that the tax will take those sorts of situations into account and allow them to avoid the tax via a number of exemptions.
“Our focus is only on empty homes and underutilized homes,” Robertson said. “Principle residences—either by owner, tenant, or business—will not be taxed. They will not be subject to the empty homes tax. Our proposed empty homes tax targets secondary property that are empty or underutilized or used as a business holding. That is a key delineation here. Those are properties that could be returned to the rental market; therefore, the empty homes tax will apply to those.
“Ultimately, this is going to affect a very small number of people who are holding homes for business.” he repeated.
The proposed tax is largely in response to the results of a study of empty homes that the city commissioned earlier this year.
It found that in 2014, there were an estimated 10,800 vacant housing units in Vancouver. Of those, 9,750 were apartments, 950 were single-family homes or duplexes, and 125 were rowhouses.
Measured another way, Vancouver single-family and duplex homes were found to have a vacancy rate of just one percent while nearly 12.5 percent of apartments were left empty.
The tax could serve as a noticeable but not significant new stream of revenue for the city.
If there are 10,800 empty homes with an average assessed value of $300,000 each, if the tax is deemed to apply against 50 percent of those units, and if the tax is implemented at a rate of 1.5 percent, that would equate to $24.3 million in annual revenue for the city.
A range of conservative and liberal estimates could see that number swing from $2 million (the city’s low-ball estimate) to as much as a figure in the range of $85 million a year.
Robertson said the implementation and collection of the tax will be paid covered by money it brings in and that additional revenue will be invested in affordable housing.