On the heels of the recent provincial 15 percent property tax increase, Vancouver Mayor, Gregor Robertson has announced a new tax on vacant homes.
“We need a tax on empty homes to encourage the best use of all our housing, and help boost our rental supply at a time when there's almost no vacancy and a real crunch on affordability."
Currently, nearly 10,000 homes are left vacant. That’s one in every eight homes that are left empty while Vancouver’s vacancy rate continues to drop. As of the Spring 2015 the Vancouver CMA reported the city’s vacancy rate to be 1.4 percent which dropped from April 2014’s vacancy rate of 1.6 percent, though there are reports indicating that Vancouver’s vacancy rate is hovering around 0.6 percent.
The amount of empty homes began drawing attention by the city’s residents. A collective art group started documenting photographs showcasing the city’s empty homes titled "Beautiful Empty Homes of Vancouver".
Details Left Up In The Air
While the tax is expected to be implemented sometime in 2017, the amount of tax is yet to be determined. Robertson has said that he expects the tax to be between 0.5 and 2.0 percent. Owners of empty dwellings would then be expected to pay a tax of 5,000 to 20,000 on homes.
The way Mayor Robertson sees it, if this tax is being collected on just five percent of empty homes, it would generate approximately $2,000,000 million dollars which would then fund affordable housing for the city’s residents.
Rightfully, the hardest part of this new proposed vacant home tax would be determining who owns an “empty home” and what “empty” truly means.
According to Mayor Robertson, homes classified as “empty” would be homes that are left dormant nearly year round or considered to be a non-primary residence. “Secondary properties that are business holdings,” said Robertson.
But, how would the city actually know if a home is vacant?
Owners would need to self-declare empty homes by completing their annual property tax assessment. A penalty will be incurred by those who have not declared whether their home is empty or not.
What REALTORS® Are Saying About The New Vacant Home Tax
“When you look at the increase in the property transfer tax on luxury homes, vacant home tax and 15% property tax targeted at foreign buyers, sales in the high end market have slowed down,” explained Vancouver Luxury REALTOR®, Phil LeGree.
The real impact will be on the average homebuyer and homeowner looking to sell. As Phil explains, business for luxury agents will feel the impact of all of these new taxes being implements but the loss won’t near compare to the loss of value of homeowners in
“Yes, luxury agents businesses will slow, but their losses won't compare to the losses of value of homeowners in the high end market,” said LeGree.
The real question here is whether the tax will be good for the city long term.
"Taxing these [vacant home owners] won't be a feasible solution in the long run either" explains Vancouver Real Estate Investment Specialist, Justin Li.
"While the policy will free up rental space, it fails to address the latter as rental rates continue to climb, pricing out renters. I do believe that should prices of sales and rental units reach a threshold, that is when sellers can no longer rent at the highest rates possible, and renters maximum budget is reached, we reach an equilibrium, and this is when adjustment will happen. We've already seen examples of the industry adjusting this past August 2016" says Li.