Empty home tax coming into effect

VANCOUVER — Owners of secondary homes in Vancouver that sat vacant for more than six months this year will soon have to pay a new empty homes tax, but it remains to be seen whether it’s having an effect on the city’s tight rental market.

The city became the first in Canada to introduce such a tax this year. Owners of empty secondary properties had until July 1 to find a renter, and if they did not, they must pay the levy in February.

Mayor Gregor Robertson said Tuesday the city expects an updated vacancy rate from the Canada Mortgage Housing Corporation at the end of the month. The corporation has previously pinned the rate at 0.7 per cent.

The tax could free up as many as 25,000 empty units for rent, said Robertson at a news conference.

“This is a way, an incentive, to get people renting their homes if they’re not using them,” he said. “We need to do everything we can to get more rental housing available for people in Vancouver.”

The tax is one per cent of a home’s assessed value, and it affects any property that is not a principal residence and is not occupied for six months a year.

There are some exemptions, including properties that are in probate, under renovation or changing owners. Tenants or owners in care are also exempt.

Homeowners have to submit a property status declaration every year to determine if their units are subject to the tax. More than 180,000 residents can expect to receive instructions in the mail starting this week, Robertson said.

Those who fail to declare by Feb. 2 will have their property deemed vacant and will be subject to the tax plus a $250 fine, warned Robertson.

Robertson said there is a $10,000 fine for false declarations and the city is in the process of setting up an enforcement system that will include hiring an auditing team.

Patrice Impey, the city’s general manager of finance, risk and supply chain management, said it isn’t clear yet how many staff will be hired and it will depend on how many declarations are received.

She said the auditing process will involve requesting information from property owners to support their declarations. For example, if an owner declares a property their principal residence, they will be asked to provide their driver’s licence or their income taxes, which should be registered to their primary address.

Neighbours can call the city to report a home they believe to be vacant, but generally, auditing staff won’t do home visits or inspections, she said.

Tom Davidoff, an associate business professor at the University of British Columbia, said he understands some people are skeptical of the enforcement, but he thinks it could be effective.

It’s very difficult to fake a driver’s licence or income taxes, he said.

Davidoff said the tax won’t solve the housing crisis by itself, but it’s a good idea to raise property taxes on people who don’t live and work in Vancouver. Ideally, that would be combined with lower sales and income tax for people who do live here, he said.

“We have low property taxes and high income and sales taxes, and the message that sends is: Don’t live and work here, but do buy property here,” he said.

“Not surprisingly, when you send that message, the market responds, and look what we’ve seen.”