Taxing secondary residence ‘inherently unfair’
In the weeks following the City of Vancouver’s mail out of pamphlets about the new empty homes tax, homeowners and experts have been debating the fairness of the measure, the first of its kind in Canada.
Rainer Borkenhagen, a semi-retired physician, worked and lived in Vancouver for more than 35 years, during which time he and his wife downsized from a detached house in Vancouver to a 700-square-foot condo not far away. For the last four years, they’ve made their primary residence on the Sunshine Coast and maintained the Vancouver home, which they and their family members use year-round for short stays.
Borkenhagen was upset to learn that, for the purposes of the city’s new bylaw, his family’s Vancouver home is considered “empty,” meaning he could be on the hook for an $8,000 hike in his property taxes next year.
“There is something inherently unfair about this,” he said.
Starting this year, Vancouver homes deemed empty will be subject to an additional tax of one per cent of the property’s assessed value. For the purpose of the bylaw, a home is considered empty if it’s not occupied by a tenant for at least 180 days in a year. That means properties that are currently empty need to be occupied by a tenant before July 1 in order to be excluded from the tax.
There are probably thousands of other Vancouver homeowners in a situation similar to Borkenhagen, said Michael Geller, a Vancouver architect and real estate consultant.
Geller said it’s unfair to penalize those who own a secondary home in Vancouver for use as a pied-a-terre, a French term describing a secondary residence used for either a portion of the year or each week, usually by a relatively affluent person.
“We should be welcoming people who want to make Vancouver their second home. The irony is these people are paying full property taxes and placing relatively little demand on municipal services,” Geller said.
Thomas Davidoff, executive director of the University of B.C. Sauder School of Business’s Centre for Urban Economics and Real Estate, said he agrees with Geller that the tax will affect people with seasonal residences and pied-a-terres and agrees the empty homes tax is probably misnamed.
But Davidoff disagrees with Geller on the fundamental question of whether it’s fair to tax owners of pied-a-terres or vacation homes.
“A pied-a-terre doesn’t provide housing for the workforce,” he said, adding while people should be free to own multiple residences if they can afford to, it’s not unreasonable to charge a progressive tax on them in a city with an acute housing shortage.
Further, Davidoff added, Vancouver has relatively low property tax rates to begin with, so even for homeowners facing a one-per-centincrease, it will bring the property tax rate to a level not unusual by North American standards.
The bylaw was meant to address “both empty and under-utilized properties,” said City of Vancouver housing policy staff in an email. “Careful consideration was given to the impact of the tax on owners of second homes, however, this impact was weighed against the goal of the tax and the enforceability of the program,” said the email.
Meanwhile, Borkenhagen is trying to mobilize a group of similarly affected Vancouver homeowners and is assembling an Unfair Vancouver Vacant Homes Tax Coalition, first with a Facebook page and with plans for a website soon. He said he hopes the city could amend the bylaw to exclude existing homeowners in his situation from the tax.
“The city has no idea how many people are in our situation and neither do we,” Borkenhagen said. “It’s not that we want to fight the city, we want to work with them.”