TAXED NERVES
Empty homes calls abound
Vancouverites have been happy to drop the dime on absentee neighbours, phoning in 1,456 tips about supposedly vacant or underused homes since the introduction of North America’s first empty-homes tax.
Residents, it appears, are only growing more eager to report. City statistics provided to Postmedia show that between 2017, the first year of the tax, and 2018, the number of tips almost tripled year-over-year. So far this year, citizens’ zeal for tips hasn’t cooled off: a comparison of January 2019 and the same month in 2017 shows a 600 per cent increase in tips.
The work of Vancouver’s 12-person empty-home tax audit team is reportedly paying off: While the vast majority of audits — about 95 per cent — conducted during the first year of the tax found properties to be in compliance, city numbers show that audits found 331 non-compliant properties for 2017, which generated a combined $6.2 million.
In other words, the amount of tax revenue generated through audits was enough to cover most of the $7.5-million one-time implementation costs for the program or more than double the $2.5-million operating costs for the tax’s first year.
That’s just part of the $38 million in empty homes tax the city expects to receive for 2017, of which the city had collected about $24 million as of last week (that’s up from the $21 million reported in late November when the city released its first report on the empty-homes tax). It’s too early for a 2018-tax-year revenue estimate, the city said. The tax, a levy of one per cent of the property’s assessed value for the year, targets homes that are vacant or used only part-time.
In a city with a near-zero rental vacancy rate and a housing unavailability crisis, the policy is seen as a way to increase the number of units available for rent, raise revenue for affordable housing, or both. Some critics question the tax’s efficacy or argue against what they see as its fundamental unfairness, but so far, the city’s numbers suggest the tax is achieving both of those goals.
The City of Vancouver describes its empty-homes tax as “the first of its kind in North America,” and other jurisdictions battling their own housing crises have taken notice. Over the weekend, the New York Times quoted Vancouver Mayor Kennedy Stewart and cited a report by the Real Estate Institute of B.C. in a story about New York considering a so-called “pied-aterre tax” on homes worth $5 million or more that are not the owner’s primary residence.
Vancouver’s plan for collecting unpaid empty-homes tax revenue will work “exactly the same as it works if your property taxes are unpaid,” said the city’s director of financial services, Melanie Kerr. The taxes are added to the property tax bill. If taxes remain unpaid for three years, the city can seek a court order to sell the property.
The city found 7,923 empty or under-utilized properties in 2017, about two-thirds of which were exempt from the tax. Properties could be exempt for a number of reasons, including if the home is empty because of strata restrictions or major renovations. Property owners can be exempt if they maintain a second home while working in Vancouver, or if they’re undergoing medical care that keeps them away from their primary home.
Through a combination of random and “risk-based” audits, the city’s compliance team investigates properties to determine if they are legitimately someone’s principal residence or otherwise exempt from the empty homes tax. The city will notify an owner their property has been selected for audit and request evidence, such as utility bills or mail, to support the property status declaration, Kerr said. In some circumstances, the city will conduct a property inspection after notifying the owner, Kerr said.
Owners who feel their property has been wrongly deemed vacant can complain to the city, Kerr said. Complaints are initially reviewed by an internal review officer, Kerr said, and then owners who are still unhappy can request a second look from an external review panel, made up of lawyers and other professionals. For 2017, the external panel conducted 47 reviews, and of those, eight succeeded in getting the tax rescinded.
About half the empty-homes tax payments for 2017 were between $5,000 and $15,000, Kerr said, meaning about half the homes subject to the tax were valued at between $500,000 and $1.5 million. Most of the vacant and exempt properties — about 60 per cent — were condos, while single-family homes made up about 34 per cent.
The city declined to release detailed information about the amounts paid by individual owners of the 2,538 empty or underused properties subject to the tax for 2017, but Kerr said payments ranged from $1,500 to just over $250,000 — meaning that at least one $25-million home was deemed vacant and subject to the tax, which would place it among the province’s 40 highest-value houses.
After covering the program’s operating costs, all remaining revenue must be used for affordable housing. Last June, the previous city council allocated the first chunk of $8 million, including $3.1 million in land and resources for non-profit and co-op housing, $1 million for grants to improve existing co-ops and build new ones, and $3.5 million for improving living conditions in singleroom occupancy housing.
Vancouver’s new mayor and council will eventually decide how to spend the remaining millions and will also look to refine the tax. Stewart introduced a motion, passed at the Jan. 29 council meeting, directing staff to report to council by the end of March on how to improve the “fairness and effectiveness of the empty homes tax in achieving the objective of returning empty and under-utilized properties to the market.”
In the meantime, neighbours can keep phoning 311 with tips.