CHALLENGES OF VACANT HOMES TAX

The City of Vancouver’s proposed vacancy tax may be well-intentioned, but there’s no guarantee such a punitive and intrusive measure will lead to more affordable rental units.

The first challenge is determining if a property is truly vacant and why. The city’s best estimate based on electricity consumption is that 10,800 housing units are empty. The city hopes to improve the quality of the data by forcing homeowners to declare their homes are empty or prove that they aren’t. It will follow up by recruiting neighbours to spy on homeowners they suspect may not be in compliance with the new tax law and with random audits by city staff. Recent changes to the Vancouver Charter now allow city auditors to demand driver’s licences, health cards and Canada Revenue Agency documents as proof of principal residency. Those who believe in privacy and property rights should be disturbed by this.

The tax rate has not been set but is thought to be between 0.5 and two per cent. On an $850,000 condo, a two per cent tax would amount to $17,000. That’s quite a disincentive to leave a property vacant, but would it encourage a homeowner who has chosen to leave a residence empty to take on the hassle and expense of becoming a landlord? We don’t know.

The tax might instead lead to deception. Lighting and energy consumption can be controlled remotely, or an owner’s friends or family members could spend a day in an otherwise vacant home to give the illusion of habitation. Moreover, an owner may choose to list on Airbnb or VRBO to serve tourists rather than local residents, even though Vancouver bylaws already prohibit short-term rentals outside of hotels or licensed bed and breakfast businesses.

The principle driving the tax is that the owner of a vacant home will either agree to rent to tenants or sell the property to someone who will live in it or rent it out. Another option, as Mayor Gregor Robertson noted this week, is that some owners may prefer not to rent out their homes “and therefore they’re going to make a generous contribution to affordable housing in Vancouver.”

Indeed, the city estimates the tax could bring in up to $2 million. But the object of this exercise is not increased tax revenue, but rather more rental accommodation. That goal still seems out of reach.