Increasing Vancouver's property tax by 1.5 per cent for vacant homes would create enough incentive for homeowners to rent out properties that are currently sitting empty, thereby increasing the city's housing stock says a group of UBC economic professors.
The percentage of vacant homes in Vancouver has remained flat over the last 14 years despite longstanding complaints that investors are buying homes and leaving them empty, according to a report released Tuesday to city council.
The report says Vancouver's non-occupancy rate was 4.9 per cent in 2002 compared with 4.8 per cent in 2014, which is line with other big Canadian cities.
Taxing those vacant units would bring in an additional $90 million and encourage more people to rent out secondary properties, say some economists.
"That is key. We [would] provide an exemption for rentals," said Josh Gottlieb, economics professor at UBC who came up with the proposal with colleagues.
"If you're subject to this tax, all you have to do is rent out this property and you won't be subject to it anymore."
This is not the first time researchers have proposed imposing a property surtax to improve housing affordability in the region.
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- Proposed property tax surcharge would put cash in the hands of Vancouver residents
Creating a win-win situation
Vancouver's current property tax rate is low compared to the rest of the country, making it an attractive place for investors who prefer to not rent out their properties, said Gottlieb.
"If you want to just go plop money somewhere and let it sit there without using the property very much, Vancouver would be a great place to do it."
Gottlieb says his proposal gives vacant home owners two options: pay the 1.5 per cent surtax, which gets redistributed to residents, or rent out the property, which increases housing stock in the city.
Supply is king
Some housing analysts say a shortage of housing supply is the key problem.
"The way to ultimately deal with that problem would be to expand housing supply. What do vacant units do? They do the opposite — they effectively restrict housing supply," said Gottlieb.
A tax increase for vacant properties would increase the city's housing stock by encouraging more people to rent out their secondary properties, he said.
According to the report, there are about 11,000 vacant homes in Vancouver, said Gottlieb.
"It would take multiple years of construction to make up for that."
To listen to the full interview, click the link labelled: Impact of vacant homes in Vancouver.