Owners of empty homes in Vancouver could soon be paying as much as an extra two per cent tax on their properties, Mayor Gregor Robertson revealed this morning.
But the mayor stressed the primary aim of the tax would be to encourage owners to rent out investment properties that might otherwise sit empty.
"Vancouver's dangerously low vacancy rate is putting our renters in crisis. Our proposed empty homes tax is first and foremost about bringing rental homes back into the market," said Robertson.
"We need to ensure the best use of all our housing. Empty and under-utilized investment properties are holding back badly needed homes for thousands of renters who are struggling to find a secure and accessible place to live in a tight rental market."
Secondary holdings targeted
Robertson introduced the plan at city hall Wednesday along with Kathleen Llewellyn-Thomas, the city's general manager of community services.
The specific rate of the tax has yet to be determined, but will be in the range of 0.5 to 2.0 per cent of the assessed value of each home, she said. That would be between $5,000 and $20,000 for a million dollar home.
Robertson said if the tax is collected on just five per cent of known empty homes, it would generate an estimated $2 million, which would go toward cost recovery and affordable housing.
The tax would only apply to homes that are empty year round and not primary residences — that is, "secondary properties that are business holdings," said Robertson.
Snowbirds and other residents who live only part of the year in Vancouver would not be taxed, stressed Robertson.
"Almost all Vancouver residents will not pay this tax," he said. "It is focused on the empty homes that are being held as businesses or effectively holding properties."
Robertson said if people choose to pay the tax, the city and renters will still come out ahead because the tax revenue will be used to build affordable housing.
"Some people who can afford it will not want to rent out their properties and they are going to make a generous contribution to affordable housing in Vancouver," said Robertson.
"Certainly part of this is symbolic, but at city hall we are going to use every tool to create more rental housing."
Self declaration of empty homes
Owners will be required to declare their homes' status themselves as part of the property tax process in 2017, and the new tax would be payable in 2018, said Robertson.
The proposed tax will be enforced with an audit and complaint response process "that will keep people honest," Llewellyn-Thomas said.
"It will be random, but we will be having a very high level of audits in the first months and years that we run this," she said.
Penalties for non-compliance are still being worked out, but they would have to be significant enough to ensure it made financial sense to pay the tax instead, she said.
Additional staff would be hired to administer and monitor the program, but it is expected to generate enough revenue to cover its own costs, they said.
Proof of residency required
The proposal will be presented at council next week, and if approved, a extensive public consultation process will be launched before the tax is implemented.
Under the mayors proposal, all Vancouver homeowners will be required to declare their principal residence (or tenancy), similar to declaring the Home Owner Grant, which generally will not be subject to the tax.
Other details confirmed by the mayor included:
- If audited, owners will have to prove that the home was a principal residence for the owner, a tenant or a licensee.
- Proof of primary residency could include a B.C. driver's licence or BCID, a completed Home Owner Grant, a tenancy agreement or similar documentation.
- If the owner is unable to prove the home was a principal residence for a minimum number of days in the previous year (to be determined by staff through consultation this fall), the tax will apply.
- If a declaration is not made, legislation allows for owners to automatically be charged the empty homes tax.
- Homes that are vacant because they are awaiting development permits or are in probate will be exempt.
The mayor has also promised to reveal more details soon on a proposal to regulate short-term rentals such as Airbnb.
City granted new taxation power
Robertson first proposed the tax in June to encourage property speculators in Vancouver's hot real estate market to rent out unoccupied homes.
At the time, the city's rental vacancy rate was 0.6 per cent and a city-commissioned report estimated there were 10,800 homes and condos sitting empty.
Originally, Robertson proposed either tracking vacant homes as part of the annual provincial property assessment, or creating a new business tax, vowing the city would act alone if the province did not help.
In July, the province responded by granting the city the power to tax vacant homes. The province also introduced a 15 per cent tax on foreign home buyers in August aimed at curbing property speculation.
Victoria City Council has also indicated it wants to tax vacant homes as well, but has not tabled a proposal.
Compliance will be key
Tsur Somerville, a senior fellow at the UBC Centre for Urban Economics told On The Coast's guest host Gloria Macarenko the effectiveness of the new tax will depend on whether or not homeowners comply.
"The city can come up with stiff penalties and an audit, but you still have the situations where people have their sons or daughters in the unit even though they're not there, so that's going to be a challenge."
He said the biggest benefit of the new tax will be to relieve pressure on Vancouver's tight rental market by opening new rental spaces and subsidizing affordable housing .
"The rental market here is so tight that even working a little bit is a big plus. If all of a sudden, just by taxing people who are making things more expensive, you can help out the people who are most affected — even if it's just 200 households — that strikes me as a really good thing."
"If what we're talking about is making Vancouver affordable, it's not going to make Vancouver affordable at all," he said.
With files from CBC Radio One's On The Coast