British Columbia

Is Vancouver's vacant home tax going to rely on snitches?

New details about Vancouver's plan to tax vacant homes are raising as many questions as they answer, say experts, including how much it will rely on neighbourhood snitches to catch those who try to skirt the rules.

How the city plans to catch cheaters is just one of many questions experts have about the vacancy tax

Vancouver's mayor hopes a proposed tax on vacant homes would encourage owners of an estimated 10,000 empty homes to rent them out rather than leave them empty. (Christer Waara/CBC)

New details about Vancouver's plan to tax vacant homes are raising as many questions as they answer, say experts, including how much it will rely on neighbourhood snitches to catch those who try to skirt the rules.

Yesterday, Mayor Gregor Robertson revealed a few more details of his plan to tax empty homes up to two per cent of their assessed value, with the aim of encouraging real estate speculators to rent out their business holdings rather than leave them empty.

But with tens of thousands of dollars of potential taxes on the line, Michael Ferreira of Urban Analytics says there are going to be plenty of owners looking to cheat the system.

"I think there are a lot of folks out there, like in the case of the foreign buyers tax, who will be looking for a way to get around this," said Ferreira.

"Whether it is putting a student or a friend into one of their homes and allowing them to live there for free or putting some electronic equipment into the home so it allows the light to go on to show BC Hydro and Fortis B.C. that they are using the unit, I think that there will be people out there trying to evade the tax."

Robertson has said the city will rely on on random audits and complaints to catch cheats when the tax is rolled out later this year.

Ferreira says that's not going to be good for community spirit.

"If you are trying to encourage your neighbours to fink on each other about their vacant homes ... you know that doesn't do a lot for community or neighbourliness."

New proposal 'fantastic'

But economist Tom Davidoff  at UBC's Sauder School of Business — who has harshly criticized the idea in the past — calls the mayor's new proposal "fantastic."

What he likes is Robertson's plan to use a home's primary residence status as one way to excuse it from the tax, because that's already used by the B.C. government's Home Owner Grant program.

"I think it's a really positive step and leaps ahead of what people were proposing," said Davidoff on Wednesday.

And while he also has concerns about enforcement, he says the proposal is better than doing nothing.

"This is a step in the direction of fixing a very broken tax system which rewards investment and punishes people who live and work here," he said.

"Is it going to be enforced perfectly? No, but we had zero enforcement previously."

Compliance is key

Other questions remain about how many days each year a home must be occupied in order to avoid the new tax.

Robertson has promised those who legitimately maintain a home to live or work in Vancouver won't be affected. 

But what about secondary or vacation homes that some owners might only visit a few days a year — if at all? Or absent owners who attempt to list children or friends falsely as residents or tenants of a home?

Robertson says he'll ask the public for input before those rules are defined.

Tsur Somerville, a senior fellow at the UBC Centre for Urban Economics agrees the effectiveness of the new tax will depend on the fine print.

"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."

Despite any loopholes, Somerville says he expects the new tax will open up new rental spaces, which Robertson has said is the ultimate aim of the tax.

"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."

But he said it is unlikely to trigger a drop in rents or house prices in the city's pricey real estate market.

"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 the Canadian Press