VANCOUVER – Vancouver wants to tax homeowners by as much as two per cent of assessed value for properties they declare vacant, with the hope of freeing up more supply in the city’s crunched rental market.
Mayor Gregor Robertson announced new details of the proposed tax on Wednesday ahead of a report going to council next week. The city aims to have the levy in place for the 2017 tax year, with the first payments in 2018.
The tax is meant to encourage owners to rent out empty homes in a bid to improve Vancouver’s vacancy rate, which has hovered near zero for years, Robertson said.
“This empty homes tax is not a silver bullet solution. This will not solve Vancouver’s rental home crisis or vacancy rates alone. But we expect this will be an important tool to start the shift to get more rental housing available to people who desperately need it,” he said.
According to the report to city council, the tax would be administered using an annual self-declaration, audit and complaint process.
Each year, every residential property owner in Vancouver would receive a notice from the city requiring them to declare the status of the unit.
If the property is an owner’s principal residence, rented to a long-term tenant or occupied by a friend or family member, the tax would not apply.
There would also be defined exemptions from the tax, including properties that are in probate, going through renovations or changing owners. Tenants or owners in care would also be exempt.
The question of how long homes must be vacant in order to be taxed still needs to be settled through public consultation this fall, Robertson said.
He has previously said only homes that were vacant year-round would be taxed. However, the report said residents will be asked whether leaving homes empty for six months, or nine months, out of a year should warrant the levy.
The city would enforce the tax through random and targeted audits, as well as acting on complaints. The report said the city can compel owners to provide substantiating evidence.
Penalties are still being decided but must be strong enough to persuade owners to pay the tax, said Kathleen Llewellyn-Thomas, the city’s general manager of community services.
She said the tax rate being considered is between 0.5 and two per cent of assessed value.
Robertson said if the tax is collected on just five per cent of known empty homes, it would generate $2 million, which would go toward cost recovery and affordable housing.
He said success will be measured by the city’s rental vacancy rate. If the rate rises to a healthy three to five per cent, the city will review the tax and could remove it, he said.
A University of British Columbia economist who has harshly criticized the city’s plan to tax empty homes in the past said the latest proposal was “fantastic.”
Tom Davidoff said the city previously suggested the criteria for the tax would be the actual number of days a home was occupied, which is practically impossible to observe and easy to fake.
But the city’s proposal instead bases the tax on whether or not the home is a primary residence, an existing tax concept already defined by the B.C. government’s Home Owner Grant program, he said.
“I think it’s a really positive step and leaps ahead of what people were proposing,” said Davidoff. “Is it going to be enforced perfectly? No, but we had zero enforcement previously.”
City staff are also studying the impact of Airbnb and other short-term rental services and are expected to report to council next month.
In July, the British Columbia government gave the city the authority to create the tax, which is separate from the province’s 15-per-cent tax on foreign buyers of Metro Vancouver real estate.
A study commissioned by the city earlier this year found that as many as 10,800 homes were sitting empty, most of them condominiums.
— Follow @ellekane on Twitter.