Photo: Wendy Cutler/Flickr
Vancouver may have been the first Canadian city to implement an empty homes tax to address its housing affordability crisis but will other cities jump on board with a similar levy?
According to University of British Columbia Professor Thomas Davidoff, other cities should consider the tax as a solution to curb low supply and high demand.
“Any place struggling with affordability needs to shift the tax burden away from making a living and towards just plain old owning property, and I think empty homes taxes are a terrific way to do that,” Davidoff tells BuzzBuzzNews.
Last year, Vancouver was the hottest market in the nation and achieved record level of sales activity. However, supply became limited and prices continued to climb, and average households continued to struggle with affordability.
To combat eroding affordability and increase housing supply, Vancouver’s city council approved an empty homes tax for the city starting in the 2017 tax year.
The rate of the empty homes tax is one per cent of a property’s assessed taxable value. The tax will only apply to class 1 residential properties within city boundaries that were not used as a primary residence or rented for at least six months of the year.
To prove homes are being used as a principal residence this year, Vancouver homeowners are required to submit a property status declaration form by February 2, 2018.
According to the City, net revenues collected from the levy will be reinvested into affordable housing initiatives within the city.
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Davidoff applauds the City’s decision and says the tax will help deter homeowners from keeping their properties vacant.
Although it’s too early to tell what the impacts of the levy are, Davidoff believes that are three possible outcomes.
First, he says there might not be any change at all because there are no empty homes, secondary properties or even Airbnb operations in the city — an outcome he believes is unlikely.
The second possibility Davidoff notes is that people might not change their behaviour at all, regardless of the one per cent levy. In this case, empty homes would still exist but the City would benefit financially.
“That would be a lot of revenue to the City. I think it’s certainly not unrealistic that they might make $100 million,” says Davidoff.
The UBC professor’s final possible outcome is that the tax could encourage homeowners to change their behaviour and either rent or sell an empty home — an ideal outcome for the City of Vancouver which is looking to free up supply in the limited market.
Despite not knowing the impacts of the tax, Davidoff says other Canadian cities that are also struggling with housing affordability should consider introducing a similar levy, including other cities in BC’s Lower Mainland, the Greater Toronto Area and perhaps Montreal.
As the BC government is currently trying to tackle housing affordability across the province, Davidoff says an empty homes tax could be the answer.
“Hopefully we’ll get an extension of something like this at the provincial level,” says Davidoff.