Vancouver is cracking down on real estate speculators, and encouraging them to put empty homes up for rent, by tripling its original tax rate on vacant properties.
The Empty Home Tax (EHT) applies to homes that aren’t a principal residence, or rented for at least 6 months of year, and launched in 2017 at 1 per cent of the assessed value of a property. An increase to 1.25 per cent was announced in 2019.
The new rate will be 3 per cent and goes into effect for the 2021 tax year.
Vancouver Mayor Kennedy Stewart says he’s pleased council backed his plan “to stand up for renters”
"This groundbreaking tool has helped move thousands of homes back onto the rental market to help house our neighbours, but there are still too many homes that remain empty,” he said in a release.
“By tripling the tax from 1 per cent to 3 per cent since the tax launched, we're sending an even stronger message that homes are for people, not speculation."
The city says the number of vacant properties has fallen by 25 per cent since the EHT was launched and $61.3 million of net revenue from it has gone into affordable housing.
Will it make a difference?
David Hutchinson, of Sutton Group West Coast Realty in Vancouver, says the increase won’t do anything to curb speculation, because the previous tax rate was already enough of a deterrent and most speculators are already gone. He says tax avoidance could even lead to lower revenue.
“This tax mainly affects condo supply, and attached prices — especially downtown Vancouver — are already taking a hit, this will have little to no effect on prices,” he told Yahoo Finance Canada.
“This is a tax grab, pure and simple. The fact the mayor was once against this tax increase, but now suddenly is for it is an indication of that. Don't get me wrong, I'm all for the empty homes taxes, but for the right reasons.”
Hutchinson says the topped up tax won’t increase rental supply either.
“Rental supply is already up, the rental market is actually saturated now, it is a renters-market; and more and more rentals are being, planned, and built everyday,” he said.
Jessy Bains is a senior reporter at Yahoo Finance Canada. Follow him on Twitter @jessysbains.