Will a New Fine Solve This Affordable Housing Crisis
Several cities are struggling with crises related to affordable housing. San Francisco, Seattle, New York — from coast to coast, there are people finding it difficult to find a place to live. Vancouver, B.C. is no exception. In fact, the affordable housing crisis in Vancouver may trump them all. It’s been an ongoing issue for a number of years now, but one that hasn’t gotten a lot of attention from Americans.
But Vancouver’s policymakers have taken a pretty big step toward trying to solve the issue. And it involves some pretty big tax increases on homeowners who let their property remain vacant instead of putting it to use.
According to a report from the Vancouver Sun, the city is proposing to slap a 1% tax on empty homes. That tax will be calculated based on the home’s assessed value, and only apply to homes that are sitting vacant — meaning that the owners are not living there, and they are not actively renting it to anyone. So, a home that is worth $1 million could potentially cost the owner $10,000 over the course of a year.
Here’s the real kicker: If homeowners lie about a home being unoccupied? They’re subjected to a fine of $10,000 per day, according to the Calgary Herald.
Vancouver and affordable housing
Why would the City of Vancouver do this? The short answer is that the affordable housing crisis in the city has reached a breaking point. While many people are unable to afford even basic housing in the city, tens of thousands of homes are sitting empty. With so many potential renters, why aren’t landlords renting?
Because a huge number of them don’t live in the area, or even set foot on their property.
Understanding the crisis in Vancouver requires a lot of background information — probably more than we can get into here. But the gist of it is that Vancouver’s housing market has been swamped by foreign buyers. Wealthy people (most, it seems, from China) are buying up properties in Vancouver and letting them sit there. They’re paying top-dollar, so previous homeowners are making a killing. But for people who need a place to live? Empty houses, condos, and apartments that aren’t being rented shrink availability. That drives rents up, and makes housing even more scarce.
That’s why the city is trying to incentivize homeowners to rent with this proposed tax and fine system. They’ve already put a 15% tax on foreign buyers to try to remedy the situation. This additional tax is yet another incentive to ward off wealthy foreigners who have no plans to do anything with these properties.
Will it work?
The big question here is whether this plan will actually work. The city clearly felt that it needed to do something, and with super-rich investors from overseas driving up the average cost of a Vancouver home to $1.9 million, some drastic measures were evidently needed. With a 15% tax for sales set to take hold and this additional “empty-home” tax, city officials are pulling some levers to see if they can get results.
We won’t know if it’s going to work, though, for some time. There will likely be many homeowners who simply don’t care, and pay the tax. Others might effectively be persuaded to open their homes to renters. But that brings other issues to the surface.
Renting a home isn’t cheap or easy, and if you live abroad, it means you’re hiring someone to manage it for you. The question really boils down to how sensitive foreign investors will be when it comes to these taxes. Are they high enough to change homeowners’ behavior in relation to their properties? Or will they simply ignore it and pay the taxes?
Vancouver’s Mayor Gregor Robertson said that there are more than 10,800 empty homes in the city. Another 10,000 aren’t fully used. With rents so high, and so many empty properties, it’s not difficult to see why policymakers would experiment with these types of taxes and fines. With affordable housing issues in so many U.S. cities, it’ll be interesting to see how things go in Vancouver.
And if it’s successful, you have to wonder if that system may be imported by some American cities.