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Opinion: Double property taxes for vacant properties

Levy could help fund affordable housing

With affordability issues front and centre on the minds of many people in the Lower Mainland, there are articles every day on how to address the issue. There’s no getting around the reality that first-time property buyers are being squeezed out of the market, and that grip is getting tighter and tighter every day. Is there anything that can be done to satisfy the Vancouver real estate market’s voracious appetite and boost the amount of affordable housing options? Yes there is, but the question remains as it always has been — is there any political will to address the issue?

Australia has been taking some tough measures on foreign ownership recently. The state of Victoria will start charging an extra three per cent tax on the purchase price for foreign buyers, as well as an additional 0.5 per cent land tax. They estimate it will generate $279 million over the next four years. Treasurer Tim Pallas, who delivered his first budget in May, said the surcharges were “modest” and would force foreigners to contribute to services and infrastructure. The Australian federal government is also considering an application tax of $5,000 AU on properties under a million, and an additional $5,000 per million above that. If someone tries to circumvent the rules, they could potentially be fined 25 per cent of the home’s value and be forced to sell.

London, England has seen its property values increase at an unsustainable rate in recent years, largely due to foreign investors buying at an alarming rate. It’s “a bubble that’s fuelled by an almost infinite supply of desperate global capital at the moment,” said Peter Rees, who was the City of London’s city planning officer for nearly 30 years. That sounds familiar, doesn’t it? Until recently foreign owners were exempt from paying capital gains tax when they sold a property. (How very polite of those lovely Brits.) Some of the recent proposals made by mayoral candidates in London include an increased capital gains tax for foreign buyers, as well as an extra tax for properties that are left vacant.

I don’t think anyone in Vancouver has a major issue with foreign ownership of properties. The main issue most residents have is when the homes are left vacant. Walk along Kits beach and you’ll see beautiful million dollar homes next to homes that look like they are occupied by raccoons. They are left vacant by the owner and are rapidly deteriorating due to being left unmaintained. Coal Harbour is one of the densest areas in Vancouver when it comes to condos, but go outside at night and there is barely anyone on the street. Why? Because more than half the units are unoccupied. It’s left the neighbourhood cold and faceless with few amenities available for the residents who actually choose to live in their homes.

A relatively simple way to address the issue would be to charge owners of homes and condos that are left vacant double property tax. Is this over the top? Some in the real estate development community will likely say so, but I actually don’t think it would be an issue for overseas buyers in any way whatsoever. If a property owner is willing to forego $1,500 a month in rental income, what is another $2000/year in property tax? It would cause nothing more than a minor blip in the current state of the real estate market, but could add $20,000,000 a year to the city coffers if 10,000 properties are left vacant. You can call that a very conservative estimate on how many properties are currently unoccupied, Coal Harbour is likely pretty close to that amount on its own.

So what could Vancouver do with all their new found riches? When Meena Wong was running for mayor last year with COPE, she put forward the idea of putting all the money towards affordable housing. That is only solution that will affect the Vancouver housing market in a solely, positive way with the goal of increasing affordability for its current residents. It could very easily be considered an ethical thing to do. Maybe half could go to affordable housing, with half of the proceeds going to improving infrastructure in the city. Figuring out how to spend an extra $20,000,000 a year would be a wonderful problem to have. It’s a win-win scenario for the local population, and would be a tiny tax burden on foreign ownership.

Barry Magee is a Vancouver realtor at livinginvancity.com.

barry@livinginvancity.com