Vancouver mayor's proposed vacancy tax raises red flags

A proposal by Vancouver's mayor to tax vacant homes is raising plenty of red flags with critics who question whether it could ever be effective.

Gregor Robertson pitched the tax earlier this week hoping to increase the number of available rental units by encouraging homeowners to put those units into the marketplace.

Coun. Melissa De Genova calls it a "knee jerk" reaction to a complex housing crisis in city with a vacancy rate of less than half a percentage point.

"He can't specify how we are going to be implementing the tax, what it is going to mean and who it is going to apply to," she noted, adding while she supports the concept, the currently proposal is too rushed.

Offloading to B.C. Assessment

One of the first challenges the mayor faces is determining which homes are vacant, according to Tony Gioventu, the executive director of the Condominium Home Owners' Association of B.C.

"How would you identify it, and if it is vacant is there a reason why it is vacant?" he asks.

To back up his proposal Robertson's cites a city report that estimated 10,800 homes and condos are sitting empty in Vancouver.

But for privacy reasons that study relied on data from BC Hydro that had the addresses stripped out.

So the city would need to find another way to identify the vacant properties, something Robertson acknowledged on Tuesday.

His preferred solution is to have B.C. Assessment create a new class of property called "residential vacant" that would apply to "empty and under-occupied investment properties."

Voluntary verification or snitch lines?

A property's status would be determined each year by self-declaration, similar to the way people claim a homeowners grant.

But it's the proposal for an "audits and complaint-response" process that De Genova is concerned will turn neighbours into snitches.

"How will this affect people's privacy? Does this mean my neighbours will be spying on me if they think I am not home, if I go away for a few months?" says De Genova.

And then there are questions about what Robertson means by "empty or under-occupied homes."

A recent city report says it could include:

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Owners of second homes in Vancouver who use the property occasionally.

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Short-term rentals such as AirBNB.

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Property occupied from time to time by family members of the owner with primary residency elsewhere.

Gioventu wonders, "What does occasionally mean?"

"We have quite a number of people who either live in Vancouver and work somewhere else. So what is a reasonable occupancy? Two days a month? Ten days a month?"

"What about people working overseas for a year or two who choose to keep their homes? ... At what point does the province or the city have the right to say what we can or cannot do with our property?" he asks.

Real estate analyst Michael Ferriera with Urban Analytics, also has concerns. He notes 90 per cent of vacant units are condos or apartments owned by people who can afford to forgo rents.

"If you are wealthy enough to own a second home that's a luxury unit in Coal Harbour, I don't think that a tax is going to encourage your to add your unit to the rental pool."

"I'm not sure it will have a significant impact on affordability, which I understand is the primary reason for introducing the policy."

Can Vancouver afford to act alone?

Both the mayor and the staff at city hall who authored the report acknowledge the problems, particularly with verification, and say these are the details that just need to be worked out in the days ahead.

But despite the complexities, the mayor has only given the province 60 days to make up its mind about his proposal to use B.C. Assessment to track down the vacant units.

After that, he says, the city will go it alone. And while the province has indicated it is willing to talk about the idea, it has yet to sign on.

So the mayor has a second proposal that won't require the province's help — a new municipal business tax on investment properties.

"In order to avoid being taxed, owners could be required to produce evidence that they are primary residents or renting the property long-term, such as government ID (i.e. a driver's licence) to substantiate primary residence or a long-term lease agreement." says the city report.

The proposal does not say how this would be done, but it does note it "will likely require significant resources to implement and administer on an ongoing basis."

Who will pay in the end?

That's another red flag for De Genova, who notes staff at city hall are already unable to keep up with the demands of regulating just 100 marijuana dispensaries under the city's new dispensary licensing system.

She says the cost of having every homeowner in the city prove they either live in their home or have a long-term lease with a tenant will be expensive to adminster.

"How are we going to ensure this is not going to cost the city and residents more money?"

Ferreira agrees the proposal may just not be worth the effort.

"If this is all about affordability, this is a little bit of a red herring. The city could have a much greater impact if it could speed up the approval process to allow more product onto the market place."

He says it currently takes up to three years to get a development permit approved and up to seven or eight if the lot needs rezoning.

De Genova says red-tape at city hall is already "adding $100,000 to the cost of a condo unit."

"If we really want to look at affordability, we need to start inside the city," she says.

Over at UBC's Sauder School of Business, real estate professor Tsur Somerville agrees.

"It's a good first step that would help renters," he says, "But ultimately it is not going to make Vancouver more affordable."