On May 10, Vancouver City Council passed amendments to the city’s so-called Empty Home Tax (EHT) to improve its fairness and effectiveness.
These included reducing the rate from a proposed five per cent to three per cent; eliminating the July 1 deadline by which certain applications had to be submitted or permits issued; terminating the current exemption provided to strata properties with rental restrictions, effective 2024; and allowing developers to claim an exempton for unsold, vacant, new inventor until the inventor is sold or occupied.
While the latter amendment prompted howls of protest in council and on social media, since developers will receive rebates that could otherwise fund social housing. council’s decision was appropriate.
Let me explain why I label this a ‘"so-called’"Empty Home Tax.
The city first proposed the EHT in 2016. At the time, Mayor Gregor Robertson told residents, “Vancouver renters were in crisis, with the rental vacancy rate hovering over zero for years. The city will not sit on the sidelines as more than 25,000 empty and under-occupied properties are held back from people who live and work in Vancouver. The city needs a tax on empty homes to encourage the best use of all our housing and help boost our rental supply for locals.”
The first people to complain about the tax were second homeowners who received letters telling them that if they did not reside in their homes for at least six months, they would have to rent them out or pay a one per cent tax.
These included Rainer Borkenhagen, a retired doctor who lived in Gibsons but owned a condominium in Vancouver. He objected to the tax and co-founded The Unfair Vancouver Vacant Homes Tax Coalition.
He pointed out that people his age wanted to keep ties with their kids, and having a second home in Vancouver was an effective way to do this. His home was not empty. He lived in it four or five months a year. Other second homeowners included Albertans, Americans, and BC residents living in Vancouver for part of the year.
I agreed they should not be subjected to the tax and wrote so in several Vancouver Courier columns. Readers invariably questioned why these owners were unwilling to pay the tax if they could afford expensive second homes. Others pointed out the injustice of them having two homes when they did not even have one.
This prompted a local rabbi to quip the tax might be called a 'Jealousy Tax'. "If I can't afford a home, you shouldn't be allowed to have two." My editor headlined a subsequent column “Is the empty homes tax based on jealousy?”
In December 2017, media reported on the plight of Jane Macdougall, a Kerrisdale homeowner who had discovered she would have to pay the EHT. But not on her house; on a portion of her garden, since it was a vacant lot.
Not only did the EHT apply to owners of second homes, it applied to vacant land. I was subsequently advised this was to discourage property owners from demolishing dwellings to avoid the tax.
In October 2018, the city proposed EHT program amendments to improve its fairness and effectiveness. However, they did not address second homeowners nor vacant land.
In February 2019, Council again considered amendments to improve the tax’s fairness and effectiveness. While the mayor had told us there were 25,000 empty homes that could be brought onto the rental market, the accompanying staff report told a different story.
In 2017, the number of homes declared vacant without valid reason was only 1,085. In 2018, it was 922. 525 properties were declared vacant for both years.
The staff report further noted “a significant number of formerly vacant units did return to the rental stock between 2017 and 2018”. How many? 117. Yes, 117.
Nonetheless, the city expected to receive $38 million from the 922 vacant properties. This was $41,215 per property which equated to an average value of $4,125,000. Even if these dwellings were to become rental, they were not going to be affordable rental.
In subsequent years, many property owners were unfairly charged EHT. These included a Marpole landowner trying to build rental apartments on vacant land zoned for duplexes. Although willing to rezone, there was no policy allowing a rezoning. Planning staff advised him to wait for neighbourhood planning or zoning changes, which he did. He was subsequently charged the tax since he had not submitted a rezoning or development permit application.
The city taxed a friend’s Gastown live-work unit in which he operated a film studio for decades because he did not live there.
A couple building a new house moved out and rented another place since permits were about to be issued. However, the city delayed issuing the permits and then charged the homeowners the EHT. After considerable stress and many sleepless nights, they successfully appealed. But not everyone has been so fortunate.
Others complaining about the EHT included developers required to pay the tax, not on empty homes, but on unsold inventory. Which brings us to the recent May 10th Council decision.
Council wisely eliminated the city’s annual July 1 deadline by which development applications needed to be submitted or permits issued. This should help address the unintended consequences resulting from city delays in accepting or issuing permits.
The decision exempting developers’ unsold, vacant, new inventory until sold or occupied was also a wise decision. Although this outraged opposition councillors since the city is returning money to developers earmarked for social housing, this too was the right thing to do.
The purpose of the EHT was not to raise money for social housing. It was to encourage the owners of 25,000 vacant or underutilized properties to make them available on the rental market. As we have discovered, the actual number was significantly less.
There is a significant difference between an empty home that could be rented and a developer’s unsold inventory. The provincial Speculation and Vacancy Tax, introduced after the EHT, recognized this. Now the two taxes are aligned. The money being returned to developers should never have been collected in the first place.
While the May 10 amendments did not address the unfair treatment of second homeowners, hopefully future amendments will.
Unfortunately, when first drafted, the EHT bylaw cast too wide a net. The new ABC-dominated Council prudently decided to approve amendments to improve its fairness and effectiveness.
As a colleague recently pointed out, the amendments approved by Council are common sense. Unfortunately, common sense is no longer as common as it should be.
Michael Geller, FCIP, RPP, MLAI is planner, real estate consultant, and retired architect. He is also an adjunct professor in SFU’s Centre for Sustainable Development and School of Resource and Environmental Management (REM). He writes a blog at www.gellersworldtravel.blogspot.com and is active on twitter @michaelgeller.