There was a story making the rounds on social media this week about how dire the affordable-housing situation is in San Francisco, including the lack of rental stock.
The reporter found a woman who commutes 260 kilometres, round trip, daily to her job in the Bay area. She wakes up shortly after two in the morning each day, and leaves for work around four.
An extreme example, certainly. But San Francisco has become the poster child for the great affordable-housing crisis that is gripping big-name cities across the United States and around the world. And as with many of these cities, one problem San Francisco is plagued with is empty homes.
What's shocking is how late to the party Frisco has been to do anything about it. Currently, the city assesses an annual fee of $711 (U.S.) for any home deemed to be vacant. Quite a deterrent. Only now is San Francisco starting to look at what other jurisdictions are doing to deal with this issue, including Vancouver. They will almost certainly be assessing the route the city of Paris has gone as well.
The city of light has been trying to deal with its vacant-home dilemma for some time. The most-recent estimate showed there were more than 107,000 of them of various descriptions – or about 10 per cent of all residential abodes in the city. The number of non-resident homes in Paris rose 43 per cent in the past 15 years, compared with just 3 per cent over that same period for those that are owner-occupied.
Starting in 2015, the city elected to tax vacant homes the equivalent of 20 per cent of the fair market value of rent. It did not have the desired effect. This year, they decided to triple the amount to 60 per cent.
For the sake of argument, let's say an apartment is designated vacant and its fair market rental value is determined to be the equivalent of $2,000 Canadian a month, or $24,000 a year. The homeowner would pay about $14,400 in tax on that unit – or almost $10,000 more than she was paying when it was just 20 per cent.
Now, $2,000 a month in rent for an apartment in the middle of Paris would be a steal. More likely, you're looking at $3,000 or even higher. Most of the vacant homes in the French capital are found in the city's trendiest districts, between the 1st and 8th arrondissements. The foreign owners of these properties can likely afford the extra tax they will now have to pay.
So, the tax may not ultimately force owners to sell or rent year round, but the city is going to rake in a lot of money – an estimated additional $63-million (Canadian), which the city plans to use to build affordable rental housing where it can.
This is not the only thing Paris has done. Last year, it applied caps on rent increases, against the vociferous opposition of real estate agents and developers. The city also makes Airbnb collect a tourist tax from those using the rental website.
Collectively, it all looks fairly aggressive, especially when contrasted with a city such as Toronto, which seems unsure about the wisdom of a vacant-homes tax – something it is "studying." But as radical as Paris' approach to this problem seems, certainly as far as a 60-per-cent vacancy tax goes, it still isn't as severe as Vancouver's solution.
Starting next year, the city will ding property owners who leave their place vacant for six months or more a 1-per-cent surcharge on the assessed value of their property. In a city where $1-million is the entry point for detached properties, and many townhouses and condos, too, that represents potentially a huge cash haul. The owner of that $1-million vacant house would have to pay $10,000 in tax. Given most houses on the west side of the city are assessed at double and triple that amount, people will be paying $20,000, $30,000 or more in a vacant-home tax.
According to the 2016 census, there were more than 25,000 unoccupied or empty homes in the city.
Not surprisingly, the tax has not been popular with those people who could be zapped by it. Even if they acquiesce and rent their place out, it has tax implications for them. But on the other hand, what is the city supposed to do?
It has an affordable-housing crisis on its hands, a rental-stock emergency, too. Cities such as Vancouver and Paris have opted for extreme remedies to deal with a problem that won't be solved by half measures. For that, they should be applauded, not condemned.