B.C. to allow Vancouver to introduce vacancy tax on empty homes

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The B.C. government says it will clear the way for Vancouver to impose a vacancy tax on empty homes, which will make it the first major city in Canada to implement such a penalty amid skyrocketing rents and growing concerns about foreign investment and speculation.

The provincial legislature will convene an emergency summer session in two weeks to deal with Vancouver's vacancy tax, as well as the government's previous promise to end self-regulation of the real estate industry.

It's the latest in a series of announcements from the province aimed at addressing distress over the housing market, particularly in the Vancouver region, where rising prices, increasing debt levels and debate about foreign investment have prompted warnings from the Bank of Canada and calls for all levels of government to intervene.

Vancouver Mayor Gregor Robertson previously called on the B.C. government to allow the city to implement a tax on vacant homes, which he said could help free up rental stock or raise money to fund new housing. He gave the province an ultimatum, warning that the city would act on its own on Aug. 1 if it had to.

Mr. Robertson noted that a city study concluded there were about 10,800 empty residential units homes in the province, almost all condos, as of 2014. The new tax will apply only to owners of units that are "clearly not being lived in" for the whole year, he said, not to people who live in a home for part of the year and leave it empty for the rest of the time. He added that the city will consult with the public and housing experts before settling on a definitive rate for the tax, which he wants in place by next year.

"We want to be sure it's fair and focused on homes that are empty 12 months a year [and] that we're using all the data that's already being collected," Mr. Robertson said.

"It's not a residence, so it shouldn't be taxed as a residence," he said later. "It's a business holding and should have a higher tax rate."

Finance Minister Mike de Jong said the government will amend the Vancouver Charter – a unique piece of legislation that does not cover British Columbia's other municipalities – to allow the city to collect the tax.

Vancouver will become the first city in Canada to administer its own tax on empty housing units, but other communities such as West Vancouver, B.C., are also examining the idea.

Mr. de Jong said the province would consider similar requests from other communities, though none have done so yet. "It is ultimately their decision to proceed," he said. "If Vancouver wants to do this, our view is that they should have the clear statutory ability to do so."

Richmond Mayor Malcolm Brodie said his city will be studying how Vancouver rolls out this complicated tax.

Penny Gurstein, director of the University of British Columbia's School of Community and Regional Planning, said it is unclear what the impact of taxing empty houses will be on forcing absentee owners to open up their units to renters.

City staff have previously said that if just several thousand units come onto the rental market, the City of Vancouver's 0.6-per-cent rental vacancy rate could climb to 3 per cent. Housing experts say a healthy vacancy rate is 3 per cent to 5 per cent.

"I don't think it's going to significantly affect the rental stock. What it might do is send a message that Vancouver is not totally open for [just] any kind of real estate transactions," Ms. Gurstein said.

That's what happened in the London borough of Camden, where a 2013 tax on "ghost homes" initially forced about one-third of absentee owners to begin renting out their flats. However, the majority of those holding empty units have kept them vacant because the spike in their property values each year dwarfs the amount of the new penalty.

Vancouver Councillor Kerry Jang said the executive of the Union of B.C. Municipalities will be meeting on Friday and will likely discuss the vacancy tax.

Mr. Robertson said he is hopeful the city can create a tax that is "efficient and straightforward" to administer. The city plans to use property assessment information to exempt owners who can prove they are the primary residents of their property, either by producing government identification that shows they live there or disclosing a renter's long-term lease agreement, the mayor said.

Any system involving this provincial data will likely have to be vetted by B.C.'s Information and Privacy Commissioner, Mr. de Jong said.

The NDP's housing critic, David Eby, cast the announcement as too little, too late.

He said the province refused to take action on real estate prices over the previous 12-week legislative session and that the only reason the Liberal government is doing something now is because it's looking at poll numbers in Metro Vancouver.

"The action they're allegedly taking is, as always, the absolute least that they could do," he said.

"They're asking the City of Vancouver to do their job of protecting the interests of Metro Vancouver residents who can't afford to buy a place, simply because they're unwilling to do it themselves."

Mr. Eby said he will have to see what Mr. de Jong puts forward in the legislature before he decides whether to support it.

The announcement comes two weeks after B.C. Premier Christy Clark announced sweeping changes to the real estate industry, promising to end self-regulation and introduce a host of other changes designed to crack down on unethical agents and improve investigations of unscrupulous conduct.

With a report from The Canadian Press