Rental availability and affordability in Vancouver has come under fire in recent years, as the property market continues to gain credence with national and international investors alike. With some of the highest rental costs and lowest rental vacancy rates in Canada, the City introduced the ‘empty homes tax’ in 2017 in an effort to turn these properties into long term rental opportunities.
How Does the Empty Homes Tax Work?
The empty homes tax (also known as the Vacancy Tax) is a levy is placed on homes/properties that are lying vacant. Although there can be a range of reasons that a property is empty, it has been identified as a key contributor to the lack of residential rental availability in the City.
In 2019, the average vacancy rate in Vancouver was a meagre 1.0% for 1 bedroom properties and 1.5% for two bedrooms.
Some neighbourhoods, such as the West End, have seen even lower rental availability, with only 0.6% availability for 1 bedroom condos, and 0.9% for two bedrooms. Upwards pressure on the rental market also saw an average rent increase 6% in 2018, compounding the issues of rental availability and affordability.
As a solution, the empty homes tax was introduced to encourage property owners to return their vacant properties to the rental market. If homeowners choose not to, they are charged a levy based on the assessed value of the property at that time.
Although it may seem unfair to charge property owners an additional tax, an estimated 25,000 homes (or 8.7% of total supply) in Vancouver were empty in 2016.
After being introduced in 2017, the empty homes tax is in its third year of operation. The levy itself started at 1% of the properties assessed taxable value. However the City council has recently voted to increase this figure to 1.25% for the 2020 tax year, pending an amendment to the Vacancy Tax bylaw.
Does the Empty Homes Tax Apply to Me?
There are a number of circumstances under which the Vacancy tax may or may not apply to you.
For starters, the empty homes tax only applies if you have multiple properties. Assuming you only have the one, and it is nominated as your principal residence, you will not be charged the empty homes tax. This is irrespective of how much time you spend in or out of the property, and is a common question among retirees who spend a lot of the year travelling, or those travelling overseas for work.
Second, if you have multiple properties, the tax is still only applicable if those properties are not being utilized. That is, not being made available for renters.
Third, if those properties are rented for more than 6 months of the year, the tax will not apply.
Is the Empty Homes Tax Making a Difference?
The good news for renters is that yes, the tax does seem to be achieving the desired goal. In 2018 the tax was imposed on 1989 properties. This figure was a 22% reduction on the previous year, in which 2,538 properties were listed as empty.
Similarly, an initial review of 2019 property declarations only saw 789 listed as vacant. This is equivalent to another 15% reduction in unoccupied properties when compared with declarations made at the same point in time in 2018.
Unsure if your property will be charged the empty homes tax, or looking to return it to the market?
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