Real Estate

Vancouver moves to tax empty homes in overheated property market

Vancouver, Canada.
Jean-Pierre Lascourret | Getty Images

Vancouver is one step closer to taxing vacant property as officials try to address affordability in the city's red hot housing market.

According to the latest Teranet-National Bank House Price Index, the average price in the city has risen to $898,255 Canadian dollars ($693,500) and the annual property price increase is now pegged at 23.4 percent.

Public concern is rising that homes bought and left empty by investors is impacting affordability and the British Columbian government has said it will now back city officials who want to impose a vacant property tax.

British Columbian Finance Minister Mike de Jong has called for a meeting on Monday July 25 to consider rule revisions to allow the city to create and collect the levy.

Vancouver City Mayor Gregor Robertson spoke at a press conference last week to help sell the move.

"Taxing homes empty for 12 months or more will encourage the best use of all our housing, and help boost our rental supply at a time when there's almost no vacancy and a real crunch on affordability," he said.

Robertson said if people are wealthy enough to own an empty home for a year without renting then it is not a residence but a business holding and should have a higher tax rate.

"We need (to) work on how that tax is applied and how much so that we can encourage these homes to return to the rental market," he said.

A report to the Vancouver council in March of this year showed there were 10,800 homes empty for a 12-month period in the city area.

Learning from the UK

A general view of Egerton Crescent in the Royal Borough of Kensington and Chelsea.
Dan Kitwood, Getty Images News

A report in November last year by charity Empty Homes revealed that 56,715 properties sat unused in London, U.K.

In 2013, local authorities in England were granted flexibility on what council tax can be levied on furnished housing left empty for 12 months or more.

Camden in North London was one such authority which introduced a 50 percent premium tax in an attempt to stop overseas investors treating property as stores of wealth.

In a telephone call with CNBC, Camden councilor Theo Blackwell said the ability to tax property did make a difference to long term furnished homes.

"The first year saw a 34 percent drop in vacant homes. The benefit is probably less now as tax losses were overtaken by rising property market but it certainly worked in the short term as a signal," he said.

Blackwell said some members of the council want to now double or even treble the tax as a small increase is not effective when capital gains are strong.

And he is also calling for stamp duty taxes (house purchase levies) raised from property sales in London to be passed to housing corporations who in turn can focus on the provision of property for low and middle income earners.