For anyone who has found themselves outbid this spring on a $2-million (asking price) East Van teardown – multiple times – this may be hard to believe. But Robert Doyle is looking to the Vancouver real estate experience for answers.
Mr. Doyle is the Lord Mayor of Melbourne, Australia, and has a chat planned with Vancouver Mayor Gregor Robertson in the coming days. I interviewed Mr. Doyle this week, and to say he spoke of Mr. Robertson in glowing terms would be a bit like saying Vancouver real estate is a little pricey. Mr. Doyle was decidedly optimistic that Vancouver may hold the key to figuring out the puzzle of keeping (or at least making) real estate affordable for locals when the big foreign dollars come to town.
Both mayors preside over cities in the middle of a housing crisis. And as Vancouver prepares to introduce a tax on vacant homes, they are comparing notes.
While the city has estimated there are 10,800 empty homes in Vancouver – 9,700 of them condominiums – a survey of water use shows that in Melbourne, there are between 22,000 and 55,000 vacant properties.
Mr. Doyle says many of those empty homes were purchased by offshore investors. "We are a highly desirable investment destination for capital coming out of Malaysia and Mainland China – and I imagine Vancouver would be the same – and, therefore, the common-sense test suggests these are apartments being purchased off the plan, then simply locked up and land-banked as an asset," he said in the interview.
As is the case in Vancouver, the thinking is that if those empty homes are taxed at a higher rate, owners might be enticed to rent them out. Any extra revenue earned from the tax could be put into a fund to build more affordable housing.
In Melbourne, it's estimated that a 1-per-cent tax on the value of vacant properties could generate about $80-million a year.
But with rental rates what they are in the city, will enticing owners to rent out their suites really result in more affordable housing? A quick scan of Craigslist will tell you that finding a luxury apartment in this city isn't a problem – if you don't mind paying upward of $3,000 a month for rent. It's the decent mid- and low-range apartments that are virtually impossible to come by. We can't discount the impact of short-term rental sites, such as Airbnb, when it comes to the vacancy rate, but that's a whole other issue.
While Melbourne considers the stick of an additional tax, it's also offering a carrot by way of a tax break. "We have a tax incentive called negative gearing, which allows investors to make a tax claim for apartments that they purchase and put into the rental market," the Lord Mayor said.
It's worth pointing out that Australia already imposes a tax on absentee landowners when they purchase a new property. The amount varies state to state; in Mr. Doyle's home state of Victoria, the rate has just jumped to 7 per cent from 3 per cent. He's waiting to see the impact.
In Vancouver, if the province doesn't come up with a new tax class by Aug. 1, the city is ready to classify vacant homes as businesses as a way of imposing the tax. That is, after it's determined whether a home is vacant.
Is a new tax going to make any difference at all? I doubt it. For offshore investors holding on to Vancouver properties, it's the cost of doing business – the cost of servicing an investment that has paid record dividends in recent years.
All of this – the vacant home tax, ending self-regulation of the real estate industry, a crackdown on Airbnb – it all sounds good. It sounds like someone taking action to solve a problem. But it feels like the very definition of too little, too late.
When it comes to improving the affordability of this city, it amounts to zero.
I don't mean to be fatalist – I would love to share the optimism of the Lord Mayor, who is looking to Vancouver for answers.
"We have some differences in what we're doing, but I respect Gregor's work very much. I've always found him to be very thoughtful in terms of the social policy versus the economy and prosperity of the city, and you need to balance the two. I'm very keen to talk to him to see if there is something we can take away from your experience," Mr. Doyle said.
I'm not sure what anyone can take away from our experience, beyond viewing us as a sad, cautionary tale.
Stephen Quinn is the host of On the Coast on CBC Radio One, 88.1 FM and 690 AM in Vancouver.