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Vancouver Mayor Gregor Robertson speaks about the proposed tax on vacant homes outside City Hall in Vancouver, B.C., on Sept. 14, 2016.DARRYL DYCK/The Globe and Mail

Vancouver Mayor Gregor Robertson says his city's current proposal for Canada's first tax on vacant homes may be too low and the penalties too weak, arguing that the levy must be significant enough to dissuade owners from leaving properties empty.

Municipal staff had suggested an extra tax for empty houses somewhere between 0.5 and 2 per cent of assessed value, which would translate to $5,000 to $20,000 a year in extra taxes for a million-dollar home. The maximum penalty for evading the tax would be $10,000, which is the cap that is set by the current Vancouver Charter for all bylaws.

But Mr. Robertson and his fellow councillors on the Vision Vancouver party asked staff Tuesday to look at a higher tax rate and the potential for higher fines as they begin public consultations on details of the proposed tax.

"The tax rate needs to be high enough to motivate people," said the mayor, whose council voted – with some dissenters – to move ahead with the process for imposing the tax. "Two per cent might be too low."

He also said the current maximum $10,000 fine is "useless" when the city is trying to discourage significant violations.

Mr. Robertson first raised the idea of a tax on empty houses this past June, amid growing concern that speculators who leave properties empty were fuelling the region's rapidly increasing housing prices. Several months earlier, the city released the results of a study that attempted to measure the problem, identifying more than 10,000 empty houses, mostly condos.

The province eventually agreed, passing legislation that allowed for a vacant house tax in Vancouver but leaving the details up to the city to figure out.

The process now envisioned is that property owners will be sent a form, along with the yearly mailed-out tax notices, that requires them to indicate whether the house is a principal residence, an investment property that is rented out, a vacant residence that qualifies for an exemption, or a secondary residence that is used only part of the year or left vacant.

City staff will conduct audits to verify whether houses really are principal residences, based on resident complaints about vacant houses and in areas that are known to have significant percentages of vacant units.

Tuesday's vote on the tax did not pass unanimously, even though several polls have shown there is widespread support for the measure.

The arguments over it in council prompted Mr. Robertson to accuse opponents of fear-mongering, which prompted some of them to demand that he retract what they called attacks on their personal characters.

The city's three Non-Partisan Association councillors all voted against moving ahead with the tax, citing slightly different reasons.

Councillor Elizabeth Ball said it was alarming many seniors, who fear they will be charged the tax if, for example, they have to leave town for several months to help support a child elsewhere.

As well, she said, it's unclear what the city thinks it will achieve.

Councillor George Affleck said he would rather see city policies that encourage new supplies of row housing to meet demand, instead of creating a "bureaucratic nightmare" that dictates what people can do with their property.

And Councillor Melissa De Genova said she would have preferred to see an incentive system for people who choose to rent out their property, rather than a punishment for those who don't.

And she worried about the cost of enforcing it.

"It could cost us more than we're getting … and be a tax for our current taxpayers."

But Mr. Robertson said that the city had received overwhelming feedback from the public that people wanted to see more rental housing and that they supported a vacancy tax.

"Properties being used as a business should be paying that tax," he said.

The public consultation in the next few months, which will cost $220,000, will ask people for feedback on how big the tax should be and who should be exempted.

There are many twists and turns already in the list of exemptions. Someone who owns a house with a basement suite, for example, won't have to pay a vacancy tax if the suite is left empty or if it is rented through Airbnb as long as someone is occupying the main part of the house.

But if that same owner also owns a condo that is empty or rented out through Airbnb, the owner will be charged the empty-houses tax.

Staff won't recommend, until after the consultation, what period of time a unit should have to be occupied every year to be exempted, although nine months is being suggested as a possible cut-off.

Vacancy Tax Presentation