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The latest batch of data on empty homes in British Columbia, and the taxes levied on them, offer insight into what first became a hot issue in the mid-2010s, when the housing market went ballistic and there was a widespread feeling that many homes were left vacant by overseas owners, as locals struggled to afford a place to live.

The new B.C. data lands at a relevant national moment: The federal government, as of Jan. 1, is bringing in a 1 per cent tax on “non-resident, non-Canadian owners of vacant, underused housing” – including foreign-owned vacant land in big cities. The City of Toronto also plans to start taxing vacant homes in 2022. Like the original B.C. taxes, these moves aim to increase rental housing supply, and lower rental prices, by penalizing investors who don’t rent out their properties.

So what do several years of data from similar levies in Vancouver and B.C. reveal? Three things.

First, vacancy taxes seem to be working, with more investment properties becoming rentals. Second, the rate of overseas ownership of Canadian real estate may be lower than thought. And third, while foreign owners are paying these new levies, so are some Canadian investors.

Vancouver started its empty homes tax in 2017, at 1 per cent of a property’s value. It rose to 1.25 per cent in 2020 and 3 per cent in 2021. The provincial government in 2018 created a “speculation and vacancy” tax, applied to Metro Vancouver, Victoria and several other cities – 0.5 per cent for Canadians and 2 per cent for foreign owners or “satellite” families. The latter can include Canadians, as it is levied when the main income earner pays taxes outside Canada.

Vancouver’s new data, released this past week, found 1,627 empty homes paid tax in 2020, one-quarter fewer than in 2017. Empty homes, including 4,227 that earned an exemption, account for 3 per cent of all homes in the city. Since inception, the tax has raised $87-million, and goes toward affordable housing.

B.C.’s vacancy numbers, issued this past month, paint a further picture. In Metro Vancouver the past year, 4,222 properties paid the provincial levy. Almost 40 per cent of the owners, 1,606 homes, were B.C. residents. The bulk of the money raised, however, came from foreigners and satellite families, since the rate they’re charged is four times that of domestic owners. The B.C. tax has so far raised $231-million, less than half of what was first forecast.

In the mid-2010s, there was a lot of debate – and finger pointing at overseas investors – but an absence of data. The data flows; the debate continues: A review of B.C.’s numbers by a UBC professor and a local analyst find noticeably lower rates of foreign ownership than does Statistics Canada. Statscan estimates foreign ownership of City of Vancouver housing at more than 6 per cent; the researchers peg it at closer to 2 per cent.

Beyond raising taxes and gathering ownership data, the primary aim of these policies is pushing vacant housing back into the market. Canada Mortgage and Housing Corp. has found that, in Metro Vancouver, about 9,000 existing condos became rentals in 2019, plus another 3,600 in 2020. CMHC says vacancy taxes are part of the reason.

Condos, however, are a precarious form of rental. Owners can sell at any time, displacing residents. What’s badly needed are more purpose-built rentals. With so many people priced out of home ownership in Vancouver, there has been a rise in purpose-built rentals – jumping by 2,388 units in 2020, according to CMHC, the biggest increase on record going back to 1990. Even so, CMHC says purpose-built rentals in Vancouver and Toronto remain unaffordable to most households below the median income.

These numbers add substance to the debate over our out-of-whack housing market. B.C. shows that taxing empty properties can grow the number of rentals. But the data also suggests that, among investors sitting on fallow real estate, fewer than expected may be foreigners, and more may be Canadians. That’s relevant, given that the Liberal government promised to cool the market by banning new foreign ownership, across Canada, for two years.

Vacancy taxes were never going to be a cure-all. They have helped, and will continue to, but they work at the margins. By themselves, they can’t eliminate the biggest problems – housing that’s too expensive, restricted supply and a lack of affordable housing. All of that will take a lot more work, at every level of government.

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