Critics upset about Vancouver's 'absurd' Empty Homes Tax
Vancouver's attempt to address the issue of people purchasing properties and leaving them empty is hurting the wrong people, citizen group says
When Samantha Reynolds got a reminder from the city in the mail that she had not yet submitted her Empty Homes Tax declaration, she shook her head at the irony.
Ms. Reynolds lives a few houses down from a house owned by the city that has been vacant for almost two years.
Last summer, the city-owned character house at 3030 Victoria Dr. became a case of bad publicity for the city when it was revealed in this column that the city purchased the house in February, 2016 and left it empty.
City hall and the park board, had plans to tear it down and leave it as a vacant lot, with the expectation that the other homeowners on the block would also sell. All the houses would then be torn down to create more parkland. The block is adjacent to John Hendry Park, better known as Trout Lake. But the residents on the block are part of a tight-knit community and have no plans to leave. After neighbourhood push back, the city said the house would remain and it was to be rented out. However, it has remained empty for almost two years.
There are 25,502 unoccupied or empty homes across the city, according to the last census. The rental vacancy rate is less than one per cent.
"I would like them to be accountable to their empty promise; to rent the house out," Ms. Reynolds says.
She'd also like the city to give up its plan to create more parkland and put the house back on the market, since there's a housing crisis.
"As a neighbourhood we are not backing down. We want them to reverse the whole plan."
When I contacted the city last week, staff said they were just about to put out a request for a co-op operator who could take on a lease and find tenants for the house. The operator would also have to do repairs according to the building code. (The first winter the city owned the house, no one turned off the water and the pipes froze and broke.) There was no explanation as to why that process had not begun several months ago.
Double standard aside, the Empty Homes Tax (EHT) is well intentioned. It was introduced in order to address the practice of purchasing properties and leaving them empty as mere land banks. Rich property owners who can afford to leave a perfectly good home empty is just the sort of crass wastefulness that is making Vancouver residents apoplectic. Kerrisdale and Dunbar are full of empty new homes that symbolize the hypercommodification of housing that's become a Vancouver specialty.
The EHT becomes a reality on Feb. 2, also the deadline for Vancouver homeowners to declare whether they are holding a property that has been empty for more than six months. The tax amounts to one per cent of the home's assessed value, which will be due by April 16. People who make false declarations will face fines up to $10,000 a day, as well as the tax.
But some are arguing that the tax is sweeping up a good many innocent citizens in its attempt to net those homeowners who have turned housing into a mere money-maker.
Developer Michael Geller calls the approach well intentioned but "absurd" – a tax that will only incentivize people to find ways around it.
"They will either figure out a clever way to get around it, or sell their places. That's what's happening. A number have sold them, but others have come up with clever legal structures to avoid paying the tax."
He also questions what will happen when someone purchases an empty house. If audited, will the new buyer be stuck with the previous owner's EHT?
"There is a whole series of unintended consequences, which the city should have remedied and instead they are simply standing by it," Mr. Geller says.
There's the case of Jane Macdougall, who owns a lot that has never had a house on it. In 2005, she had restored and saved a significant Tudor Revival heritage house on a large lot, and, with the help of a Heritage Revitalization Agreement, she subdivided the adjoining empty lot. The grand house, with its striking Gothic arch entrance, was designed by Hodgson & Simmonds in 1930. That same year, Simmonds designed the Stanley Theatre.
Ms. Macdougall says she will owe around $60,000 in total taxes for the lot, including the EHT. She says she's being punished for not providing housing, while the City – which will face no penalty for leaving 3030 Victoria Dr. standing empty – is held to a different standard.
("City of Vancouver-owned properties are exempt from payment of property taxes under the Vancouver Charter and are therefore exempt from the Empty Homes Tax," city staff said in an e-mail.)
Despite its significance, Ms. Macdougall could have torn the house down and made a fortune from the three city lots that it occupied. It happens all the time in Vancouver. Instead, she sold off the house and planned to build on the lot that remained. However, building on a property that had limited access proved to be a case of endless bureaucratic red tape.
Instead, Ms. Macdougall bought a house elsewhere and allowed the owners of her former house to use the lot as garden in exchange for maintaining it.
Now, she has discovered the EHT also applies to empty lots such as hers. The city had included empty lots in the tax because they quite rightly realized that some homeowners would rather bulldoze their houses than pay the tax. Ms. Macdougall is in a unique predicament. She says city staff have advised her to take out development permits.
"I'm thinking, 'Okay, do you want to give me the $2-million it's going to take to build on this? And who am I building it for? And to what end? And how does that address the ridiculous crisis of affordability in housing that we have found ourselves in as a result of, in my estimation, some people not being proactive when they needed to be?"
Dr. Rainer Borkenhagen started the citizen group, Unfair Vancouver Vacant Homes Tax Coalition, last spring, and it has hired legal counsel to advise them on whether they should take action against the bylaw. The group, which numbers about 80 people, is made up of retirees, artists and working professionals who come and go from Vancouver. Dr. Borkenhagen lives on the Sunshine Coast and owns a small condo in Vancouver, which was intended for family gatherings since their family has become dispersed. Once the tax was announced, they found a family friend to rent it last year, and this year they intend the condo for their own use. If they hadn't rented the unit last year, they'd be looking at an EHT of about $8,000, Dr. Borkenhagen says.
They feel the tax unfairly targets tax-paying citizens who've done nothing wrong.
The way the bylaw is written, only people who are working in Vancouver can occupy a secondary unit for a minimum of six months of the year. It doesn't apply to retirees, which, he says, is discriminatory.
"If it's your secondary home, you have to prove that you are there for six months working," says Dr. Borkenhagen, who still works, but will retire this year. "What the city is saying is there is no room for retired people who used to be full-time in Vancouver."
Dr. Borkenhagen makes a number of strong points. The tax is retroactive, which means it affects people who would have never purchased a secondary unit if they had known about the tax.
He says that if he does rent out his secondary unit, he doesn't have to prove that the tenant is working, or even spending a lot of time in it. So, the tenant can come and go, but not the retired owner. As well, with housing costs the way they are, a pied-à-terre is often the only way that parents can visit their city-dwelling children, he argues. The family has become decentralized.
"The other thing is, how are they going to monitor it? Right now it's the honour system, what you declare. And then they threaten to audit you, and industrial-size penalties of up to $10,000 a day. The threat is there."
It is not a tax, but a fine, he says. And it's a substantial fine for retirees on a fixed income.
"They should just across the board increase taxes and put the increase towards social housing," he says. "People like us, taxpayers who've paid our dues in everything, do not throw us in the pot and say, 'you're a culprit.' They should recognize that the issue is much bigger.
"They see us as a necessary collateral damage," he adds. "But they want to keep it clean and easy and not look at too many exceptions to the bylaw, because it becomes too difficult to administer."
As of last week, 62 per cent, or 116,000 property owners had made their declarations. The city says it will release the number of declared vacant properties later this year. It's unclear how the bylaw will be enforceable, other than an audit, if the city asks for it. In that case, the homeowner will have to prove that they qualify for one of several exemptions.
Empty homes represent speculative buying by mystery buyers who often have no other connection to the city than real estate. Local incomes can't compete.
Until government gets tough on foreign money, the empty home will remain what it is – a symbol of an empty promise to meaningfully do something.