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Fire department tape is seen outside a $3-million vacant home that was damaged by fire at 2920 West 41st Ave. in Vancouver, B.C., on Thursday November 10, 2016.DARRYL DYCK/The Globe and Mail

Vancouver council has approved Canada's first-ever tax on vacant homes, despite hearing from a raft of people who say it will penalize owners of modest second homes who use their properties regularly instead of pure investors.

The city's mayor defended the tax as an essential part of the response to the region's housing crisis. Mayor Gregor Robertson has argued the tax will encourage owners of empty units to rent them out while allowing the city to raise money for new housing through the tax.

"I think the way it is proposed is going to achieve thousands of units in the short term," said Mr. Robertson, adding that the tax is just one measure needed to tackle Vancouver's extreme housing crisis.

The debate over housing in the city has focused in part on the theory that speculators have been buying up houses and apartments and leaving them empty. A city analysis conducted earlier this year estimated there were 11,000 homes in the city that had been empty for 12 or more months in 2014 and 2015; 90 per cent of them were condos.

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The first time homeowners would pay the tax would be in 2018, after self-reporting on the status of the homes they owned throughout 2017. The tax will be equivalent to 1 per cent of a home's assessed value, meaning a person with a $400,000 condo would pay an additional $4,000 a year in taxes.

Before the tax was approved, councillors were deluged with letters from owners pleading special circumstances and also heard in person from a handful of speakers saying the same.

Many said the tax should be directed exclusively at people who are investors – not people maintaining second homes in Vancouver.

"If you pursue this tax, it should be for an individual who owns two or more properties," said Paula Chu, who owns a $400,000 Coal Harbour condo with her husband Henry, along with their principal residence in Bellingham, Wash. "But it's the little people who own the one condo that you're actually causing a hardship for."

Another woman, Danice MacLeod, said the new tax, which would bring her bill to $28,000, would likely force her to sell her parents' former home in the city as she had to declare an Alberta house as her principal residence years ago for complicated reasons.

"I suggest the city direct its efforts to those hedge-property owners who caused the housing shortage," she said.

AndFormer lawyer Barbara Bulmer argued that the tax is "really retroactive rezoning."

Ms. Bulmer, who owns three properties, in Vancouver, the Sunshine Coast and Whistler, said she wouldn't be personally affected. Her Kitsilano condo is her principal residence.

But she said that for her and some others, a second property is not an investment.

"The second home is a home for most people."

Mr. Robertson's colleagues in the city's ruling Vision Vancouver party supported the measure, with one addition. On Wednesday, Councillor Kerry Jang asked staff to look at second homes being "frequented for family purposes" that should perhaps be exempted.

In spite of that conciliatory move, the three Non-Partisan Association councillors voted against it. Councillor Elizabeth Ball called it a "cruel, cruel tax on good citizens who aren't rich."

A number of exemptions have been outlined. For instance, homeowners won't need to pay – even if they are away for large parts of the year – if their house is a principal residence, the place listed on their driver's licence, tax forms and health cards.

Homeowners will also be exempt – even if it is a second home – if they can prove that they or a family member have been living there for more than six months of the calendar year, or that they have rented it out for at least that much time.

People will also be exempt if they own condos in buildings where the strata council had a rule in place, as of the start of the new tax, restricting rentals.

Staff will audit about 3,000 self-declarations a year, based on reports from residents, on evidence of high-likelihood areas of empty homes, and on random checks.

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