Investors sit on thousands of empty homes as more and more people struggle to pay rent. Public sentiment turns against wealthy foreigners, who many say are responsible for surging property values.
There are many parallels between Vancouver's housing market and the inner-city London borough of Camden, said Councillor Theo Blackwell, who oversees the finance portfolio for the district.
"There was a suspicion that quite a lot of these people or overseas companies were using Camden's property like gold bricks, basically," Mr. Blackwell said in an interview last week.
In 2013, he helped implement a tax on empty "ghost homes" that has since been mimicked in other parts of London and is now being embraced by Vancouver's mayor as a way to bolster his city's 0.6-per-cent rental vacancy rate.
Mayor Gregor Robertson issued an Aug. 1 ultimatum to the province last week, saying Vancouver would go it alone if the government refused to start implementing the idea. On Wednesday, city council voted to approve this adversarial approach, despite staff from both city hall and the provincial Finance Ministry meeting throughout this week to see if the proposal will work.
Supporters say the tax is a valuable tool in the fight to make housing more affordable when the world's richest people increasingly seek to profit from real estate. But critics argue that the tactic is too much work for authorities and has little overall effect on a superheated market.
Camden is one of the few available case studies for such a tax.
To Mr. Blackwell, penalizing landlords who leave their properties empty has brought mixed results to his community of 220,000 residents, which is about a third as big as Vancouver's population.
Council began by penalizing the owners of 248 homes that sat empty for longer than two years an extra 50 per cent on their annual property taxes. All properties were assessed this extra tax, and owners who rented or lived in their properties full-time then had to apply for an exemption, Mr. Blackwell explained.
Initially, about one-third of the absentee homeowners hit with the tax agreed to rent out the homes, he said. The tax also raised roughly $260,000 for the borough, a relatively small amount that was about "enough to keep open the neighbourhood library," Mr. Blackwell added.
But Camden's property tax rates, like in much of Britain, are relatively low – with the owner of a high-end detached home assessed roughly $5,000 a year, he said. That has led the majority of those holding empty units to keep them vacant because the spike in their property values each year dwarfs the amount of the new penalty.
"They got wise to it and now it's quite common for these ghost developments to happen in London where foreign investors are buying into new developments, not tenanting them and paying the extra levy," Mr. Blackwell said.
Things might have turned out differently if the national government didn't stop Camden from doubling the tax, because "they thought that would be unfair," he said.
Such a tax was floated in Vancouver two years ago, when long-shot mayoral candidate Meena Wong gained some traction with her proposal to charge people for the privilege of letting property sit empty in the city. The spectre of nosy bureaucrats snooping on people's homes and a clear lack of data on the scope of the problem led few in power to embrace the tax. Since then, housing prices have continued to skyrocket and various studies have been released that hint at the influence of foreign money on the market.
Last week, Vancouver – which is ruled by its own municipal charter – announced it will determine a special business tax rate of its own if the B.C. government does not begin penalizing those who profit from sitting on any of the thousands of empty housing units amid an ongoing rental crisis.
Tom Davidoff, a business professor at the University of British Columbia, argues that the vacancy tax is a good start, but the proposal pushed by him and a group of other real estate economists would also cover the city's "astronaut families" – where the main breadwinners pay little to no income tax in Canada, and relatively low property taxes, while their partners and children enjoy living in the region.
"I think where they're not earning money here, that family ought to be paying higher property taxes," Prof. Davidoff said. "That's what we care about; I don't care if someone's a citizen of China and comes here and pays income tax."
Pushed by both the mayor and the federal Liberal government – which recently formed a task force to address the affordability crisis in Vancouver and Toronto – Premier Christy Clark praised this new attempt to craft a vacancy tax for Vancouver during an announcement this week that her government is taking back regulation of the real estate industry.
NDP housing critic David Eby said governments have probably been reluctant to implement such a tax because they don't want to dictate how owners can use their homes. "The idea is you buy your property and it's yours," he said. "The issue has been the idea of the transformation of property into an investment."
Mr. Eby said last week he doubts the province will help Vancouver create the tax. He is in favour of it, but prefers the wider-ranging proposal from Prof. Davidoff's group.
There are other things the city could do immediately to increase affordability, he said, such as cracking down on Airbnb operators (which it is currently studying), relaxing single-home zoning rules and pushing the province to allow UBC and Simon Fraser University to build thousands of units of on-campus housing for students.
Mr. Blackwell said Camden has seen some success building affordable rental units and social housing.
"My advice to Vancouver is this: [The vacancy tax] is not a solution in itself, it's part of a suite of measures."