Presentation to Vancouver City Council on improving fairness and effectiveness of Empty Home Tax February 27, 2019

"Would you like to talk about the empty homes tax review report that’s coming before council next week? https://council.vancouver.ca/20190227/documents/pspc2.pdf. I can talk to you this afternoon before 3:00, or any time tomorrow."

     Had I not received this email from Jen St.Denis, a reporter with the Star Vancouver Newspaper, I would not have known a report was going to Council regarding the Empty Home Tax. Nor would I have ended up spending much of Wednesday in Council, watching the new City Council in action. I say much of the day since the meeting was scheduled for 9:30 and I was speaking to the second item. As it happened, I didn't get to speak until 2:45 due to changes to the agenda, etc.

     I prepared some notes, but after having to wait in the council chamber for 5 hours, ended up revising them many times over. But here's the gist of what I said in my presentation and subsequent Q&A with councillors!

·        While I have long had concerns about the proposed Empty Home Tax since it’s inception, in terms of its likely effectiveness and administration challenges, I acknowledge that given Vancouver’s housing affordability crisis, it is legitimate for the city to take measures to convert vacant properties into rental properties….

·        I won’t call them empty homes since if they’re empty, they’re not homes.….as you will hear, my biggest complaint is that too many of the dwellings impacted by this tax aren’t empty, they are people’s homes, albeit second homes.

·        The report before you sets out improvements to close some loopholes, and a strategy to develop longer term improvements to make the tax more equitable and effective.

·        I compliment those of you who fully understand this report. I’m not a lawyer, and frankly I had some difficulty understanding exactly what is being proposed. But the proposed changes appear to do three things:

o   narrow the tenancy exemption to essentially exclude non-arm’s length tenants such as family members;

o   expand the exemption for a place left vacant because of the owner’s death and

o   narrow the exemption because of a sale during the year.

·        There are other changes that are required, as proposed by a local tax lawyer Noah Sarna. I included a link to these suggestions in this week’s Vancouver Courier Column. https://www.thor.ca/blog/2019/02/how-to-improve-the-fairness-of-vancouvers-empty-homes-tax/.

  The report suggests that, in the future, the city emulate some of the provisions of the provincial speculation tax, such as imposing higher rates for foreign owners, compared to local owners, etc. and reconsidering rental units in strata corporations.

·        But as you consider what future changes might be made, I want to highlight a most significant distinction between the city’s EHT and the province’s so-called Speculation & Vacancy tax

·        The city’s tax is a PROPERTY TAX, whereas the province’s tax is a PERSONAL TAX. In making changes, you need to decide what you want this to be.

·        We also need to consider how effective this tax has been in terms of increasing the supply of rental housing. 

·        When this tax was first proposed, we were led to believe there were anywhere between 10,000 and 25,000 empty homes that could be brought into the rental market. (you can find many references to this online). However, according to the report, if I am reading it properly, the number of homes declared vacant, without valid reason, was only 1,085 in 2017 and 922 in 2018 — 525 properties were declared vacant for both years.

·        The report further notes that a significant number of formerly vacant units did return to the rental stock between 2017 and 2018. How many? 117. Yes, 117.

·        We are told the city expects to receive $38 million from the vacant properties. While it is not clearly set out in the report, in 2018 there were 922 empty dwellings taxed. This equates to an average of $41,215 per property which translates into an average $4.1 million property. If the money came from 1,085 units, that equates to $35,000 per unit based on a $3.5 million value.

·        Even if these homes are converted to rental, they are not going to be affordable rental.

·        My biggest concerns related to this tax are its effectiveness, and unfair impact on second homeowners.

·        Now, I appreciate that when many cannot afford one home, there is little sympathy for those who own two. But we should think about this because many of these second home owners want to be in Vancouver. They have good reason to be here. They are paying full property taxes, but don’t send their kids to our schools or place significant demands on our services. Their homes are not empty.

·        However, the city’s empty home tax, combined with the provincial tax will force them to sell. Why, because no matter how much money they have, they don’t want to pay $100,00 or more in taxes every year on the average property now paying the tax, in addition to their property tax.

·        Now some will leave the city. But not all. I know this for a fact. What they are doing is selling their properties….and renting. Let me repeat this. They are renting. So instead of creating more rental stock, by taxing second homes, you are encouraging these people to move into existing rental accommodation. Was that the intention? I don’t think so.

·        If the true purpose of this tax is to increase the stock of rental housing, I would urge you to reconsider taxing legitimate second homes. They are not going to be rented out, especially if you ban non-arms’ length transactions.

·        I admit that it will be complicated to come up with a way to exclude second homes, but it can be done. One suggestion is to reduce the timeframe from 6 months to say 3 months. There are other ways too.

·        And if you do stop taxing legitimate second homes, I will not be bck to oppose the mayor’s proposal to increase the tax from 1% to 3%.

·        Again, on the proviso that the tax lives up to its name, a vacancy tax. A tax on vacant properties, not people’s homes.