Owners of empty homes in Vancouver will get higher tax bills starting in the 2021 tax year, following a Wednesday council vote that the city’s voters can expect to hear more about between now and the 2022 municipal election.
A staff report before Vancouver’s council Wednesday recommended holding the empty homes tax at the current rate of 1.25 per cent of a property’s assessed value, to allow time to study the effectiveness after council voted last year to increase it from 1.0 per cent. The report also outlined, but did not recommend, the idea of raising the tax to 1.5 per cent for next year.
But council ended up choosing neither of those options.
Instead, Mayor Kennedy Stewart introduced an amendment at Wednesday’s meeting to hike the rate all the way to 3.0 per cent starting next year.
Stewart said he hoped the move would mean more owners of empty homes will rent them out or sell to people who will live there. Although council had previously backed a plan to increase the tax more incrementally, he said, “I do feel now moving to three per cent is the right thing to do.”
The three current NPA councillors who opposed Stewart’s amendment did not take the opportunity to explain their reasons Wednesday before voting. But Kirby-Yung took to Twitter after the meeting to criticize the mayor for going against staff’s recommendation to hold the tax at 1.25 per cent.
“It’s rare to see City of Vancouver staff not recommending a tax or a fee increase,” Kirby-Yung wrote. “So when staff suggest holding the line for a year to enable analysis and informed decisions, it’s worth taking note.”
Kirby-Yung cited the cautions from city staff, as well as tax experts from Ernst & Young, warning that increasing the empty homes tax beyond one per cent might have “unintended consequences” on its effectiveness and future revenue. She gave the example of property owners converting residential properties to commercial use. More analysis, she argued, was needed before increasing the rate.
But Stewart, in explaining his reason for hiking the tax, cited new figures from the Canada Mortgage and Housing Corporation, showing a large number of Vancouver condos being converted to long-term rental use.
CMHC provided Postmedia with a copy of that report, to made public on Thursday. It shows, for the first time, that of the “unprecedented increase” in the number of rented condominiums in Metro Vancouver between 2018 and 2019, the vast majority of those were units that had been converted to a long-term rental home from another use, such as an unoccupied property held for investment purposes, an occasionally used pied-à-terre, or a short-term rental through a platform like Airbnb.
Although they are considered a less stable form of housing than purpose-built rental apartments, rented condos for an important part of Vancouver’s rental market.
The CMHC report shows that between 2018 and 2019, there were 823 new condos in the City of Vancouver that were immediately rented out upon being completed. While those added badly needed rental homes to the market, that number was dwarfed by the 5,097 existing Vancouver condos converted during the same time period from another use to long-term rental homes.
That far exceeds the pace of new rental construction: City figures show that from 2010 to 2017, Vancouver had an average of fewer than 950 new purpose-built rental units built each year.
Last year’s net increase in rented condos, both in Vancouver proper and the Metro region, was more than two times the average for the last decade, said the report’s author, Vancouver-based CMHC market analyst Eric Bond. “Hey, we’re looking at what is really quite an important change here.”
Bond noted that the dramatic change follows the implementation of various new policies at both city and provincial level, including Vancouver’s empty homes tax, the city’s regulations for short-term rentals like Airbnb, and the province’s similar speculation and vacancy tax.
Last year, the city collected almost $40 million in net revenue from the empty homes tax, which was used for a range of affordable housing initiatives.
Stewart’s amendment passed with the support of seven councillors, opposed only by Non-Partisan Association councillors. Melissa De Genova, Lisa Dominato and Sarah Kirby-Yung in opposition. Council’s other NPA member, Coun. Colleen Hardwick, supported Stewart’s amendment.
In the lead-up to the 2018 election, when the empty homes tax was still relatively new and sat at one per cent, Stewart campaigned on the idea of tripling it, as he was quick to remind voters on Wednesday. Within hours of the council vote, a press release from Stewart’s office heralded his following through on a “key campaign promise.”
A separate email Wednesday, from Stewart’s re-election campaign to supporters, struck a more political tone, stating that while the mayor was happy most councillors supported his amendment, he was “disappointed that too many NPA councillors chose to stand with wealthy housing speculators rather than fight for Vancouver residents who need homes.”
While Stewart and some other mayoral candidates in 2018, such as third-place finisher Shauna Sylvester, campaigned on increasing the empty homes tax, the NPA’s Ken Sim — who finished a narrow second to Stewart — criticized the tax during the campaign, saying he wanted to add new rental units to the market by allowing two secondary suites in homes.
Vancouver’s empty homes tax was approved in 2016, under the city’s previous Vision Vancouver-majority council, over the opposition of all three NPA councillors.