Mortgage Blog

Vancouver's Proposed Vacant Property Tax

August 26, 2016 | Posted by: Kelleway Mortgage Architects

On the Horizon:  Vancouver Vacant Property Tax

In June 2016, the city’s mayor, Gregor Robertson, suggested that the council take measures against the practice of owners leaving homes vacant. He is proposing to introduce a vacant property tax in Metro Vancouver with or without provincial backing. In July, Finance Minister Mike de Jong supported recalling the BC provincial legislature to change the Vancouver Charter and provide the city with a new power to tax homeowners.

The intentions of people owning a residential property and then leaving it vacant can usually be sorted into five categories. The vacant property is held:

1) until such time as the owner wishes to occupy it
2 until such time as the owner wishes to rent it
3) for its appreciation value in hopes of selling at a profit (i.e., flipping)
4) for later renovation or development to sell at a profit sometime in the future
5) when ownership is uncertain perhaps due to separation/divorce proceedings, an unresolved property insurance claim or an estate is in probate after the death of an owner

Still open for discussion is how long a residential property can be left vacant and what deems it “unoccupied”. The city proposes that the vacant timeframe is a year. What if the owners are renovating and waiting for permits to arrive and that takes longer than a year? What if the home is unliveable and the owners are awaiting demolition permits, zoning changes, building allowance exemptions and construction financing approval? What if the home is rented for a short time, is the timeline of it being “unoccupied” reset? What if the home is only partially occupied (e.g, only one unit in four is rented and occupied)? What if the home is occupied by owners for some months and then left vacant while they live elsewhere for the remainder of the year? What if the owner-occupier is deceased and the estate has not been settled?

Once questions like the above are addressed, there is then the matter of detection and enforcement. Like Crime Stoppers, will there be an “Empty Home Spotter” reporting system? Will owners be obliged to self-declare on their property tax remittance and/or income tax forms if a home is unoccupied? Or, will door-to-door spot checks be done similar to meter readings? How can owners prove their occupancy? For example, utility bills are now unreliable proof of occupancy as utility use can now be controlled by mobile phone apps.

What is clear is that, in their current state, vacant properties do not contribute to the housing supply as neither owners nor renters are housed in the premises – and that is a problem. Uncared for vacant properties could contribute to vandalism, squatting, fire, flooding, uncollected garbage, overgrown landscaping, pests and vermin. Left unchecked, escalating problems related to these unoccupied homes will likely decrease neighbouring property values.

Whether imposing a tax will deter empty homes is debateable as owners who can afford to leave their properties vacant will likely have the financial capacity to pay the tax.

Even if taxes are collected, how will the monies be used? Perhaps the funds could go towards:

- increasing the supply of affordable housing,
- improving neighbourhood amenities and services, and/or
- increasing funds for municipal bylaw or police enforcement.

All in all, the vacant property issue is a complex one.

The takeaway is that if you own a residential property that is or may become vacant, be financially prepared to regularly care for your property and pay extra on your property tax. You may also want to revisit your home owner insurance policy as your insurance may be null and void if the property is left empty beyond a specified time.

On the other hand, if there is an uncared for vacant property in your neighbourhood, be aware that it could cause problems. You and your neighbours could spend considerable time and effort applying pressure on municipal officers and police to enforce bylaws and laws against those who neglect their vacant properties.

What's the Next Step for You?

1)    Keep us in mind and on hand in case anyone you know runs into the same sort of situaltion.
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Glen Kelleway, BSc, AMP, Senior Mortgage Planner & Owner
 

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