VANCOUVER (Reuters) - Vancouver will find a way to tax its vacant homes, possibly by treating them as business investments, to ease the Canadian city’s housing affordability crisis, Mayor Gregor Robertson said on Wednesday.
If implemented, the tax could drive up costs for many foreign investors who have helped make the west coast city Canada’s most expensive property market and send new investments to other housing markets.
Robertson said the city would give the British Columbia government until Aug. 1 to respond to its plan to tax nearly 11,000 empty homes in Vancouver.
If Vancouver fails to win provincial backing, Robertson said, the city would begin drafting its own regulations to create a business tax on empty homes that are held as investments.
“We are going to make sure that those who treat housing as a business are treated and taxed accordingly for that use,” Robertson told reporters.
A tax rate has not been decided, but it needs to be high enough that there is an incentive for owners to rent their homes, Robertson said, adding that vacancy rates in Vancouver are close to zero.
Robertson said the city’s preferred option was to work with the province, which already has data on whether properties are vacant. If it goes it alone, the city would also have to enact a new business tax by-law, something that could take time and be expensive to administer and enforce.
In a tweet, British Columbia Premier Christy Clark said the province was reviewing the city’s report and would respond quickly.
If high enough, the tax could make housing markets elsewhere in the world more attractive for foreign investors and cool blistering demand for Vancouver real estate, said CIBC economist Benjamin Tal.
“It might make the difference between Sydney and Vancouver,” he said.
More than 90 percent of detached homes in Vancouver are worth more than C$1 million ($780,000), compared with 19 percent a decade ago, according to a study released last week.
In the Greater Vancouver region, home prices have risen 46.9 percent in the last five years. Despite this rise, the province has hesitated to intervene, and only recently took small steps to start tracking foreign buyers and to slow aggressive flipping activity.
($1 = 1.2797 Canadian dollars)
Reporting by Nicole Mordant in Vancouver; Editing by Steve Orlofsky