Vancouver mayor proposes hiking Empty Homes Tax to 5% of property value

Example of a single-family house in Vancouver (karamysh/Shutterstock)

In a bid to further reduce housing speculation and push more homeowners to rent out their under-utilized homes, Mayor Kennedy Stewart is proposing a significant hike of the City of Vancouver’s Empty Homes Tax (EHT) to 5%.

This is up from the 2021 rate of 3%, which was also an increased rate first proposed by Stewart. When the EHT was first introduced by the previous Vancouver City Council in 2017, the rate was 1%.

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At a rate of 5%, based on BC Assessment’s latest average assessed values for homes within Vancouver’s jurisdiction, there would be a $100,000 EHT tax on a vacant single-family house worth an average of $2 million, and a $38,000 EHT tax on a vacant strata condominium or townhouse worth an average of $760,000. And this does not include potential additional penalties from the provincial government’s separate Speculation and Vacancy Tax.

In his announcement today, Stewart said the hiked rate would also generate more revenue for the city towards funding affordable housing projects, which is what EHT revenues have been dedicated to since the inception of the tax. As of the end of 2021, city staff reported the EHT generated an estimated $106 million in revenue over its history.

Stewart suggested the previous major hike — from 1.25% in 2020 to 3% in 2022 — resulted in a further decline in the number of vacant properties and a doubling of EHT revenue on declared properties, rising from the interim revenue total of $15 million in 2020 to an estimated $32 million in 2021, based on the preliminary figures by city staff he released earlier this week.

Without rate increases, EHT revenues would be on a downward trend due to growing compliance with each passing tax year, but some of the revenue decreases would also have been offset by the growth in assessed property values.

In addition to hiking the tax rate, Stewart is also proposing to direct city staff to increase audits and inspections. Stewart says city staff performed 892 compliance audits in 2019 and 722 in 2020, with 5.5% found to be in non-compliance in 2019.

“We still have hundreds of homes declared vacant, and thousands more empty homes claiming exemptions,” said Stewart.

“By further strengthening the tax rate to 5% and doubling the number of audits, we will make it tougher for speculators and make sure housing in Vancouver works for all of us – not just the few. I expect unanimous support from council on this important step, as we must use every tool we have in our municipal toolkit to tackle our housing affordability crisis.”

Stewart will introduce a member motion proposing the EHT changes at the end of this month.

It should be noted that city staff opposed the previous EHT rate increases. They warned that an increase in the tax rate beyond 1% might have unintended consequences on both the administration and the effectiveness of EHT and on future revenue. City staff previously stated they wanted more analysis on how a higher EHT would find its place with the provincial government’s separate speculation and vacancy tax and other interventionist policies on demand.

Earlier this month, the federal government also banned foreign buyers from Canada’s housing market for two years, with some exceptions for certain groups who are able to prove they will use the properties like homes, not investments. This includes students, foreign workers, permanent residents, and foreigners buying their primary residence in Canada. It was previously assumed a segment of the vacancies were due to foreign buyers, but foreign buying during the pandemic has decreased to under 1% of total sales. Much of the market activity is driven by domestic buyers, fuelled by reasons that include low interest rates.

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