Vancouver to Increase Vacancy Tax

by | Dec 14, 2020 | Rental Property Management Tips

Citing the apparent success of the Empty Homes Tax in creating more rental housing, Vancouver lawmakers voted to increase the tax in 2021, sending an “even stronger message” to owners of vacant properties.

This vacancy tax currently is set at 1.25% of the property’s assessed value. The new amendment raises that figure to 3%.

The EHT was the first of its kind when introduced in 2016. At that time, the vacancy rate in Vancouver hovered around 1%, forcing officials to explore new avenues for bolstering the city’s rental housing inventory.

The vacancy tax is designed to be an incentive for owners to place idle properties in service to avoid paying the penalty. It applies to homes that are not the owner’s principal residence, used by the owner for work at least six months out of the year, or already being offered for rent six months or more of each year. The tax does apply to properties used as short-term rentals.

Since the tax came into effect in 2017, Vancouver has monitored the success of the program in bringing new rental housing to market. City officials are pleased with what they are seeing and report a roughly 25% year-over-year decrease in vacant properties in 2019.

CMHC recently reported that as many as 11,000 new units were converted to rental housing in 2019. However, new limits on short-term vacation rentals may have contributed to that figure. The CMHC also warns that this new inventory may be more volatile than purpose-built rental housing given the ease at which these private owners can sell and take a property out of service.

It is difficult to gauge what role the pandemic and the sudden and sustained decrease in travel and tourism may have played in the decision to convert properties to long-term rentals.

A Vancouver Council staff report generated prior to officials hiking the EHT rate suggested that the tax be increased incrementally over the course of subsequent years to allow time to analyze 2020 figures, which are not currently available.

However, Mayor Stewart decided to push forward with an immediate and substantial increase for 2021 and City Council agreed. The Mayor argued that it was time to raise the stakes on reluctant property owners who have opted to keep their homes vacant to encourage them to either rent or sell to residents. “Homes are for people,” he says, “not speculation.”

While the tax applies to most idle properties, including vacant land, exceptions are made for medical emergencies, newly acquired properties, renovations, or homes subject to strata rental restrictions.

Questions have arisen regarding how the city will enforce the EHT. For instance, how does the city know if a property is vacant? Monitoring may be accomplished through access to utility records. However, the main enforcement tool is a declaration requirement that must be submitted to the city each year where an owner must report, under oath, how the property was utilized.

Property owners have until February 2, 2021 to submit a declaration for this year.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

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Disclaimer: The information provided in this post is not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

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