‘Unintended consequences’: Vancouver council votes to cut empty homes tax back to 3%

Vancouver city council voted Wednesday to cut the city’s empty homes tax back to three per cent for 2023.

The vote also directs staff to explore the possibility of a graduated tax rate that increases the penalty for homes that remain vacant for multiple years, and includes an amendment to return millions of dollars to property developers.

It reversed a recent move by the city to increase the tax rate from three to five per cent.

The motion followed a report from the city’s director of finance recommending the reduction, along with numerous new exemptions to the tax — which were also approved Wednesday.

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Current exemptions for the tax include properties under renovation, property transfers and strata rental restrictions.

The new exemptions will cover properties with a building permit, development permit, rezoning inquiry, rezoning application or policy inquiry issued in the tax reference year.

Other new exemptions include properties that can’t be occupied due to hazardous conditions, properties being used as a second residence closer to medical treatment, and a one-time exemption in 2023 for properties with strata rental restrictions.

One of the exemptions will cover developers who have new units that sit empty because they have not been sold to their first owners.

In a vote that split along party lines, it approved an amendment which will make that exemption retroactive to the 2022 tax year, returning $3.8 million in tax money already assessed to developers for last year.

The tax was designed to turn empty homes into housing and to ensure foreign owners, and those with primarily foreign incomes, contribute to B.C.’s tax system.

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The tax targets properties that have been unoccupied for more than half a year.

“The significant tax rate increase from 3% to 5% effective in 2023 may possibly support further conversion of additional homes from empty to occupied,” the report states.

“It can also result in a higher risk of tax evasion and consequently, requiring more resources for performing compliance work and increased impact of unintended consequences.”

The report states that vacant properties in the city fell by 20 per cent in 2020-2021 and again in 2021-2022, both under the three per cent tax, but adds the drop may be related to the COVID-19 pandemic.

The city said it has dedicated more than $115 million in revenue from the tax toward affordable housing since the measure was first implemented.

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