Vancouver mayor Gregor Robertson eyes vacancy tax amid debate over Chinese money and offshore investors
Vancouver’s mayor Gregor Robertson says he is considering the introduction of a tax on empty homes, amid a roiling debate in the city about the role of Chinese money and offshore investors in North America’s most unaffordable real estate market.
In an interview with Bloomberg TV on Tuesday, Robertson said he was “looking at new regulation and a carrot-and-stick approach to making sure that houses aren’t empty in Vancouver,” including a tax on vacant homes. “If you’re not using your property - either living in it or renting it out - then you have to pay more tax. Because effectively it’s a business holding, and should be taxed accordingly.”
It is the latest in a series of pronouncements from Robertson about Vancouver’s real estate affordability crisis, with benchmark home prices up by 30 per cent from last May, and average detached house prices skyrocketing by about 40 per cent last year, hitting C$1.8 million. Incomes in Vancouver are among the lowest in Canada.
Some economists have linked the huge spikes to an unprecedented outflow of US$450billion in private capital from China last year, which came amid fears of both a substantial devaluation of the yuan and a crackdown by Beijing on illicit cash transfers.
On Sunday, Robertson warned that due to “unregulated, speculative global capital flowing into Metro Vancouver’s real estate, we are seeing housing prices completely disconnected from local incomes”.
However, he has for years sought to dispel concerns about the role of Chinese money on his city’s housing market, which has been ranked the second most unaffordable in the world, behind Hong Kong, in four of the last five Demographia studies, covering of hundreds of cities. In November 2013, on a visit to Hong Kong, he told the SCMP it was “ridiculous” to blame Chinese money inflows for Vancouver’s unaffordability woes.
Robertson has also decried what he called the “racist tones” of a study last year that showed two-thirds of all house buyers in some of the city’s most expensive neighbourhoods had “non-Anglicised Chinese names”. Among homes that sold for more than C$3million - representing a third of all homes in the study - 85 per cent went to buyers with non-Anglicised Chinese names.
A tax targeting vacant properties was proposed by dozens of economists in January. The BC Housing Affordability Fund, which has been pitched to both the City and British Columbia provincial government, would impose a 1.5 per cent annual tax (based on home price) on owners who either left homes vacant or had “limited economic or social ties to Canada”.
BCHAF proponent Tom Davidoff, an economist at the University of British Columbia, said it was unclear if Robertson’s remarks on Tuesday referred to his group’s proposal. “We talked to the city and they gave us a good listen,” he said.
“I would hope that any vacancy tax would cover the bigger issue here which is not paying taxes here and not being a landlord [either],” said Davidoff, whose group’s proposal would also tax people who under-utilised properties as a “pied-a-terre”, and those whose primary breadwinner paid little or no income tax in Canada - so-called “astronaut families”.
Although the BCHAF would make no distinction based on Canadian citizenship, residency or foreign nationality, “you can see the writing on the wall, or the writing on the ‘for sale’ sign, and you know where the demand is coming from,” Davidoff said.
He said there was a consensus among most economists that Vancouver housing prices were being driven by Chinese money, which filtered through the market, even if it was directed at the multi-million-dollar top end. “The last year has been so bonkers, and with the evidence of the huge outflows from China and the weak loonie [the Canadian dollar] - that doesn’t just randomly happen,” he said. “We all think it [Chinese money] is a big factor,” he said of the 47 academics from UBC and Simon Fraser University who signed on to the BCHAF.
Peer-reviewed research has previously identified the foreign-sourced wealth and income of new immigrants as a key driver of Vancouver’s market. The vast majority of such wealthy immigrants has lately been from mainland China.
A vacancy tax was proposed in 2014 by unsuccessful mayoral candidate Meena Wong, of the left-leaning Coalition of Progressive Electors. Wong’s plan was one of the most popular policy proposals during the campaign.
A study of vacancy rates commissioned by the city, based on electricity usage, found non-occupancy of all City of Vancouver dwellings ran at 4.8 per cent in 2014 and about 4.5 per cent in 2011. However census data has suggested higher numbers.
Both Canadian Prime Minister Justin Trudeau and BC Premier Christy Clark have said they worry that taking steps to curtail foreign ownership in Vancouver could imperil the equity of existing owners.