Good news next year for those who have struggled to find rental properties in Vancouver lately. A new law will come into effect taxing absentee landlords thousands of dollars per year for holding onto empty homes.
Canada’s most expensive housing market has suffered a shortage of rental homes in recent years with Vancouver’s mayor estimating that there are about 20,000 empty and under-occupied properties in the city. We knew months ago that the city was thinking of a way to increase available rentals and tax empty homes but they had yet to put a plan in place.
This tax seeks to change that by spurring landlords to lease their properties or take the financial hit. According to Financial Post, the tax will be 1% of the home’s assessed value per year. For the average Vancouver home, that works out to nearly $10,000/year for most owners. For those with multiple vacant properties however this could quickly add up to tens of thousands per year.
This new expense might lead some to risk lying about the home being occupied or about its status as a principal residence, but getting caught will come with a heavy price of up to $10,000 per day for as long as the offense continues. Paying the tax late will incur a 5% penalty on the payment.
The onus will be on homeowners to declare whether the property is their principal residence or secondary investment. Most importantly, if you don’t declare occupancy the property will be taxed automatically, so any homeowners in Vancouver should be mindful of that. Principal residences won’t be taxed and properties that are rented out for at least 6 months of the year on 30-day minimum leases will also be exempt.
The public have spread the image of wealthy foreign property owners buying up properties and leaving them empty while Vancouverites struggle to find affordable housing. While research showed foreign buyers only made up a small portion of a big market, the province put a tax in place for foreign buyers that seemingly killed a lot of the market activity in the city. This new tax may lead to the market cooling down even further. The city hopes the tax will boost the vacancy rate from 0.6% to 3.5%. A higher vacancy rate will mean there will be less bidding wars for rentals and hopefully more stable and affordable prices.