Vancouver mayor mulls empty homes tax


By Leith van Onselen

Yesterday I published a disturbing report aired on Tuesday’s SBS Dateline examining the large-scale migration/investment of wealthy Chinese into Canada’s city of Vancouver, which has forced house prices to astronomical levels and left a swathe of empty homes.

The Dateline segment follows a report presented to the City in March which found just under 11,000 empty homes in Vancouver, most of which are  apartments or condos.

Amid growing pressure, Vancouver’s mayor, Gregor Robertson, has stepped up his call for a tax on empty homes, arguing that if a home is being treated like a business then it should be taxed accordingly. From Bloomberg (video above):

“We’re looking at new regulation and a carrot-and-stick approach to making sure that houses aren’t empty in Vancouver,” Robertson said, 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.”

UBC Professor, Tom Davidoff, has gone further, arguing for Vancouver to introduce taxes for those that own homes in Vancouver but do not pay taxes in the city:

“People who purchase homes but aren’t landlords, of course that would include vacant homes. But would also include homes run by so-called astronaut families, where people might actually live in the homes but nobody pays taxes in Canada”…

“If people who live and work here are being outbid for homes by people who do not live and work here and don’t pay taxes here, that other class of homebuyers ought to be paying higher property taxes”…

“We would take you to an extra 1.5% property tax if you’re not a landlord, if you don’t pay income tax, if you’re not a CPP recipient where you haven’t lived in the home for a long time. So we protect people who have been working in the community for a long time”…

As noted in Dateline’s report, the vast majority of wealthy migrants to Vancouver have contributed very little in either taxes or economic activity to the city:

IAN YOUNG: The primary bread-winners that arrived under those schemes, we are talking multi millionaires here were only paying an average of $1,400 in income tax each year. You know, they were declaring less income than refugees in many cases. The Government doesn’t like sharing a lot of this information either.

Journalist Ian Young has been closely following Canada’s immigrant investment visa program, which peaked in 2010.

IAN YOUNG: There were 35,000 applications that year, and virtually all of them, basically they were all mainland Chinese, millionaires, who just flocked to these schemes, so it was really just insane.

Ian‘s research found that the businesses started by millionaire migrants employ on average a grand total of one person.

IAN YOUNG: Clearly the immigrant investor program, has just been abject failures, in terms of fostering economic growth and in terms of fostering business growth and jobs.

At least a tax on so-called “astronaut families” would deliver some benefits to the resident population and discourage Vancouver from becoming just a resort town for wealthy foreigners, rather than a community.

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Unconventional Economist
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  1. The point Ian Young made in the dateline doco (and his Hongcouver pieces in the SCMP are a good read) was the one which requires address – in both Canada and Australia. It is of domestically funded real estate purchases against foreign funded real estate purchases.

    What needs to happen is that locally funded real estate purchases need to be distinguished (and taxed differently) from foreign funded (and from there the purpose of the locals could be distinguished too) and the foreign funded taxed more heavily and be subjected to far greater veracity eatablishment requirement (ie if you have a million to drop how did you get it and how can you prove it).

    As things stand we are currently placing corruption beneficiaries well ahead of Australian PAYE taxpayers (and their mega mortgages).

    The other thing Young highlighted was the utter fraud of Special Investor regimes and the economic benefits flowing from these.

    • Simple. You make the default tax rate the higher rate, and get people to apply for the lower rate – with evidence of ATO taxpayer residence status (not DFAT residence status).

      It may be a pain for local title holders and a bit more expensive for the government but simplifies the process.

      • That is exactly the approach to adopt when dealing with nationals of any nations dropping large sums on real estate.

        When it is nationals of any nation with an openly acknowledged corruption issue, which has made the leap from a centrally planned, societally owned basis for everything, to a ‘privatised’ asset base (albeit one which has the state controlling more than half the economy still and where massive amounts are syphoned out of state owned enterprises) within the the last 20 years – I would make it a sine qua non for every individual moving money from that nation to

        – state how they have come to the money they intend to deploy in Australia
        – have that statement examined by auditors (and including liaison with the taxation officials of the nation)
        – get a statement about any ongoing fund generating assets the individual may still have in the original nation
        – get a statement of intent about their purpose in buying Australian real estate
        – get a statement of intent about any family members and their access to fund generating assets
        – get a statement of connections, family friends and acquaintances who may at any time have access to sources of wealth they may wish to transfer the individual making the purchase in Australia, or by whom claims may be made on that individual
        – have all of the above on record and audited
        – have an acknowledgement from the individual that at any time within the first seven years of the individual owning a real estate asset in Australia the Australian government may revoke the right to own real estate in Australia at any point of its choosing (without any right of appeal by the individual making the purchase) and may revoke the right to live in visit or transit through Australia.

        The one thing we can be 100% certain of is when it comes to individuals with access to large sums of money coming from profoundly corrupt regimes there will be no ‘innocent’ – it will just be a matter of some being more or less guilty than others.

        And yes, let them prove their ‘innocence’ so that they understand that Australian law (which they generally want some form of sanctuary in) is not easily bought, and is law they can be held accountable for.

    • When a significant source of our bank’s funding is overseas, then what’s the difference?

      I think you probably mean locally and foreign serviced?

  2. taxing empty homes / unused land should be taxed much more to prevent waste of over-investments into new housing just to offset unlimited speculative demand
    we do not need to build million empty homes just to stop easy credit speculative price inflation.

    adding taxes on empty homes is only part of the solution, other part more important is on capital gain side. If homes are empty (being used for money making purposes) they should be taxed at least as other money making investments (no CGT discounts) if not taxed at much higher rate because of use of natural monopoly (land) to make profit (all other natural monopolies are taxed at higher rates or regulated to limit profit).
    We can charge extra CGT (20% or 50% more) on homes sold within 10 years and not used by the owner for at least 80% of the time.

    • Doc, I’ve seen you make this point a hundred times, (There are plenty of homes, it’s just that many are unoccupied), This maybe true but the solution IMHO is still “build more homes”, as I’ve said before Chinese investors will get sick of owning vacant Aussie apartments (that require high up keep costs and in all likelihood depreciate) long before Australia runs out of land suitable to construct apartments on.
      Building more of something and thereby proving there’s no shortage (i.e. no need to hoard) is always the solution to perceived availability problems / high costs resulting from these assumptions.
      This is why I can’t understand your focus on the supply being adequate if we could only maximize occupancy.

      • This maybe true but the solution IMHO is still “build more homes”, as I’ve said before Chinese investors will get sick of owning vacant Aussie apartments (that require high up keep costs and in all likelihood depreciate) long before Australia runs out of land suitable to construct apartments on.

        What do you think will happen to an Australian economy heavily unbalanced towards construction on the day Chinese investors decide they’re bored of owning Australian property, especially if, as your scenario implies, they lose interest to the extent of attemtping to offload them into a domestic market that was never interested in such dwellings?

      • @Robert What will happen?
        Ahm Prices will fall and likely fall dramatically.
        Construction companies will go bankrupt and construction workers will be out of a job
        Land-bankers will see that their days are numbered and dump residential land holdings
        Aussie banks will probably collapse
        Many average Australian’s will learn the meaning of Negative Equity Maaate!
        And most importantly we’ll somehow stumble through the crises, because what other options do we have.
        One thing is certain at the end of this build we’ll have plenty of housing so that should be good for the Aussie poor and no-longer-working class.
        In some circles it’s what we call a return to sanity.

      • and then large numbers of people will leave Australia, whilst none of the newly unemployed can afford the empty housing at any price, and most of it gets demolished when its found either to have been poorly constructed from the get-go, or after years of sitting empty with zero maintenance its deteriorated past the point of no return,

        Sounds awesome – let’s keep building.

  3. But our economy is now dependent on constructing empty homes. See we are already just like China.

    • Yes – if the construction industry was suddenly made to only produce residences that someone was actually going to live in, many developers would go under, many workers would be unemployed and we’d be plunged into a deep recession.

      • Its not just the apartments themselves. Public infrastructure (especially transport) is now critically dependent on construction of residential apartments owing to the adoption of the Chinese “value capture” model (where the developer funds the infrastructure in exchange for the rights to develop public land). Those apartments need buyers. Whether or not someone lives in them is immaterial, they will be marketed to Chinese as investments, so it is important that prices are maintained.

      • Ronin8317MEMBER

        I agree that many developers will go under, and they deserve to!!
        There is a recently build apartment block which I walk past on the way to work. After the huge storm last week, there is a huge damn patch underneath every window on one of the cement block wall. To make thing even worse, the colour on the blocks is discolouring and coming off, for a brand new apartment.
        I saw all the stages of construction : I don’t work in the construction sector, but I thought we don’t do the ‘build one floor on top of another’ type of apartments in Australia anymore? The concrete slab on each floor is not reinforced, so you see this huge crack on one of the slabs after it settled (which they have plastered and painted over)., and I would be very scared to walk on the balcony. I’m almost certain the vertical walls are not ‘vertical’ either. It is not fit for habitation, and a 2 bedroom unit in this mould-inducing bottomless-moneypit death-trap cost 600k!!
        How the council can issue an occupancy certificate I do not know.

      • We already have a lot of Chinese developers and increasingly using a Chinese workforce, so I guess its only natural to expect Chinese standards. Also here in NSW all our elected councils have been sacked and replaced with hand-picked administrators, so Chinese standards of governance are also to be expected.

      • Its not just the apartments themselves. Public infrastructure (especially transport) is now critically dependent on construction of residential apartments owing to the adoption of the Chinese “value capture” model
        I don’t think that is true Robert. Are you thinking of any particular example?

      • Sydney is currently having a construction and infrastructure boom. They are building light rail, metro rail, heavy rail. At each station along the route high rise towers will be built, by private developers who are funding the infrastructure build. This is also happening in Canberra and Newcastle with light rail. This is why NSW economy looks so strong. But how can there be domestic demand for all these apartments? The scale and density of some of these developments is unlike anything we have ever seen. The plans for the new Waterloo station precinct (near Redfern) have densities only seen in Hong Kong. I don’t doubt there won’t be many lights on once they are built.

    • But our economy is now dependent on constructing empty homes.
      A rather worthless comment Dan. What do you mean by dependent, and what is the significance of this?
      Is seems to me we could quickly make our economy dependent on something else, and be the better for it. Construction workers are very skilled and flexible and used to handling difficult situations. They could easily do something else. Mortgage brokers and real estate agents not so much.

      • As I pointed out, the “value capture” model currently in vogue with governments (especially at state level) relies on private developers constructing and selling homes, to fund public infrastructure. The alternative is for governments to fund infrastructure themselves by going into debt. That ought to be a good option with currently extremely low rates, but its politically unpopular. Debt is seen as bad, ironically unless used for private real estate speculation.

      • The alternative is for governments to fund infrastructure themselves by going into debt.

        There is another alternative.
        Take 10,000 public servants on $200,000 per year currently paper-shuffling. Cut their pay to $100,000 per year and bring in 10,000 workers from OS on $100,000 to train the public servants 1:1.
        The public servants are then trained how to operate earth moving equipment, how to measure up for concrete slab, how to lay and tie reo, how to pour concrete, etc.
        After a year the OS workers are thanked and sent home and the public servants are put to work. The $1BN left over is then used to buy steel and concrete and machines for the workers to use. The govt then builds the infrastructure and owns it debt free.

        No debt, no bankers, no private-public partnerships, no elites, no waste, no fraud, … , no chance.

      • Sounds a lot like Stalinism. Well it might be seriously considered since we are guided by the Chinese Communist Party in our current business models.

  4. I wouldn’t be surprised if some of these homes fail to pay the tax and end up being confiscated by the state.

    • Yeah good prediction, these things play out over decades and most people who propose these taxes and regulations are hardly fans of property rights, the very essence of which is you can do with your property whatever you please, even if it is unpopular.

      Keeping a property that you own vacant seems fair to me. Unless of course somebody else out there has a belief that you don’t really own it.

      • Haha, I’m not really on your side mate. If it was up to me, I’d slap a 20% tax on these empty properties that belong to international investors and introduce a massive supply of both rentals and houses for sale. Shelter is a basic human need and anyone who messes with it for personal gain at the expense of others will get no sympathy from me. I don’t think we need to do much about local investors that may keep a holiday home empty. But international investors shouldn’t even be able to buy here.

        The government should force a lot of these international investors to prove they have clean money and confiscate the properties if they can’t. They could even team up with the Chinese and split 50/50 if they share information.

      • Seems like in a situation where a group of people who can vote are inconvenienced – to the extent of not being able to obtain shelter, in extreme cases – by a group of people who can’t vote or who are unlikely to exercise their vote exercising their property rights, said rights have a good chance of being removed or severely curtailed.

        They’re only one populist pollie from losing their property altogether

      • property rights, the very essence of which is you can do with your property whatever you please, even if it is unpopular
        Jono. I’m developing an experimental nuclear power plant on my property but my neighbour is giving me grief. I promised him I would compensate him for any unpleasant odours, etc wafting over to his property.
        Could you please come over and help me convince him of the legitimacy of what I am doing?

      • Of course The Claw is right. !

        Yes, better have the government own everybodys land and get rid of property rights because we see all these neighbours trying to build nuclear power plants on the land !

        Why let women own their own bodies as well, they might do something unpopular or unwise. Bring back slavery !
        Its such a common problem, I agree !

  5. I thought the most interesting part of the SBS report was that Vancouver’s Chinatown is on its last legs, suggesting that Chinese-born people who are NOT in the 1% have basically stopped coming to Canada (Vancouver, anyway) in search of a better life.

    • I thought it was sad really, it’s nothing to do with being Chinese and it’s everything to do with wealth. The economic migrant lady who said “We brought good food and economic prosperity, so why complain?” is utterly clueless…

      People complain because doctor’s can’t afford 3M humble homes, the economic prosperity is only enjoyed by a select few, the rest are left to suck eggs. But of course she’s never struggled a day in her life to pay bills so what would she care?

      I thought it funny that Vancouver had built thousands of dog boxes, like Melbourne and Sydney. That seems to be the solution, supply supply supply haha.

      • I thought it funny that Vancouver had built thousands of dog boxes, like Melbourne and Sydney. That seems to be the solution, supply supply supply haha.

        I don’t find it funny at all. A young working family in Vancouver has ZERO chance of affording a decent house. You laugh about supply supply supply as if it is all the same.
        A dog box may be adequate for some, but dog boxes are not supply of decent housing for all.
        Stop laughing and use your brain.

        The real solution is for Vancouver elites and Vancouver voters to decide what is Vancouver for? what is a Vancouver house for? Is it there for super rich Chinese, or is it there for people who grew up there?
        If they decide it is for the super rich, then indeed many dogboxes for the plebs would be a necessary part of the implementation.

      • I laugh at how pathetic it all is, seeing it in Melbourne, Sydney and Vancouver. Same mistakes repeated over and over. It’s laughable because that’s the only way to deal with it. It actually makes me mad if I’m honest. I am and do use my brain, that’s been my problem so far… Otherwise I’d have jumped into the madness already.

        But I often ask myself this question… Why do I deserve to own something more than a wealthy Chinese person? Why do I think my country owes me anything? I may have grown up in the community or country I want to buy a place to live in but does that give me any special privilege? Apparently not, even though our laws are quite clear in this manner it doesn’t matter if they are not enforced.

        Perhaps Sydney / Melbourne / Vancouver / SFO are for the uber rich only? Perhaps that’s just the way it is and perhaps young folks like me should just fuck off and move somewhere else. After all that’s the meme that gets parroted to me by older generations. If you don’t like it move they say? Why not just go to Adelaide or Brisbane they say?

        Joe Hockey pretty much confirmed this is the way Governments think anyway, he said if houses were unaffordable people wouldn’t be buying them, he also said I should get a good job that pays good money, but unfortunately that didn’t help. So clearly they simply don’t care just like in Canada they don’t care…

      • You obviously are using your brain Gavin. My apologies.

        Actually I wouldn’t mind so much if Sydney was handed-over to Chinese elites if the govt ensured there were decent other places for Aussie to escape to. What is such a disgrace is that young people are forced to come to Sydney and Melbourne for work.

      • Totally agree, if Adelaide, Perth, Brisbane offered the same employment opportunities I’d move. The other problem is if I have kids it would be nice to have my parents and my partners parents in the same city to help with raising them / baby sitting etc..

        And look I could stretch myself and buy in parts of Melbourne, but the value for money is simply not there. Spending the best part of 3/4 of $1M for very average looking abodes – which require 45-1hr of commute time to work.

        Or buy over priced poorly built dog box apartments in the CBD that cannot be used to raise a family. It’s a shit sandwich no matter how you look at it. That’s why I hope the whole thing blows up. Better we have a reset, than keeping pushing on a string.

    • Notably, Robert, it is Land Tax that is causing the final destruction of that China town and dog box buildings are the likely replacement for this historic area. Macrobusiness strongly supports Land Tax which I frequently warn them is a cause of the rush to dog boxes and many other undesirable economic effects.

      • During the mid 80s in Calif a heritage law came to be, where in renovating beach local property one must retain at least 1/3 of the original structure, especially the fascia. To my surprise a property close to where I lived and only a block from the sand, some dude erected a temporary scaffolding which retained the vestiges of a few windows and the west corner of the building. All the rest was demolished, their it stood, a few windows and cladding suspended in the air and totally legit.

        When it was all done what a monstrosity… 80s minimalism with a vain of glass cubes going from the ground up to the roof line, in a bolt like effect with the light shining through. Totally expected one of the brat pack to roll out in their 911 SC in a cloud of coke dust….

        Disheveled Marsupial…. at least the houses I built for Buff and Hensman were schmick regardless of their shenanigans… mostly posing…

  6. “if a home is being treated like a business then it should be taxed accordingly. ”
    Yep absolutely spot on.
    Currently in WA the latte sipping blue tie brigade are agitating against the current state govt for increasing rental tax on their rental properties. Apparently they think its unfair.

  7. SchillersMEMBER

    What the Dateline segment showed was how futile it is to expect “new builds” to make a difference to land prices if they are just being sold without restriction as second homes to foreign wealth. Once foreigners are allowed to scoop up most of the newly built stock, the notion that this somehow makes housing more affordable for the locals is laughable. Developers (often foreign) are consistently setting new price records for the cost of acquiring land for development. This cascades through as an uplift to the cost of land everywhere within the municipality. Look at Vancouver, look at London, look at Auckland. Every year, thousands of new housing stocks come onto the market…but land prices in these cities just keep going up, not down. The same is happening in Sydney and Melbourne. Land price inflation is now endemic, caused substantially (not exclusively) by the overseas super rich and the merely rich buying up homes in cities they neither live in, work in, pay taxes in or contribute to in any meaningful way.
    The solution is to have far greater restrictions on selling property to non-Australian residents than we currently have.
    Housing affordability is bad enough with the population ponzi that has run for the last decade or more. There is no need to make it worse. The ALP’s changes to the FIRB rules in 2010 were a big mistake.

    • Exactly.

      In Sydney, many families are suffering from a severe shortage of decent housing. At the same time one decent house is often demolished and 20 units put in its place. Morons claim this adds to supply and proves there is no shortage.
      In truth, the units would add 19 dwellings of supply if they were made available to the families suffering from the severe shortage of decent housing (and were decent).
      However, if the units are all sold to foreigners and kept vacant then the units do not constitute supply of decent housing for local Aussie families and in no way prove there is no shortage.
      In fact, the construction destroys one decent house and hence reduces supply and makes the shortage (of decent housing for local Aussie families) more severe.

      • We need qualitative measures as least as much as quantitative ones.

        These hi-rise units don’t meet the desires and requirements of most Australian households, not to mention the huge strata levies make them a pretty unaffordable option even if the purchase price was low.

      • “At the same time one decent house is often demolished and 20 units put in its place”

        Great point Claw. Our SE Melbourne beachside suburb (30 kms down the coast from the CBD) has seen this a lot. 10 years ago it was mostly single family homes on large block – now apartments are popping up everywhere.

        Some of them are ok, but a lot of them are not suitable for families as well.

      • dd, if they were building quality, well designed generously sized apartments it would be ok, but all we seem to get is cookie cutter 2 bedders built to appeal to investors who don’t have to live in them and maximise the number that can be built on the site.

  8. wasabinatorMEMBER

    Threw up in my mouth three times within the first 3 minutes. Had to turn it off >_<

  9. Are empty houses really being used for the purpose of producing assessable income? If left empty for long periods of time eg 3 months I would say “no”. In that case how are they are able to claim any tax deductions in any event?
    Is hoping for eventual capital gain, part of which will be included in assessable income in a future year, sufficient by itself to mean that a long vacant dwelling is being used for the purpose of producing assessable income?
    Are the owners of a property held vacant during a whole year of income able to claim any deductions?
    Does the tax office audit any of the vacant properties for claims of deductions by owners?

  10. These ‘millionaire’ Chinese in Canada are the products of a corrupt and criminal class in China, who stole from China and then re-created their nepotistic racist elitism in colonisation of a Canadian city.

    The woman in the video still can’t speak English properly or identify with being Canadian and assimilate, 15 years after being sent in as the usual fake student to be the family money laundering washing point and a visa anchor.

    It’s different in Australia.
    What we get is what can’t get into Canada or the UK or USA.
    Firstly the students in the Canada or USA or Uk have to be doing real courses and have real funds, and can’t work.

    In Australia and NZ there is no such check, just a self declaration (always fake funds) and they can work.
    Prostitution in Australia for example is a widely advertised, legally valid and preferred source of income for most Asian female international students here, joined by tens of thousands doing the same on a working holiday or tourist visa.
    Australia and NZ are the only countries that encourage this so that’s what comes in.

    And our education and degrees are viewed as worthless junk pretext visa alibis.
    Almost all of the international education qualifications in Australia are invention for what is just a blatant migrant guestworker importation scheme and are not recognised anywhere globally.
    Anyone pulling out an ELT or VET ‘diploma’ just indicates the person was an Australian migrant blackmarket or vice worker.

    All Chinese know this.

    They view the Chinese who come to Australia on temporary visas as students, or as a tourist or working holiday with much disdain.

    No rich or high class Chinese would ever allow their child to go to Australia as a ‘student’ and be tainted by that inference.

    Point is we have a completely different intake.

    We do not get Chinese millionaire elites.
    We get the overflow and slum clearance actively sent by China to be remittance income, and PR anchors, so that the rest of their useless slum or factory poor unskilled parents and grandparents can be sent out by China to be our social welfare and Medicare burden.
    Quite a different colonisation by quite a different class of Chinese and quite a different impact, and a much greater social and economic burden.

  11. Posted today on Mark Wadsworth – the world’s number 1 blog in support of Land Value Taxation:

    “Would it not be more authentic to stick to your primary ideology – Land Value Taxation.

    Welfare, is welfare, is welfare. Whichever way you try to euphemise it(Citizens Income), it’s still welfare. And welfare is an inherently unjust institution, because it’s another form of unearned income.

    And like taxation in reverse its paid whether you earned it or not. Likewise, taxation is confiscated with no guarantee ‘benefits’ will be received for it, nor any lack of guarantee you will get more than you paid for.

    Unearned incomes, in whatever form, including Citizens Welfare are inherently unjust, so can only lead to more bad in the end – you cannot get any good from doing bad. Its against the law of science.

    What Citizens Welfare does for you I suspect is gets you a vote for your ideology where pure LVT clearly never gets a vote. And I reckon you know this unconsciously but are not willing to be authentic.

    This approach facilitates an effective ‘compensation’ or ‘exemption’ for rent seekers. The same kind of thing which has caused LVT to persistently be the most failing economic policy in all of history. And here we go again.

    So… get rid of all the proximate ideologies and stick to your primary one with authenticity and maybe you will start to make in roads?”