Vancouver council votes to stop plan to increase empty homes tax from 3% to 5% of assessed value

A planned increase of Vancouver's empty homes tax has been halted by its new city council, in a move recommended by staff and supported by the ruling ABC Vancouver party but criticized by opposition councillors. 

In a 7-3 vote, councillors voted to keep the annual tax at three per cent of a home's assessed value rather than increase it to five per cent as approved by the previous council in April 2022. 

At the time, they asked staff to come back with a report on future rate increases and ways the tax could be modified to improve its fairness. In their report this month, staff said an analysis of how the tax worked at three per cent was inconclusive and warned the increase to five per cent might lead to more people trying to circumvent it. 

"Five might yield more reports, but it also could lead to more fraudulent or tax evasion, false reporting. And so I think that continuing moving back to the three per cent is reasonable," said Coun. Lisa Dominato. 

Exemptions for those unfairly caught

The tax was introduced in 2017 at one per cent of a property's value but had been slowly increased to three per cent over the course of former mayor Kennedy Stewart's term. 

Approximately $115 million had been raised over five years — with the number of declared vacant properties decreasing from 1,010 in 2017 to 502 in 2022 — and the funds had been used for various affordable housing initiatives.

However, it had been the subject of various legal challenges, along with some people complaining that the tax unfairly targeted them, leading to staff proposing a variety of exemptions that council mostly passed unanimously.

Those included delays in building permit and redevelopment approvals, properties vacant due to flooding or other disasters, or people who own a property primarily to access medical treatments in the city.  

"It was a new tax four or five years ago. And so a number of the changes that are proposed are being responsive to what we've heard are some gaps in the system," said Dominato.

Millions back to developers

However, one new exemption was controversial — and became more so after an amendment by an ABC Vancouver councillor. 

Staff recommended that new developments be exempt from the tax until they are sold to buyers so that developers aren't forced to pay additional fees if the housing market is slower than anticipated when their projects are available to the public.  

Staff noted it was the same rule the province had for its own vacant homes tax, and Mayor Ken Sim framed it as making it easier for Vancouver to meet its supply goals by doing more to support development. 

"They can build anywhere, and I think anytime we create another punitive thing, a penalty out of their control ... it just sends a signal that Vancouver's not receptive to building more homes," he said. 

However, Coun. Mike Klassen introduced an amendment that would make the new rules retroactive to 2022, which would eliminate $3.8 million in expected revenue this year, forcing the city to give back $2.4 million it had already collected.

"In the grand scheme of things, it is a relatively small amount of money that will help keep the costs down ... for those who are purchasing or occupying these buildings," said Klassen.

"And it also sends a signal ... that we want more people to be working at the City of Vancouver to build more housing, create more affordability and create more supply."

Opposition councillors disagreed.

"I am actually sort of stunned that we are proposing basically returning [mililons] that have already been collected for a bylaw that was understood," said Christine Boyle.

"I am almost speechless, which is uncommon for me. It's like a reverse Robin Hood tax."