I grew up in Vancouver more than any other city, but left in 1986. It’s one of the most beautiful large cities in the world, and was a lovely place to live. Recently, due in large part to the influx of foreign money and buyers, it’s become unaffordable, both for buying and renting. The provincial government just slapped a tax on foreign buyers, and now the mayor is going to add another tax.
Vancouver plans to tax its vacant homes by the end of the year, the city’s mayor said on Wednesday, announcing the second government move in as many months to address foreign investments that officials say have helped drive up home prices.
This combination of action is absolutely the right thing to do, especially a tax on vacant homes (I assume it will include apartments and condos.) This action should be copied by cities around the world who are experiencing similar foreign buyer driven booms: like Australia’s large cities, London, and Canada’s Toronto.
This is what I have been pushing for for some time. The issue is that the fee must be punitive, and I fear that Vancouver won’t set it high enough.
As I wrote in 2015 in reference to a similar New York city proposal.
People who can afford luxury apartments can afford that fee. Make it simple: Put in a residency requirement. Someone must live in the apartment six months to a year. If they don’t, the tax rate is 50 percent of the ostensible value of the apartment. If that doesn’t work (and it might not, given how rich they are), well, then just make it illegal to own apartments that aren’t used and have the government seize the apartment and use it for social housing, or sell it. And if the next owner doesn’t use it, seize it again.
The simplest way to stop stuff is to just forbid it. Foreigners don’t have any “right” to buy property in other countries. It’s a privilege. If they’re making life miserable for the permanent residents of a city, there’s no particular reason not to just stop them buying more residences. There will always be ways around such bans, of course, but it will still make such purchases far fewer.
It’s not reasonable for a city’s rent and/or cost of purchasing a house to rise much faster than its economy. It’s not fair to shove out residents and people with jobs so that foreigners can have vacation homes or homes to which they can escape with their corrupt wealth if things go bad in their home country.
If they want such a house, well, there are plenty of small municipalities who would be happy to sell to them, but turning one of the countriy’s main, economically viable cities into a place its actual residents can’t afford isn’t smart or fair. The same is true of Toronto, London, or Melbourne.
China throws off so much money and wealth that smaller nations (and Canada, Australia, or Britain are all smaller where it matters in population) can be swamped just by their overflow.
Don’t let that happen.
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EmilianoZ
Yeah but such measures could be interpreted as impeding the free flow of capital, and this of course is anathema to Neoliberalism.
Lefty
How is this enforced?
A serious question. It would be up to the owner to prove that it is occupied. Electric/gas bills? Phone bills? Someone rings the bell randomly and needs an answer a percentage of the time?
I am serious, how can this be enforced?
Singapore already enacted a few laws to slow down flipping condo\’s, but to my knowledge, not as severe as this. Singapore, being a much more controlling state that British Columbia, have some hard data to use for enforcement. How can Vancouver/BC enforce it?
I\’m for this type of law. Housing is stupidly expensive, well beyond most peoples means, and the high price seems to be killing major Canadian cities.
Effem
I like the idea but seems like it’d be so easy to game this system…keep the lights on and fool the power company, etc.
Would be my preference to see initiatives to increase supply (e.g., less onerous zoning).
Peter*
Without knowing reliable numbers of properties involved or the price range of those properties this knuckleheaded government revenue extortion scheme seems a deflection and projection of a local problem onto foreigners, an old and disgusting tactic.
In the US these housing affordability problems are often caused by what used to be known as Yuppies desiring the urban lifestyle and developers who empty older rental properties and convert them into high rent apartments or condos for sale. This conversion also drives property taxes up which further accelerates the gentrification process because lower income homeowners are taxed out of their properties.
The only hint as to what type of properties these ‘foreigners’ are buying was a reference to their only occupying the property occasionally which would mean these are high end luxury properties and these foreigners are already paying their high taxes and utilities for the whole year whether they reside there or not.
This type of knuckle dragging political pandering leads to calls for Soviet style confiscation to teach these rich guys a lesson while destroying a desperately needed tax base. This social housing in manses should do wonders for the neighborhood while helping the politicos and their developer friends avoid their responsibility to provide affordable housing.
Peter*
OT, Ian are you going to do a post on Corbyn’s wonderful speech about his ideas for a new Green Industrial Revolution in the UK?
Synoia
Peter
Go and walk around London’s Belgravia. Count the percentage of unit with lights on.
Synoia
Lefty
There is no land to build new houses, in Vancouver, London or New York. There is none close to the job is Sydney, Melbourne, Johannesburg or Toronto.
The land is occupied by the rich, living in low density housing.
Shall we seize their land for these new housing projects you would like built?
AndrewD
Synoia asks “Shall we seize their land for these new housing projects you would like built?”
The answer is, of course, YES
Joe
Its not just cities that are subject to absentee investment gentrification. Living three hours drive from the S.F bay area one would expect a working local would afford a home eventually. Yet it’s not the case. Fully one third of the houses in my county are vacation homes and theres none to buy unless you have some serious cash 350,000 is about median. The pay here is 9 or 10 bucks an hour. The numerous giant 5 bedroom “cabins” remain completely empty except for occasional use. Yes, some are air b in beed and utilized by moneyed on holidays etc. for the most part though Its the same issue as the housing in the city. Virtually no rentals nothing affordable to the locals to buy. This issue isn’t isolated to any region. I have seen in many places in the world. Rural and urban. Housing has been snapped up by the wealthy everywhere. I suggest this is an international emergency.
Caoimhin Laochdha
Vancouver is adopting a modified Henry George approach to taxation. Sort’of taking pressure off of people who live by earning paychecks, and finding more revenue from people so rich they do not need to utilize their own property; or who have property whose value to based on locations enriched by the greater Vancouver population, municipal government and government run infrastructure.
A quick synopsis of George’s approach via The Economist:
Added twist/modification to the Henry George’s land value tax is to make it more progressive by levying a higher rate on partial or non-inhabitants. Properly implemented, this can have the benefit of levying a “fair tax” (i.e., one that is progressive, objectively uniform and increases along with the ability to carry one’s societal weight).
In the U.S., essentially needed tax reform includes issues such as the estate transfer tax (which the right has grotesquely labeled a “death tax”) triggered by the transfer of a wealthy person’s estate to someone who never earned the money. Even if the media continues to parrot the “death tax” meme, progressives should counter with “we’d rather tax people in the soil than people who toil.”
The U.S. system of taxation is grossly regressive and it is impossible to list all of the most critically needed reforms, but this post makes me think of two basic changes we must have. Taxing property that the most wealthy don’t even bother to utilize; and taxing the extreme wealth that people, quite literally, “couldn’t spend in a lifetime.”
nihil obstet
Or one could legalize squatting.
Synoia
Nearly all jurisdiction have definition of blight and the power to condemn and seize blighted properties.
A suggestion:
Declare vacant homes a form of blight, and have the local Governments sieze them and sell them to locals.
Vacant properties are an economic blight, because their inhabitants contribute noting to the local economy.
S Brennan
Peter* the a-holes you are so worried about could avoid the tax by…wait for it, renting it, the tax is purely voluntary.
Ian; I think would have crafted the law to encourage the renting of property by foreigners by staggering the tax burden using a % above/below median rent.
Peter*
I don’t worry about the wealthy but I do worry about poorly conceived nostrums proposed by politicians to divert attention from their responsibilities to the public. The fines that are proposed for these properties, they are not taxes, will disappear into the city budget and I doubt any affordable housing will be acquired because it is being gentrified by the developers with the assistance of the local politicians.
Please tell me who will be able to afford to rent these expensive vacation residences or why the owners have any responsibility to let their property. The people who are having problems finding affordable rental property do not need vacation homes to live in part time.
If someone finds evidence of investors foreign or domestic who are holding apartment buildings or homes for speculation and leaving them empty, as foreign Canadian investors have done in Phoenix, this fining them for holding needed residences off the market would be rational and might help the situation.
V. Arnold
It’s ironic that one can never own their home in the U.S.; bought and paid for, there are always property taxes. These taxes often exceed the “owner’s” income after retirement.
Thus they lose their home to forfeiture for failure to pay taxes. This forfeiture is a criminal act, IMO.
Here in LOS, there is no property tax after a one time payment at purchase. Thai people actually own their homes once the mortgage is paid off.I think it’s an act of insanity to purchase a house in the U.S.A.; even prior to the housing collapse.
In the U.S., the government owns everything within its borders; think about that. They even consider their citizens as property. The laws are carefully crafted to ensure that as reality…
V. Arnold
Addendum: The ownership remains even if one lives abroad. The only way to get out from under that is to renounce one’s citizenship. Adding further to the irony…
Tal Hartsfeld
Tell governments and authorities to quit being so obsequious toward the overprivileged civilian and social monarchs of the world—both foreign and “home-grown”.
People are being displaced because they simply “don’t matter” and aren’t “important” enough in the general scheme of things.
Peter*
@VA
I think you are exaggerating a wee bit when you try to describe privately owned residences as government property in the US. The property taxes paid to local government bodies are mandatory but necessary to fund schools, fire and police departments, roads and other services. Even if owners can’t pay back taxes the local government doesn’t usually end up owning the property but they can force its sale and deduct their owed taxes often leaving the rest of the proceeds to the owner.
If a retiree’s income doesn’t cover their property taxes it just means they have too much house and they should downsize to a more moderately valued home where their income fits their lifestyle and they should have plenty of cash from the sale of their more valuable house to live well.
I wonder how secure property rights are in Thailand if one of the Generals or politicians decide that a privately held piece of property is an ideal location for their sex tourism business.
Guest
Yes v Arnold, nobody owns land in the us or most other countries. That’s why it’s called real estate, real meaning royal meaning owned by the government. So even if Mexico bought every house and acre of land in California it would still be us real estate. You do not own land, you HOLD it (I.e tenancy) and the fee or rent you pay for that privilege is called taxes. Grow up and spare us your ignorant libertarian rants.
Btw most places I have ever lived freeze your real estate taxes when you turn 65 or so. And for that matter, prop 13 and other tax revolt/relief measures are a big part of what drives real estate price bubbles. So that the money you think you have saved on taxes ends up being spent on mortgage interest to the banks because the prices go so high you need to borrow almost all of the purchase price. All your libertarian trolling accomplishes is to change your master from the govt which you supposedly have a small say in and which money provides for public services, over to the banks and other swindlers over whom you have no control or redress, and you and society get no benefit from those payments.
V. Arnold
Peter*
I exaggerate a wee bit? Then like most Usians, you do not have a clue as to your true position as a citizen. Land of the free? Ha!
And again, like most Usians, you automatically equate a coup in necessarily negative terms.
The U.S. narrative towards the Thai government is fraught with much propaganda. I’ve lived here well more than a decade so please don’t tell me your stilted , uninformed opinions re: Thailand.
And by the way; the U.S. is single handedly responsible for the sex tourism business here. You can thank the U.S. war on Vietnam. for that.
@ Guest
Your ignorant ad hom is barely worth a reply. Go troll some where else…
markfromireland
Synoia September 16, 2016
Yes long-term vacant properties are a form of blight. There was something like 10,ooo the last time I looked. It’s by no means beyond the wit of man to devise a system of crippling taxes for those who “buy to leave”. The precedent was set by the Victorians with their slum clearance schemes and their railroading of proprietors whose properties were need to provide the way for the tracks.
It’d be a pleasing irony to use Maggie Thatcher’s war cry of “Victorian Values” to force the tories to actually do something good for those in need of housing. As a happy side effect her remains would achieve something in excess of 250000 rpm and finally fly apart into dust.
markfromireland
When I said above “There was something like 10,ooo the last time I looked.”
I should’ve specified that that’s for London alone and IIRC not all boroughs responded to requests for information.
Peter*
@MFI
Thanks for the info on the ancient city of London and I would think the value in these properties is mostly in the land while the buildings may be past their useful lifetime. A regime of penalties/fines might get some of this blight removed but it won’t produce affordable housing. Even if some of the buildings are repairable the cost of rehab is very high and investors will seek to maximize their returns which will not be found in affordable housing.
The local and UK governments could get involved but I doubt they have the resources or the inclination to take on this task or expand what they are already doing.
No one has provided any similar information on Vancouver but they have tried to depict million dollar vacation homes that produce huge tax revenues and get occasional use as ‘blight’.
Hairhead
@Peter
Try these sites:
crackshackormansion.com
beautifulemptyhomes.tumblr.com
Here in Vancouver, a 60-year rotting bungalow on a 33 foot lot can be put on the market at $6 million. The bubble here is insane, and residents (and renters, like me) have every reason to be upset.
Peter*
@HH
I knew there was a real-estate bubble still growing in Canada but this is insane, the value is in the land not the houses so they will probably be demolished to make way for high value buildings.
The comments at beautifulemptyhouses admit that renting these homes won’t solve the housing problems and that the root cause of the housing problem is local developers and politicians. The problem with putting renters in these homes is that when they are sold the new owner will evict the tenants and demolish the house to build something else.
I don’t know if there is a viable solution for renters who need moderately priced homes in these inner cities because if someone pays a million dollars for a house they will demand extremely high rent especially if the house needs repairs.
I read a novel that depicted a dystopian near future where these extreme land values and a never ending Great Recession meant that the less wealthy ended up living in what were called the Stacks where building sized frames were constructed so mobile homes could be stacked, with their occupants, ten or more layers high, that could be the future of affordable housing.
Synoia
To: markfromireland
We have differed in the past. We may in the future.
On this we agree. We may agree on much more.
Thanks
Kaleberg
It sounds like the housing problem has gotten REALLY bad in Vancouver. Douglas Coupland called his home town the ‘city of glass’ back, because so many of the new glass walled buildings downtown were owned by foreigners as investments and safe refuges if things got too bad at home. That part of town, towards Stanley Park, looks a little more lived in these days, but there’s still a lot of glass.
markfromireland
@ Synoia September 18, 2016
That’s entirely probable. A topic I’ve kicked around a little with our host is the difference between continental European conservatism and the Anglophone kind. My contention is that the reason why it was so easy for British (or Canadian in Ian’s case) conservatism to be hijacked by an increasingly radical right wing is that it had no underlying ideology. Thus the Canadian Progressive Conservatives have just withered away. The American Republicans have been hijacked by the combined perversions of libertarianism from one quarter and religion based right-wing extremists on the other.
The same lack of an ethical backbone amongst UK conservatives made it easy for Keith Joseph’s acolyte to vanquish the “wets” in large part because she and her cohorts did have an ideology for which they were prepared to fight. Thatcher and her cohorts also laid the ground for people like Cameron, Ian Duncan Smith, George Osborne, and so on who between them ran the most regressive, repressive, and socially vicious Tory government in living memory. This viciousness in large part stemmed from their attraction to libertarianism which has been allowed to contaminate what was once a reasonably decent party*, I would like to believe that Theresa May will be an improvement but I’m dubious not least because of her record as Home Secretary. I’m not convinced that you can with any degree of accuracy call the (English and Welsh) Conservative party a conservative party any longer they’re closer to Libertarianism than anything else. (The Scotish conservatives are a different matter entirely, they I think, will bounce back eventually).
Continental conservatism does tend to have an ideological basis. For example, you may not agree with Angela Merkel’s theory of social justice or her theory of redistributive justice but she and her party do have such theories and do attempt to put them into practice. Moreover countries that Anglophones tend to think of as Centrist or Left are often very small ‘c’ conservative in reality. Which is one of many reasons why somebody as deeply conservative as me can live very happily in Scandinavia.
*And that’s before we get into what the Orange Book crowd did, really bastards like that make me sympathise with Herod.
XFR
I mostly agree with Peter* (never thought I’d say that) though I suspect the anti-foreign rhetoric is driven more by geopolitical expediency than anything else. (It’s funny how neoliberalism suddenly stops being an implacable fact of nature when it’s preponderantly the “wrong” sort of money involved.)
The speculators wouldn’t be here if it weren’t for the odious macroeconomic policies that inflated the bubble in the first place, and there’d still be a bubble even if they weren’t here. If those policies are set in stone then there are plenty of much better ways of intervening in the market than this one, such as rent controls, publically owned housing corporations, and–
Oops, it just went back to being a fact of nature again, that was fast…oh well.
Phil Perspective
We’ll see if the tax is upheld, eventually:
http://www.cbc.ca/news/canada/british-columbia/class-action-lawsuit-launched-against-b-c-foreign-buyers-property-tax-1.3769751
Interesting that the person who this was filed on behalf of is a 29 year old student. Wonder where they got the $50,000(Canadian) down payment.
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