If you have an empty house, you've already decided to pay a "tax" in the form of lost potential rent, not to mention actual property taxes and maintenance, and and an extra 2% isn't going to make huge difference.
Maybe 10% would be more like it.
I understand the problem but i dont see how raising taxes is the solution. Why are these houses vacant in the first place?
In Buenos aires this is a huge problem, in a census they found like 20%+ of units are vacant. The economy minister once hinted at implementing this tax and had to retract quickly.
The main reason property is vacant in Buenos Aires is because the state is failing to enforce contracts between tenants and owners, and owners do not trust tenants. A bad tenant can literally ruin you, because he can destroy the property, make himself impossible to evict, and a lawsuit can take up to 20 years to resolve, which is enough time for the perpetrator to liquidate his assets before the loses the trial.
And as you mention, if the reason behind these vacant units is rich people, then such a tax will prove a poor deterrer.
The city implies that many aren't, just that people don't declare the income to evade taxes.
The vacant home issue is prevalent in nearly every large city in the world and it has a vast social cost. If you don't want to suppress it through tax (force them to live there, sell, or subsidize the locals by paying extortionate tax), another way would be facilitating squatting of empty property.
When you do that, you actually have charities that specialize in "opening up" unoccupied spaces and setting them up for homeless people to live there. I actually like the way we do it in France where if you stay there for a couple of days you are legally an inhabitant so it takes up to a years worth of legal proceedings to expel you.
And nobody likes to get coerced into anything. There should be no policy with the intent to punish anyone, whether rich or poor. And it is not the rich that cause the housing problem, which is real and global.
> The vacant home issue is prevalent in nearly every large city in the world and it has a vast social cost. If you don't want to suppress it through tax (force them to live there, sell, or subsidize the locals by paying extortionate tax), another way would be facilitating squatting of empty property.
It is vastly different to see an inefficiency as a cost over seeing as a lost of potential gains. A property owner that does not rent his property is not costing anyone anything: only he is the loser of the potential gains of renting the property. It is a benefit for a renter when he rents it out, not a cost when he doesnt. If we start seeing potential gains and costs that have to be subsided, you will notice a very uneven application of such criteria. Should people be spending time for leisure? maybe we should force them to do charity. Not doing charity is a vast social cost! 10% tax on wages if you dont do charity!
Any law that artificially lowers the value of property, for example by allowing squatting, or forcing taxes will lower both demand and supply. IF people buy less of those property, developers will build less, and often in the end you end up with less properties to begin with.
Not only that, but forcing things on people have the funny side-effects of getting push back. If you allow squatting, you will now see empty buildings getting boarded up (you can see this in Buenos Aires very often). That is costly to the property owner, costly to the neighborhood by showing an eye-sore.
>When you do that, you actually have charities that specialize in "opening up" unoccupied spaces and setting them up for homeless people to live there. I actually like the way we do it in France where if you stay there for a couple of days you are legally an inhabitant so it takes up to a years worth of legal proceedings to expel you.
Thats terrible, a huge deterrent to buy property, and so, of building property. People always have the greatest ideas when it comes to doing things with other people's resources.
What you're saying is you should be able to do whatever you want with your property.
I guess what I'm saying is that it is only your property because we who live here allow it to be, and uphold your ownership. If you're not using it responsibly - and leaving it empty is not using it responsibly - it's our right as a community to have you GTFO. And the softest way to do that is to tax you out.
The only reason the property is valuable in the first place (and rising) is because we who live here patronize shops, organize things in the area, and make it a good place to live. So you're piggybacking on our efforts while depriving a real person from living here. Again, the right thing to do seems to get together and get rid of the parasite...
Unknown. Until about 3 months ago, the municipal, provincial, and federal governments were all in lock-step agreement that there's no problem and everything is wonderful and there's no need to gather any kind of data about the housing crisis because that's just how things are in a World Class City™. As recently as May, our provincial finance minister was openly saying how great it was that "university students" were buying $32m mansions (that example was not a hypothetical). Right at the beginning of summer, some important election strategies went up in smoke very publicly. Between that and the Panama Papers leak showing that Vancouver real estate is a money laundering mecca, the housing crisis has become the #1 election issue. If you're trying to sneakily move money around using real estate, having a tenant calls a lot more attention to your activities than you'd probably want. Even if all your money is above board and you're just looking to hold onto a property to flip, a tenant can gum up the works. Evictions without cause take at least 2 months.
There has been some data collected by 3rd parties. The most reliable collected thus far shows ~12% of apartments in Vancouver are sitting completely vacant year-round. That was with a very narrow definition of "vacant" (staying in the apartment for 2 weeks in the summer counted as "occupied"). But that data was collected by the power company. They didn't care about why, just how many.
I am skeptical of that explanation, because housing has increased in rural areas as well, and in lesser cities. Moreover, increased demand could be accompanied by increased supply: cities could be building more. I know buenos aires is, and even though people complain about prices, demand for middle-class houses has been steady for almost 8 years and so has development.
For sure i am absolutely against laws and rules that try to patch a problem that is not understood, having the risk of making the problem worse.
I wonder what modern economists think of this.
At this point, it's a certainty that it's happening. The only question is to what extent. Overleveraged residents certainly isn't helping, but that alone simply cannot explain Vancouver real estate increasing in value more than the combined annual income of every resident in the city.
>housing has increased in rural areas as well, and in lesser cities.
That's usually chalked up to a combination of residents buying further out because they've been priced out of Vancouver, and former Vancouver owners who sold and are now looking for a "quieter" place to live. That's happened to at least one former landlord of mine, and my friend's parents are in the process of doing that right now. There's also an area to the south that is zoned for agricultural use, with mansion farmhouses and Ferraris parked out front.
>cities could be building more
In Vancouver, that's simply not possible to build more than we already are. People will often blame overregulation or zoning for not building more, but they completely forget about logistics. There isn't a single construction crew in the city that doesn't already have a huge backlog. Realistically, we're putting up towers as fast as they can be built and it's having zero measurable impact on housing affordability. And that's ignoring the already substantial problem of shoddy construction we have in this city.
>For sure i am absolutely against laws and rules that try to patch a problem that is not understood, having the risk of making the problem worse.
The general consensus among people I know is that it will have little to no effect. The government spent so long denying this problem even existed and openly refusing to even consider such a tax back in the spring, to implementing one overnight in the summer. Everyone here pretty much agrees that it's window dressing done to boost abysmal poll numbers in an election year.
>I wonder what modern economists think of this.
Economists out of UBC have been saying that the only explanation for such explosive, unrealistic growth in real estate is a flood of foreign money. Last I heard, they were calling this tax, at best, a good first step.
> Economists out of UBC have been saying that the only explanation for such explosive, unrealistic growth in real estate is a flood of foreign money. Last I heard, they were calling this tax, at best, a good first step.
Do you have any sources for this? This is a bit mindboggling: flood of foreign does not explain the global effect very well. Argentina doesnt have the same issue, but real estate prices also had its great increase. But also, flood of foreign money into a city like Vancouver could be helping a lot in its economic development: if a city is flooded with cash prices increase, but so does the economic revenue of many people in it: by putting a measure that limits money coming in, you could reduce prices but you would also reduce value, because the property is simply less desirable.
In any case, we still dont know why a rich person would buy a property and never rent it out if he doesnt plan in living in it and thats the supply problem its trying to get targeted. Why would the chinese tycoon face depreciation of his property and losing money? It even looks like a business opportunity, if it is so.
That's in the US. Canada wasn't hit anywhere near as bad by 2008, and Vancouver construction rebounded very quickly. With the way real estate has been skyrocketing since 2009, it was inevitable.
>This is a bit mindboggling: flood of foreign does not explain the global effect very well.
I'm not talking about the global effect, I'm talking about Vancouver, where prices have become so decoupled from local wages that you need to earn twice the median family household income just to afford the average home (I'm including condos in the definition of "home").
>flood of foreign money into a city like Vancouver could be helping a lot in its economic development
And it could also hinder its economic development if there's too much. The only question is whether or not there's too much. Given the completely out-of-whack salary to cost of living ratio, I'd say we hit the "too much" point a long time ago. I don't think there's anyone familiar with the area who says otherwise at this point, including the infamously, intentionally out-of-touch government.
>we still dont know why a rich person would buy a property and never rent it out if he doesnt plan in living in it
Right now, we can only speculate thanks to the government shoving their fingers in their ears and refusing to admit there's a problem. But there's a few key factors that help us make informed speculation.
First, we know from the Panama Papers that Vancouver real estate is being used to launder and hide money. You don't rent out your tax shelter or money washer to some rando off Craigslist.
Second, having a tenant delays sales by at least two months (that's how long an eviction without cause takes). That's a LIFETIME in Vancouver real estate.
Third, in the last few years, asset appreciation means you're gaining more money on paper just by holding onto the real estate than you could ever hope to collect in rent. Even if you pay a property management company to deal with everything, it's still a non-trivial amount of work for comparatively little gain.
Fourth, it sounds nuts, but in Chinese culture, a home that has been lived in sells for less money than one that has never been lived in. Something about feng shui, which is still such a big deal in China that it's made its way into Vancouver real estate. Hell, until the city council put a stop to it due to the logistics issues it causes emergency crews, buildings were going up that didn't have floors with the number 4 in them. 4 is associated with death in Chinese culture, and apartments with the number 4 don't sell as quickly.
http://www.theglobeandmail.com/real-estate/vancouver/out-of-...