Hacker News Reader

Here's some math that should make this make sense to non-Vancouverites:

A 1200sqft bungalow across the street from me sold for $2.8mm four months ago; it's now back on the market for $3.2mm. If you put 20% down, that'd be a monthly mortgage payment of $11,500. That's 1/6th of the average Vancouver family's annual income, per month!

I have a feeling that if you're paying $11,500 a month on your mortgage, you're not worried about 1% of the value of your house, and you're definitely not worried about renting it out at a profit. You're just hoping it keeps appreciating enough to pay for interest and this new piddly 1% tax.

That's who this tax is targeting. And I welcome it wholeheartedly.

Just thinking about this in a detached, mathematical sort of way. The increase or 400,000 over 4 months, is more than 1% of the value.

Depending on how crazy the market it, prices may jump even higher short term to accommodate the added speculation loss.

In any case, hopefully Toronto doesn't reach that level of insanity.

So $3mm is basically retirement money, right? So why isn't everyone just selling and moving somewhere else?

This sounds to me like real Vancouver residents who bought years ago have just won the lottery. Boohoo my house is worth 10x what I paid?! Tell me more about your problems!

Seriously, cash in the chips and enjoy life until the crash and then move back in a few years, own your house outright, and, continue to enjoy life.

I mean, I don't want to be rude but I'm having trouble wrapping my head around this...

  Hey man, my house is worth like $4 million on Zillow.
  Yeah, that totally sucks, how are relatable people supposed to move in next door?
  Those Ferraris really have loud engines. It's a menace!
  How are we going to *fix* this?!
  We need the value of our homes to plummet back to equal or less than what we paid. I need noisy neighbors who can't afford landscaping, not just this eerie silence all up and down the street.
  For sure.

Please can you tell me how we can get these Chinese investors interested in some nice New England properties?!

I don't think the anger is people bought their home 20 years ago. It's from people who rent; people who grew up with their parents and want their own place in the city; people who have moved to the area for a job and cannot afford to live within a reasonable distance of work.

Having property that no one lives in despite people wanting to seems like a poor allocation of land. (Mind you, it may not be a poor allocation of resources for the people investing)

A 1200sqft bungalow across the street from me sold for $2.8mm four months ago; it's now back on the market for $3.2mm.

That's incredibly frustrating, I get that. I'd love to live in the Bay Area again, but it's too expensive to be worth it to me.

What you're describing is a classic bubble. Speculation divorced from the underlying asset value. Presumably not enough Vancouverites would think that $3.2mm for a 1200 sg ft house is worth it to keep that value there. So it's temporary and will eventually pop. Bubbles hurt a lot of people while they run up and when they pop, but it's not clear that price controls do anything other than shift the pain elsewhere, usually while making it worse. I'd rather try and understand what's driving the underlying bubble and fix that if we can. The vacancy is a symptom, not a cause. That said, that's probably not something Vancouver can deal with directly, as it seems more tied to global macroeconomic conditions.

> I'd rather try and understand what's driving the underlying bubble and fix that if we can

Foreign real estate investment? Driven by economic forces in foreign countries? I don't know if you can really "fix" that, but you can sure as hell tax it while it's happening. And 1% isn't bad at all if the houses are gaining that much in value over such a short period of time. Whoever's flipping these is certainly beating inflation still.

EDIT: Read some more comments, particularly emptybits':

> It's an experiment. Much like our recent 15% foreign buyers tax reported a few months ago. We're all watching the experiment. Perhaps our role is to serve as a lesson to other cities?

So it seems as though they are trying to curtail the bubble caused by foreign influence, and my comment about "fix"ing it was made in ignorance.

However, I still think it makes sense to tax both ends of the spectrum...the buyer tax limits new purchases, the "living here" tax limits houses already bought.

>there are a million reasons why you might need to leave your house for 6 months or longer //

Could you give a few examples? I know some rich middle-class (UK) people who have left their home for a couple of months whilst they've had renovations. And I know a few people, again pretty well off, that have travelled extensively abroad or lived abroad and rented out. Beyond that though?

I do think they should adjust to allow small-scale local-owner rental.

>Policies like this make it crystal clear; you own nothing, even owners are renters [...] //

I think they make it clear that peoples housing needs are being preferred over rich peoples right to profit from those same housing needs.

It could be to care for a sick, disabled, or mentally ill relative. Or because the resident gets sick and needs to move in with a relative.

It could be some sort of seasonal work transfer, or an unexpected work transfer that you are forced into until finding a new position back home. Or maybe you are taking a sabbatical. Or a stint in the peace corps (I think that's usually 18 months).

I might want to live in a warm climate for 183 days per year and Vancouver for the rest.

I might have a temporary overseas assignment.

I might have a military deployment. (Or UN or Peace Corps.)

3 months is a long overseas assignment in most roles, I guess your company would have to pay you enough to make it worthwhile. That's not the city struggling for housing stocks problem.

Military deployment, seems reasonable, I wonder how many deployable military are living in these houses; also wouldn't the location remain your primary residence and so avoid the tax?

Wanting to live somewhere else? That's exactly what the tax is for - pay up or change your residence.

You asked for reasons why someone might choose to move out of their house for 6 months or longer rather than rent it out. I gave a few; nothing more. By all means, I support the local government's right to pass whatever laws/policies/incentives they want as representatives of the residents and a policy could be good on balance even if it screws over a few edge cases.

BTW, most of our overseas assignments are 2 years initially. 3 months seems more like a long business trip, not an overseas assignment to me.

You must be filthy rich to be able to keep an empty house for 2 years.

Not if your housing is covered overseas as part of the package (whether private or military).

> A city should be happy to have the tax revenue with none of the burden.

This is true. The city (actually province & city) receive the tax revenue.

Unfortunately, rental stocks are so low in Vancouver that it's very difficult to find a place to live among all the (apparently) empty condos and houses owned by people who don't live here. The average house price is $1.4 M. A small 2 bedroom condo will still set you back half that. Thus, the pressure is on the rental market and finding/encouraging a larger rental supply.

So while the government is fairly paid by absentee home owners, there is an argument that the government should be doing something for its resident citizens.

It's an experiment. Much like our recent 15% foreign buyers tax reported a few months ago. We're all watching the experiment. Perhaps our role is to serve as a lesson to other cities? :-)

Honestly, you aren't the problem. The problem is speculative investors who are buying lots of property in nice areas and sitting on them: not renting them, not living in them, but just letting them sit vacant.

For a city like Vancouver, that drives up the cost of living for everyone as it drives the price of real estate through the roof, which is exactly what those speculative investors want. They have a perverse incentive to buy up all the property and not rent it out.

A tax at a percent of the property value destroys the motive to do that, which is in the best interest of the city. There are exemptions for primary residencies and properties that are rented for at least 50% of the year by month are exempted.

Sounds like all you need is a primary address exemption. IE, a property needs an associated primary addressee, rather than occupancy. You would not be able to claim a primary address for your second or third home, so if it goes unused it can then be taxed.

Their second, third, and fourth homes are in Shanghai, Beijing, and Hong Kong. I don't think Canada has any access to their land registries.

The burden is lack of housing and therefore skyrocketing housing costs, what are you talking about?

The sooner some of you guys get the idea that you own nothing, the sooner NA will become a better society. Living inside a society means your rights are not granted by the god or by nature, it is granted by other people around you, by the society. The right and law of ownership is the same. It is merely a consensus how the society distributes its wealth.

The issue you described doesn't really exist in Vancouver, where it has one of the lowest vancancy rate in the world (0.6 percent), it's a seller market and rent is high enough comparing to local income/maintenance cost.

BTW, Switzerland has the lowest house ownership in Europe according to [1]

1. http://qz.com/167887/germany-has-one-of-the-worlds-lowest-ho...