Vancouver’s Vacant-Homes Tax Doesn’t Improve Housing Affordability: Study

Condos and apartment buildings in downtown Vancouver on Feb. 2, 2017. The Canadian Press/Darryl Dyck

A vacant-homes tax may boost housing availability but it hasn’t improved affordability, says a new study on the policy’s impact in Vancouver.

The C.D. Howe Institute study looked at how Vancouver’s Empty Homes Tax has affected the housing crisis since 2017. The tax was introduced amid concerns about high rents, expensive homes, and homelessness happening at the same time as homes were sitting empty, according to the study.

The Vancouver city council reported a decrease in the number of vacant homes after introducing the tax. In 2017, nearly 2,200 properties were identified as vacant, with the number dropping to about 1,100 by 2022.

This echoes the study’s finding that the tax lowered the vacancy rate by 1.5 percentage points. The rate translates to about 226 out of 1,078 vacant homes becoming occupied due to the tax, according to Enrico Miglino, study co-author and an economist at the Bank of Italy.

However, researchers said that while the tax effectively reduced the number of empty homes, it did not affect average rent or the number of new dwellings being built, suggesting “a need for further measures to address the wider housing crisis.”

“When using this tool, policymakers should understand that, while this tax might be part of the larger solution, it has limited impact on the ultimate goal of improving affordability,” Gherardo Caracciolo, co-author and former senior policy analyst at C.D. Howe, said in a press release.

The study noted that many cities and countries have recently adopted similar policies to tackle the housing crisis by adding taxes on empty homes. France was the first to introduce a vacancy tax in 1999. The United Kingdom followed with a similar policy in 2015, and both Spain’s Catalonia province and the city of Jerusalem implemented their own vacancy taxes that same year.

In Canada at the federal level, the government has introduced the Underused Housing Tax, which is an annual 1 percent tax on the ownership of vacant or underused housing in Canada.

The study also mentioned criticisms of the empty-homes tax, including that some believe it might make property developers and investors less likely to start new projects because the extra costs of holding empty properties could lower their profits. Other criticisms include that the tax is a form of government overreach, telling private property owners what they can and cannot do with their properties.

“The current housing crisis is a complex issue, and only when we act on a comprehensive suite of policies will we tackle it promptly and effectively,” the researchers said.