Some Mountain Towns are Eyeing Vancouver-style Vacancy Taxes. Could it Help Address Housing Crises?
In 2017, Vancouver, Canada, became the first North American city to enact a tax on residential properties sitting vacant for more than half the year. The goal is to return vacant homes to the local rental market and raise revenue for affordable housing projects. Kyle Mackie of KHOL Jackson reports on how some Western mountain towns are now eyeing early signs of Vancouver’s success. This story is part of a collaboration between Rocky Mountain Community Radio and the Solutions Journalism Network highlighting affordable housing solutions across the Mountain West.
In the mid-2010s, Vancouver, Canada, was faced with what the city’s director of housing policy and regulation, Dan Garrison, described as an existential crisis.
“We were having a really intense public debate about these housing challenges and about how we could address the rising cost of housing relative to incomes,” Garrison said. “Like, are we still going to be able to be a place where sort of normal people live and work or are we becoming a resort?”
Around the same time, Garrison said the city also started to notice that many properties that could have been rented out were being left vacant most of the time.
“It’s almost like wasting food in a time of abundance isn’t that big of a deal. But wasting food when people are starving is, right?”
So, in 2016, the Vancouver City Council voted to adopt an Empty Homes Tax (EHT) on residential properties that are vacant for more than six months of the year. In doing so, the Canadian city became the first in North America to enact a tax on vacant homes. The EHT went into effect in 2017 at 1% of a property’s assessed taxable value before getting raised to 1.25% in 2019. A third rate increase will go into effect this year, raising the fee to 3% for 2021.
“The average market price for a condo [in Vancouver] is about like $800,000. So, 1% is $8,000,” said the city’s Director of Financial Services Julia Aspinall, describing the average fees levied on vacant residential properties when the tax first went into effect. “[For the] average single home, using $2.5 million, that’d be $25,000.”
Vancouver worked with the provincial Government of British Columbia to amend its city charter in order to implement the EHT, according to Aspinall. She also said it’s critical for her department to be fair in how it administers the tax. That means every residential property has to declare its occupancy status annually. If owners fail to do so, the fee gets rolled over onto their property taxes. There’s a robust appeals process, several exemptions and random audits, but Aspinall said about 99% of owners declare on time. There’s also evidence the tax is making progress on its main objective.
“Our primary goal is not to generate revenue. It’s to have that housing returned into use,” Garrison said. “However, if you do have people that can afford to own property in a city like Vancouver and leave it sitting vacant, then we think it’s reasonable that they pay a tax that goes into contributing to addressing our housing problems.”
A total of 7,280 formerly vacant properties became tenanted between 2017 and 2019, according to the latest EHT Annual Report covering the 2019 tax year and activity to Nov. 2020.* That means they either became primary residences or now have renters. $61.3 million in tax revenue has been allocated for affordable housing initiatives, including land acquisition for future development by the city and grant-making to nonprofit housing providers to make their offerings more affordable for low-income residents. The city also tracks a variety of other metrics, from the total number of properties required to declare to the breakdown of exemptions by type, which Aspinall and Garrison said indicate that the EHT is helping move Vancouver’s rental market in the right direction.
Those signs of early success sound pretty appealing to some Western mountain towns.
“The Band-Aid has been totally ripped off,” said William Dujardin, a recently resigned member of the town council in Crested Butte, where residents will vote on a vacancy tax in November. “[The housing crisis] is only going to get worse if we don’t take drastic action, and a tax like this in the big scheme of things isn’t that drastic in terms of the amount of money flowing through this community.”
Colorado tax law doesn’t allow Crested Butte to charge a percentage based on property value, so the tax will be a flat fee of $2,500—far lower than the amounts paid in Vancouver. Still, combined with two other proposed tax hikes, Dujardin said it could generate up to $1.8 million for affordable housing projects in its first year. The vacancy tax itself is tied on the ballot to a 0.5% increase in local sales tax, which Dujardin said was a way to bring the community together.
“They’re linked… basically in [an] effort to bring enough second homeowners along that locals were okay with voting on it and not feeling like they were just taxing people who don’t have a vote,” Dujardin said. “A lot of people support the concept of this tax.”
Indeed, both Aspinall and Garrison said the EHT has proven to be one of the most politically popular taxes they’ve seen in their careers. But the idea of vacancy taxes are not universally celebrated, as State Rep. Mike Yin of Teton County, Wyoming—home to Jackson—learned last year.
“I got more vitriol from that 2020 bill than I’ve gotten from any other piece of legislation that I’ve ever been sponsor or co-sponsor on,” Yin said, discussing an optional unoccupied home fee he co-sponsored in the Wyoming State Legislature with two other Teton County Democrats.
The bill Yin proposed would have allowed Wyoming counties to opt into a vacancy tax on residential properties assessed to be worth more than $500,000 and which are unoccupied for more than half of the year. As written, the tax would have been based on total square footage of a dwelling or “other dwelling size specified” and would have disproportionately affected second homeowners in Teton County, according to Yin. However, the measure didn’t make it out of its assigned committee to be heard on the State House floor in a legislature that’s notoriously anti-tax.
“Even if we’ve [Teton County representatives] been co-sponsors on the income tax bill and the real estate transfer tax,” Yin said, referencing other recently proposed taxes that failed to advance, “it still seems like we’re more willing as a state to shoot ourselves in the foot instead.”
While Teton County lacks the constitutional authority to implement a county-wide vacancy tax, KHOL asked Town of Jackson officials whether the town could do so alone, as Crested Butte is now attempting. Town Attorney Lea Colasuonno said the answer isn’t clear and that she would need direction from the Jackson Town Council to research the issue.
Garrison, from Vancouver, also cautions that no vacancy tax is a silver bullet.
“The Empty Homes Tax has not suddenly turned Vancouver into an affordable city, but it has reduced the number of vacant properties in the city. It has increased the amount of rental housing available to people in the city. And it’s tens of millions of dollars in revenue that we’ve been able to put to important, affordable housing initiatives,” Garrison said. “The fact that the tax hasn’t solved the entire problem isn’t a very good reason to not try to solve the problem that it’s trying to solve.”
In Crested Butte, Dujardin is hopeful the proposed vacancy tax will pass. Unfortunately, he won’t be around to see its impact. The former city councilman is moving to Salt Lake City, where he and his fiancé believe they have a better chance of affording a home they can start a family in.
*Aspinall said data on the impact of Vancouver’s EHT lags behind each tax year because homeowners aren’t required to declare their occupancy status until the beginning of the next calendar year. A late declaration period extends that deadline to the following July. Data is also not yet available for the impact of the tax rate increase from 1.25% to 3% for 2021, but Aspinall said her department expects to see a significant impact.
This story is part of a collaboration between Rocky Mountain Community Radio and the Solutions Journalism Network highlighting affordable housing solutions across the Mountain West.