VANCOUVER—The City of Vancouver now estimates it will receive roughly $8 million more than it initially expected from the empty homes tax in its first year.

In the meantime, Vancouver’s rental vacancy rate remains well below what city staff consider a “healthy” rate of 3 to 5 per cent.

According to the latest rental market report by the Canada Mortgage and Housing Corporation, the city’s vacancy rate made only minor gains over the last year, rising from 0.9 per cent in October 2017 to 1 per cent in October 2018.

It may be too early however, to fully understand the impact the tax will have on Vancouver’s rental market, said Andy Yan, the director of The City Program at Simon Fraser University.

“You need time for this type of policy to really soak in and for people to then make decisions on their properties,” he said.

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Mayor Kennedy Stewart promised during his campaign to up the tax from one per cent to three per cent moving forward.

Rents rising despite more supply in Metro Vancouver and rest of B.C.

According to a city report on the policy’s first year of implementation, which was released Thursday morning, the tax “is intended to bring underutilized properties back into use as rental housing, limit speculative investment and ensure housing is used as homes first.”

Currently the tax applies to properties that are not used as principle residences, not rented for at least six months a year, nor covered by another exemption.

Out of 186,043 properties in Vancouver, 2,538 homes were subject to the empty homes tax for the 2017 tax year; 5,385 were exempt.

The level of tax charged for individual properties ranged from a median of $1,500 for the lowest valued properties to a median of $250,000 for the highest valued properties.

Yan said at least another year of data is needed before we’ll have a clear picture of how many empty homes moved into the rental market.

Moving forward staff will be able to measure changes in the number of vacant properties based on the declarations submitted by property owners each year, the city report said. The next round of declarations are due by February 4, 2019.

While there are some outstanding questions and possibly a few needed adjustments, the tax is “filling in the policy gap on empty homes,” Yan said.

He added though that further discussion about what counts as an empty home may be needed.

Mayor Kennedy Stewart’s campaign promise to up the tax from 1 per cent to 3 per cent throws another unknown in the mix, though the city says the one per cent tax rate will remain in place for the 2018 tax year.

Tom Davidoff, an associate professor at the University of British Columbia’s Sauder School of Business, said he expects the city would see less revenue and more people renting or selling their empty homes if the tax is raised to 3 per cent.

“That’s not a big deal whether he does that or not,” he said.

As long as there’s a low rate of cheating, there’s no bad outcome for the city, Davidoff said. Either the city raised revenue that it can reinvest in affordable housing initiatives or it reduces the number of homes sitting empty.

Based on the first year of data, the highest number of vacant homes, including those exempt from the tax, were found in the city’s west end and downtown neighbourhoods, the city found.

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Homes that were subject to the tax were required to pay one per cent of the property’s assessed taxable value by mid-April and property owners that have not paid the tax by the end of the year may be subject to 7 per cent interest, according to the city’s report.

At this point, the city said there’s more than $17 million in outstanding taxes due.

Of the revenue collected, $7.5 million will pay for the one-time implementation costs; $2.5 million will cover the first-year operating costs; and $8 million will be allocated to affordable housing, the city said in a release.

With files from Jen St. Denis and Jenny Peng.

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