The Vacancy Tax | Mises Institute

A vacancy tax is defined as,

. . .a charge imposed on property owners who leave residential or commercial properties unoccupied for a specified duration. The primary objective is to incentivize owners to either rent out or sell these vacant properties. This policy seeks to increase the available housing supply and discourage the speculative holding of real estate.

It is also called the empty homes tax (EHT). This is a recent creative city government tax policy seen in the Austrian economic worldview as an economic intervention under the city government’s purpose to incentivize more residential housing availability in that city.

The EHT in Canada started in 2017 in Vancouver, British Columbia to “. . .to help address housing affordability and availability challenges in Vancouver.” The Vancouver city web site states, “Vancouver homeowners are required to submit a declaration each year to determine if their property is subject to the Empty Homes Tax. Properties deemed or declared empty in the 2025 reference year will be subject to a tax of 3% of the property’s 2025 assessed taxable value.”

The EHT started at 1 percent of property’s assessed taxable value in 2017 and rose to 3 percent in 2021. The homeowner pays a late penalty if the annual report is not submitted by the deadline. The EHT applies to condominiums and residential homes.

Common EHT exemptions include active property renovation, property listed for sale, units with temporary absences due to owner medical reasons, the owner is deceased, property damage from a natural disaster, a known environmental hazard prohibiting habitation or owner travel. The primary residence property used greater than usually six months a year is exempt from the EHT.

The city of Vancouver states, “Net revenues from the tax are being reinvested into affordable housing initiatives across the city.” They claim 49 percent of properties declared, deemed or occupied in 2022 were converted to occupied in 2023. A 58 percent percent drop in vacant properties from 2017 to 2023. $169.8 million Canadian dollars of EHT was allocated to support affordable housing initiatives from 2017 to 2023.

The city of Vancouver 2023 EHT annual report states, “Money collected from the EHT is first allocated to cover annual operating costs associated with administering the tax with the remainder being available for initiatives respecting affordable housing.”

The three initiatives are the Community Housing Incentive Program (CHIP) providing non-profit housing providers with grants towards development of new social housing projects in Vancouver, land acquisition, and development opportunities to use city-owned land to develop new social housing, partnering with non-profit partners and emerging priorities through city-defined initiatives.

From an Austrian economics perspective, the EHT tax taken from private property owners and funneled through a city program to non-owners, approved contractors, and the city employees who administer it—based solely on the government’s designation of a property as “vacant”—constitutes economic intervention.

The city of Vancouver 2023 EHT annual report (see page 8) indicated several hundred fewer properties were not vacant in calendar year 2022 compared to calendar years 2020 and 2021. The EHT policy to add several hundred properties as owned/rented instead of vacant from the roughly 195,000 registered primary residences in the city is not worth this city regulatory effort.

The EHT is in place in the US cities of Detroit, Michigan, New York, New York, Oakland, California, and Washington, DC. “Oakland, California, enacted a vacancy tax in 2018, assessing an annual charge of $3,000 to $6,000 on properties vacant for less than 50 days a year.” It was tried in San Francisco, California by voter approval 2022 of Measure M, which imposed a tax on vacant housing units to fund affordable housing programs. The policy faced lawsuits and was struck down in court.

The EHT interferes with the activities of a private property owner of a condominium or home if they decide to let the property be vacant above a defined number of days a year. The property owner may have to file an annual report to the city of their property being vacant or not, file it on time, pay the EHT if it applies, and—if they can not pay it—they are subject to penalties and/or interest. If payment is not received on time, then the property is subject to city confiscation and public auction due to non-payment. EHT’s existence and expansion is not worth it.