Jack Mintz: Vacant home taxes may be worsening the housing crisis

financialpost.com:

The latest fashion in tax grabs is the vacant property tax (VPT). In Vancouver it’s called the “empty home tax.” In Toronto it’s the “vacant home tax.” Whatever the name, taxing residential property that isn’t used for a government-prescribed minimum number of days in a year is pernicious.

Toronto is tripling its version of the VPT to three per cent of the home’s assessed value. Residents must file by February 29th or pay a fee of $21.24 and possible penalty of $250. The idea is to free up vacant homes and land in high-priced housing markets. Some politicians believe underused property is a deadweight loss to an economy, helping ruthless speculators enrich themselves by flipping property.

That’s hogwash. Property is held vacant, often at a substantial economic cost, because people find it makes sense for them to do so. The short-run impact on housing availability is close to negligible, as I highlight below. In the long run, it could well lower the housing stock, since developers paying the tax on land inventory will be discouraged from investing in residential property. For such reasons, a paper for the New Zealand Productivity commission rejected having a VPT, which has not been adopted there.

In Canada, governments generally define “vacant” as used fewer than six months in a year. Other countries are more generous. French VPT does not apply if residential property is used for at least three months in a year, while Oakland, California, lets you off so long as your property is occupied 50 days a year.

Like Toronto’s, Vancouver’s VPT is assessed at three per cent of value. In addition, B.C.’s “Speculation and Vacancy Tax” is two per cent on property owned by foreign residents, though just 0.5 per cent on Canadian