Intelectual Property (especially patents and copyrights) should also be taxed at 1% of their assessed/declared value. And a single infringer should never be liable for more than the assessed value.
Not because patents are empty, but because this would create the incentive for patent owners to assess a real value to them, and not "bajillion dollars", which they do now.
Even just a small, yearly flat tax on copyrights, patents, and trademarks would be enough to discourage many people and companies from holding on to useless IP.
A lot of old books or music still under copyright will never generate another penny of income, but putting them in the public domain could let them be mixed or used as a foundation for new creative works.
Great, let's put old authors into bankruptcy just because their publisher decided their work needed to be archived.
This idea is absurd. Classic copyright term limits, and patents being reserved for only specific implementations of an idea would fix these problems without taxing the hell out of everyone.
You do realize everything you write is copyrighted? This means you're going to have to file with the IRS for all your Hacker News comments on an annual basis.
You're creating a false dichotomy. No plausible copyright reform requires filing notices for every forum comment or line of code.
Lines of code : Form a corporation, non profit entity or business, then pay a yearly copyright fee and transfer all code written to the business. The cost is proportional to the value of the copyright; if it's a small or unprofitable business the fee could be waived.
HN comments : the copyright is worthless anyway, people repost content all the time. To my knowledge no one has ever been sued over it.
Books and other publications : The publishers will pay for the copyright fee. Writers could be automatically covered for a grace period before publication with no fee, say one year.
These are all hypothetical,the point is you are immediately going to an extreme without considering what actual, plausible reform would entail.
If you have to ask you have no idea how important copyright law is.
Do you really want to live in a world where someone, anyone, can take something you've done and give it away to other people without your permission, or commercialize it and leave you with zero recourse?
Most people think copyright protection is for important, significant creative works like a book or a song, but it's equally important for less visible things. For example: A single method in your code that someone else appropriates.
If you had to register copyright for every line of code you wrote, you'd never get anything done.
I'm not talking about getting rid of copyright. Of course I want copyright protection for my work, and of course I want other people to enjoy that protection as well.
I don't see any reason, however, that I need that protection for every single thing that I create. What purpose does _automatic_ copyright serve?
I stick a copyright notice in every software project already, but when I don't want the copyright I also have to explicitly disavow it. Why shouldn't the model be flipped to claiming copyright with a simple attached notice, instead of disavowing it?
You stick a copyright notice on things so people know who to contact if they need to license it. That clarifies ownership, it does not establish it.
> I don't see any reason, however, that I need that protection for every single thing that I create.
This is the social network problem. When the network starts to co-opt copyrights, demanding they're able to license the work you submit to them for any purpose, for any reason, without compensation, people understand that's a form of property theft and fight back.
The problem with "intellectual property" is it comes in forms both inconsequential and profound, and in the middle is a very, very grey area. There's been flippant comments on Reddit that have turned into screenplays. There's been stuff posted on Instagram and Pinterest that turned into a line of merchandise. These things have a way of growing in importance when you're not even looking.
Like code, where a quick throw-away hack might actually turn out to be a big breakthrough and gain popularity. This is why we have license like GPL, MIT, and CC that describe how your work can be used.
You're talking about a pre 1970 world where copyrights had to be registered, and honestly, that sucks. Can you imagine having to get each and every revision of your code officially copyrighted? What about someone stealing your idea you write about on Medium, or ripping your content wholesale and publishing a book. It's not stealing if it's not copyrighted, but thankfully it is. Automatically.
The problem with liability being < assessed values is then what's the incentive to work for a licensing deal? Why pay for a license when, worst case, you'll be taken to court to pay the same amount?
> Why pay for a license when, worst case, you'll be taken to court to pay the same amount?
First of all: I'm not a lawyer and this is not legal advice.
You don't pay the full price of the intellectual property when licencing it, do you? The value of the intellectual property should be based on it's market value which would, in a perfect world be based on the expected benefit from that property. Also, paying for the damages for unlicensed usage does not mean you can keep using it unlicensed further on.
> The problem with liability being < assessed values is then what's the incentive to work for a licensing deal?
Wut ? “assessed value” ≠ “licence fee” ! The value of Windows for Microsoft is not the same thing that the value of one licence of Windows for your company ...
The proposed mecanism would just prevent Intellectual Vulture & co to gather a lot of worthless patents and then claim millions un court for patent infrigment.
First, maintenance fees are very low compared to legal action, and independent of whether the patent is worth $10 or $10B (or you believe it does). So is is entirely unlike a property tax.
> The problem with liability being < assessed values is then what's the incentive to work for a licensing deal?
If you upload a song you like, and tax has been paid for it as worth $100,000 that year, (which would be $1000/year), and you can license it for $1, then - yes, you have an incentive to license it for $1, because you are otherwise liable for as much as $100,000 (but not more[0]).
Think this is stupid? Because under the current law, you are liable for $150,000. That's what the law says, anyway.
[0] Except for e.g. willful infringement laws, which would make you pay 3x as much potentially - another answer to your "what's the incentive".
Out of print copyrighted books which are not published as ebooks should be a very good analogue to empty homes. Tax them at 1% of the average money they make they sell books' IPs to another publisher.
Because creating an acurate valuation for IP at the time IP is created that would be accurate for the life of the IP is impossible. Moreover, it would make no sense for that made up valuation for tax purposes to determine future potential damages in IP infringement cases.
Edit: to bring the concept to perspective, imagine having to assign a valuation to new borns so in the instance they die as a result of negligence the damages are capped at the assigned valuation of the deceased at their birth.
I didn't explicitly state this here (I did numerous times before when discussing this) but property tax is annual, and I propose value assignment be annual as well. Therefore, if at the end of the year neither yourself nor anyone else had made any money from your IP, just assign zero.
At the moment, patents are cheap compared to the value they have as an offensive weapon, and this is what I hope to address with my proposal.
As for copyrights - the same framework would make infinite extension unaffordable even for Disney, so I hope we would all benefit.
>Therefore, if at the end of the year neither yourself nor anyone else had made any money from your IP, just assign zero.
If you can declare $0 and not pay taxes on the IP you are basically coming full circle to existing taxation based on the income generated by the IP. However, the more important issue with your proposal is an IP holder might not want to declare $0, despite no current revenue, because your proposal would then tie that $0 valuation to potential damages in the instance of an infringement case.
>As for copyrights - the same framework would make infinite extension unaffordable even for Disney, so I hope we would all benefit.
As both a small business owner and consumer I have always been on the other side of the Disney argument. Why do you think we would all benefit from Disney losing IP protections? Most of the time its a innovation argument, but is their really any innovation being stifled by the Mouse?
As a business owner, if my company creates some form of IP, say a cartoon mouse whom I copyright/trademark to various degrees (name, logo, color(s), etc...),the company invests capital to create a movie starring the mouse and the market votes with their wallets, which the company pays taxes on, and like Steve Jobs I am fanatical about Quality Control and just keep reinvesting in the IP, creating products with the Mouse that the market love and keep paying taxes. Why, at some arbitrary point in time, should my company lose IP protections to the cartoon Mouse and all completed works with the Mouse? As a consumer, I currently know Disney for its high quality productions and there is a lot of goodwill with the brand that has been established over a lifetime, now with the floodgates opened and everyone able to profit off Disney IP there will be confusion in the marketplace leading toward loss of goodwill with the brand.
> Why do you think we would all benefit from Disney losing IP protections?
Copyright is willingly extended by the public to private interests for the purpose of fostering innovation and creativity.
The question isn't how do we benefit by Disney losing IP protections, the question is how do we benefit by maintaining what we have graciously given them? What return on investment, if you will, is the public getting for Mickey not being in the public domain?
> However, the more important issue with your proposal is an IP holder might not want to declare $0, despite no current revenue, because your proposal would then tie that $0 valuation to potential damages in the instance of an infringement case.
For that year (alone), and I proposed you set it when you pay your taxes - that is, at the end of the year, in retrospect. In this case, there is never a reason for you to file anything other than $0 unless someone else is making money of it (if you are, then you're already being taxed on it).
> Why do you think we would all benefit from Disney losing IP protections? Most of the time its a innovation argument, but is their really any innovation being stifled by the Mouse?
It's supposed to be the other way around. We have granted Disney limited monopoly in return for wide availability. "Steamboat Willy" was released with the understanding that it will become public domain within 50 years. The question is, why on earth did we retroactively give another 100 years of that monopoly for free?
And even if it wasn't retroactive - the current 100+ years doesn't seem reasonable to me at all.
> Why, at some arbitrary point in time, should my company lose IP protections to the cartoon Mouse and all completed works with the Mouse?
The only reason they currently have these protections is that they bought them from Congress.
Why do you, as an employer, stop paying your employees a couple of months after you fire them / they quit? IP is not the same as work-for-hire, but it doesn't deserve the eternal protection it currently has. I am not aware of anyone who did NOT publish in 1930 because "I only get 50 years of copyright protection".
And ... you are arguing a strawman. I did not argue that IP should be abolished. Just introduce an economic cost to the unlimited monopoly, which is currently free.
IP protection covers three things—patent, copyright, and trademark. Patent and copyright exist to encourage people to innovate; there's less incentive for the studio to produce next summer's big action flick if it were legal to copy it as soon as it's released; and there's less incentive to figure out which of many nearly identical, but subtly different contraptions actually work if someone can then take the working one and produce a thousand at some factory.
Trademark is different. That rewards not the act of creation, but the ongoing investment in a brand. Do I want a huge quantity of something for above average quality and below average price? Buy Kirkland Signature. Do I want outdoor gear that will be covered no matter what happens? LLBean has me covered.
Disney almost surely makes almost no profit off of Steamboat Willy as a film, and in fact according to the copyright laws of the time, it wouldn't be covered today, so Walt probably didn't factor in the 21st century when amortizing his costs. Is there some teenager out there who could create some truly inspiring film by remashing clips from Steamboat Willy? I have no idea, but would love to find out. But a Mickey Mouse mug is more about trademark, and Disney should get to profit off that as long as people want to buy them. And if the teenagers film hurts the trademark, then that's something that could be resolved without an indefinite extension of copyright terms.
You can only determine the exact IP revenue when someone is paying explicitly for the use of that IP. If, however, I'm selling, say, a very complex machine, where I hold a patent over a small component of that machine, how would you determine the value of my patent?
> Therefore, if at the end of the year neither yourself nor anyone else had made any money from your IP, just assign zero
How would that solve the issue of patents being used as a offensive weapon? Under your proposal if a patent troll has thousands of patents and has made zero revenue on them, they would pay zero tax. On the other hand if they made money, they will happily pay the tax.
> where I hold a patent over a small component of that machine, how would you determine the value of my patent?
I want YOU to value that patent (and the tax just make sure it is not arbitrarily high). When you sue for damages, you must have that estimate. I just want to force that to happen in a way that discourages over estimation.
> How would that solve the issue of patents being used as a offensive weapon? Under your proposal if a patent troll has thousands of patents and has made zero revenue on them, they would pay zero tax. On the other hand if they made money, they will happily pay the tax.
Court cases take years to start (and resolve). The patent troll's leverage is "if you don't license, I'll sue". If they have to pay $10,000 for every $1M patent, they will not be able to afford their current business model - they will not be able to sue for more than they paid taxes for. (The lawsuit is likely - and perhaps should legally be required - to be filed only after tax is paid).
I think what he is getting at is if the patent owner ascribes no value to the patents for tax purposes, then the same lack of value applies if they attempt to collect damages for IP infringement.
This would force the patent troll to set the value to something balances so that they can afford the taxes while still recouping enough infringement damages.
Values are placed on people's lives all the time for insurance. I'm thinking for IP a flat tax may make most sense. It would incentivize letting go of at least some things. If it's $5 fewer things will go public than if it's $1000, for instance. It should probably be more to actually affect companies.
It would favour large institutional "inventors" and lock out individuals.
An invention and subsequent patent is only the beginning of a pretty risky endeavour. There are significant risks in bringing a new product to market, such as in funding, timing, marketing, industrial production, and so on.
Overall they will average out. Some patents will be more successful than expected, and some will bomb. Large companies will be able to make a guess, pay the tax, and overall they'll make a profit. The risk on a higher value and paying the tax isn't such a big deal for them.
Small time inventors will be unable to take the risk and be forced to undervalue their own invention lest it bomb. They'll be exploited by large companies that will just pay the limited damages and then exploit their invention.
All this would do is cap the return of small inventors, without affecting the carpet-bombing large companies.
I hate patent trolls as much as the next HNer, but I don't think this idea will work, sorry.
I'm a small time inventor with one patent filed, but I didn't pay the maintenance fees (I had to publish but didn't want to spend thousands more making it final) because it didn't make enough money so it's now in the public domain. A large company could take my work. If they make a success of it where I failed, good on them. But I'll be owed nothing (rather than a proportion), which I think would be unfair since they'd be using my work. I'm already a victim of having been unable to spread the risk in a way that large companies can do.
There is no point in getting a patent if you cannot enforce it. The current situation already favors large patent owners, and my proposal will not make that worse, I believe.
> All this would do is cap the return of small inventors, without affecting the carpet-bombing large companies.
On the contrary. IBM and MS have tens to hundreds of thousands of patents. Keeping them all "Ready to sue" would cost them billions. And .. a small inventor who can't afford $100K in court fees does not have patent protection even if they have a patent.
> If they make a success of it where I failed, good on them. But I'll be owed nothing (rather than a proportion), which I think would be unfair since they'd be using my work. I'm already a victim of having been unable to spread the risk in a way that large companies can do.
So ... if you had paid $0, then a company made money of it, increase the value that year to $1M (pay the $10K tax) and have them license or sue them. You're better off under my proposed system.
So, capping damages at the listed value of the patent basically means that you have a standing offer to sell a perpetual non-exclusive license to any one for any reason. This means that for anything truly valuable (say, medicine), the value would probably have to be assessed in the several billions. Medicine can take tens of years to commercialise, so we've just raised the cost of developing new medicine substantially.
So, rather, it would probably discourage patenting these things (in favour of keeping them deeply confidential) until their value has actually been proven, which goes against the purpose of the patent system in the first place, to encourage the disclosure of inventions in exchange for a monopoly on exploiting it.
> So, capping damages at the listed value of the patent basically means that you have a standing offer to sell a perpetual non-exclusive license to any one for any reason.
Yes. At full value PER ONE YEAR. (Property taxes are per year, and the liability limit I propose is "per infringer per year" (or "per infringement per year" if infringement is defined in a macroscopic enough sense).
Patents and trademarks maybe, but copyright? You have copyright on basically anything you create. Should I pay taxes on everything I put on github? On essays I write? What if I'm a famous artist? If I make some artwork to go in my living room, should I really pay 1% of the assessed value of that every year? If I write a book, is it not enough to pay taxes on the income I get by selling my book? Should I really have to pay taxes on it to keep it out of the public domain?
A house takes up physical space. Intellectual property doesn't.
The reason we have property taxes is because maintaining the environment around the house costs money. There's no roads and sewers and schools for books.
there are a lot of costs involved with enforcing property rights. It's not sewers but it is legal departments, customs offices and law enforcement officers.
Also, a patent takes space by disallowing me to use the same kind of invention (even if I came up with it independently). And a copyright sometimes stops me from being able to use a "cultural common". They most definitely take space. And real estate property taxes are often supplemented by "road maintenance levies". They don't directly support the property's infrastructure when you really look into it.
Patents are a fairly large investment, plus they're a fixed life-span item. Although I'm largely against patents, fiddling with the fees associated with them won't help solve any problems.
Now when it comes to copyright enforcement, 99.99% of the copyrighted material out there is never formally published. It's source code, it's email, it's creative works produced and shared but never curated or packaged. How can you possibly tax all of that?
If it's not published, its protection comes mostly from not being seen (in private setting) or from trade secrets and associated laws.
If only want to use the tax as a way to make sure orphaned works can be shared, and patent trolls become unprofitable. I believe that an IP tax can help both. I think it is essential to force proper valuation of IP, and I think tying it to recovery (upside) and taxes (downside) is likely to give a proper evaluation.
It is not my intention to try to tax your own painting on your living room. I assume, by default, anything not listed, is valued at $0 for that year.
Do you understand that, regardless for copyrights or patents, your IP is not enforceable unless you can afford the court action?
I was going to mention that the enforcement cost is largely borne by the copyright holder, so there's a built-in tax there, but don't forget mechanisms like the DMCA provisions are cheap and can be applied with a heavy hand.
There's a solution to orphaned works: Reduce copyright to something like 25-50 years (plus life of creator?) and allow for one renewal, which requires a filing fee, for another 25-50 years. That's it. Suddenly all these orphaned works are liberated because it's not worth it for people to file.
Taxing based on valuation is absolutely, monstrously ridiculous. Many people write short fiction they publish online. Are you going to suggest they need to get an appraisal on their book, and then pay taxes on it? How many millions of people are going to review this and ensure that everything's tallied up correctly.
Orphaned works are a problem, but taxing them is not a solution.
> Are you going to suggest they need to get an appraisal on their book, and then pay taxes on it?
I keep repeating (and you keep ignoring) that I want no such thing, except when they expect damages for copyright infringement.
Taxing based on valuation is what is effectively done for every kind of property. If IP is property, there is no reason it should be exempt. And if it isn't property, it's about time we stop treating it as such.
It was suggested elsewhere that you would assess the value yourself, so if the only utility of your work is to hang it in your living room, you could claim it has $0 copyright value, and thus pay no tax.
The implication is that if someone decides to copy it, your claim for damages in court is based on that $0. But if your intent is to keep a private copy in your living room without the willingness to share with the public who gave you the privilege of copyright in the first place, perhaps that still remains fair.
That is the whole point. Either you agree that IP is real property and as such it should be taxed, or you don't and and you pay no taxes.
If your property has value, then you should pay property tax. If it has no value, you cannot claim damages if someone 'steals' said property since it wasn't worth anything. You can't have your cake and eat it. If you start taxing imaginary property, this will force IP owners to consider wether their IP has actual value or not and act accordingly.
Of course. But they will still be about a hundred times smaller than they are today.
Today, someone thinks of an idea, patents it and estimates its worth at $100M. Someone else develops the same idea and assigns a value of $20K. That's the error bar TODAY.
Inventor has no incentive for realistic estimate - they will always overestimate (no penalty for that). An infringer has no incentive for a realistic estimate (no additional penalty for that if he loses in court).
An ip tax will decrease the error bars by forcing the patent owner to pay for overestimates.
In practice, a poor creator already has no recourse - enforcement is by court action, and courts are expensive. If you can't borrow 1% of the value against the asset to pay the tax, it's not worth what you think it is. Declare the value $1 for this year, pay 1 cent.
If you break through - then you'll have proof of value, be able to pay the tax, and sue/recover accordingly.
But if they had something worth keeping, they could ideally get financing from someone who'd want to own it. At least, that's what should happen in an efficient market.
A poor person will have to sell his idea or else he wont be able to patent it. What was proposed may solve some problems, but if it deepens that inequality hole I dont think its worth it.
If you own a unused property, in comparison, shows you have significant funds
A poor person already has to sell it. Patents cost a minimum of $5,000, usually not less than $20,000 and often not less than $50,000 all things accounted for. That's just filing - it can take upwards of 5 years to get approved or rejected. And then, it is STILL worth nothing because you have to sue to enforce infringement, at costs north of $100,000 more often than not.
I propose that the value of IP for tax purposes is owner assigned. If you have no money to pay the tax, just declare $1. The catch is, that would make you ineligible to recover much more than that in the case of infringement.
As far as poor people, it changes little to none. But it grounds patent valuation, which are now arbitrary.
There are a few fundamental flaws with your proposal, but namely the inventor of a patent or holder of IP generally does not just randomly assign a value to their IP and win that amount in the instance of infringement. It's sort of the whole point of proving damages, because it would be impossible to calculate future damages for a violation of IP at the time the IP was created.
For example I invent and patent the widget and assign a $1B valuation to the invention. Apple violated my patent, manufactures the widget and sells $100M. Should I sue, my potential damages have nothing to do with the $1B valuation I made up but with the damages I suffered as a result of Apple violating my patent.
Alternatively I write a book and slap $1 valuation, because I assume there is no market for my writing or to avoid the big tax until I make it big. JK Rowling Violated my copyright and slaps her name on my book and sells millions of copies, again my damages have zero relation to the valuation I created for the IP.
Property taxes are a yearly thing. I did not explicitly state that, but my suggestion (which I have made numerous times both on HN and on Reddit) is that every year one can assign a different value, which addresses the majority of your complaint.
The other part, about damages, is a grey area today. It is up to the jury/judge to decide how much value to assign to the infringement, but they start from arbitrary statements - which is why Oracle can claim 9 lines are worth $5B even though they've been giving them away for free for a long time.
Why is there a reason to tax real estate property at 1% of its valuation per year? Same arguments apply, in addition to the one I gave (grounding valuations) which you dismiss without explanation.
> Remember that patents eventually run out, in which case they are 'taxed at 100%'. :)
First of all, so what if they run out? Other kinds of property also depreciate and we still tax them.
Second, copyright has effectively ceased to run out around 1970. So there is every reason to tax IP.
"Why is there a reason to tax real estate property at 1% of its valuation per year? "
Because there is an acute supply problem in Vancouver real estate. Making them pay 1% for empty homes incents people to rent them out.
The same arguments do not apply at all to IP.
"First of all, so what if they run out? Other kinds of property also depreciate and we still tax them."
'Depreciation' and 'expiration of patents' are not the same thing at all.
A 'patent' is the exclusive right to own a piece of IP for a period of time, after which it's public domain. It's basically pointless to add on a 'wealth tax' to a patent - there is already a tax on royalties and that makes sense.
When you buy your property, it does not become 'public domain' after 10 years - it's a completely different economic vehicle.
"Second, copyright has effectively ceased to run out around 1970. So there is every reason to tax IP."
Copyright and patents are totally different things.
Someone who created a unique song, has the right to protect it for quite some time. Moreover - it was 'made famous' by them, i.e. it's a brand that is invested in.
Disney should be able to 'own' Mickey Mouse forever - they created it, and they back it. They spend billions supporting 'Mickey' and there's no reason someone else should be able to rip them off by selling clones. In much the same way fashion brands are protected.
Drugs, algorithms, other kinds of solutions, there is definitely a 'public good' in those things being public after some time, so it's fair that IP protections run out.
In New York you pay 1% property tax/year (effectively), and it is quite universal. I think vancouver's 1% on empty is an addition to any property taxes. I was referring to the prevalent 1% tax on property which is applied to cars, places with unlimited apartments etc.
Disney should be able to own Mickey trademarks for as long as they maintain them - but they shouldn't be able to tell me not to copy or remix Steamboat Willy. They got 50 years of monopoly on it they were promised when they released it. It should be public domain now.
There are property taxes everywhere, not just in Vancouver. This is what I was referring to.
And actually, there IS a crisis of intellectual property. It is not a question of affordability, but rather of frivolousness, overreach and submarining. A tax is likely to solve some aspects of that.
The tax solves nothing, just as Vancouver's tax won't actually address the problem. It'll just generate more tax revenue.
Intellectual property is such a vast, ethereal concept that even pinning it down is damned near impossible.
That picture your kid drew that's on your fridge, do you pay tax on that? What if you put it on Instagram? What if your picture goes viral? What if it's co-opted by Wal-Mart and put on a bag, so you file a cease and desist? What if you make your own merchandise? There's such a slippery scale here that to tax everything, unilaterally, is absurd, and pinning down when something is impractical.
Are you purposely ignoring the discussion? There was no one, especially not me, talking about taxing the picture your kid drew. You're arguing a strawman.
Shameless plug, for my just-released "fake home occupancy as a service", where my family and I charge you only 0.5% of the property value to satisfy the government's occupancy requirements. Contact info in my profile.
Letting someone have possession of property (yes tenants have possession) like this can be a dangerous thing to do in some jurisdictions - they can quickly gain rights to live there and you lose the rights to evict (or increase the rent - which could be a problem if they are charging you to live there!). Far more likely is that people start renting the empty property out+ - which will increase the supply in the rental market and help the housing costs... I.e. the intended effect.
EDITED
+ (with proper tenancy agreements which usually provide some balance of power between owner and tenant)
But that's the main difference to other countries. In Germany, it's the only way to get a tenant out (if they pay the rent). It's basically impossible to get a tenant out if you can't find a family member who wants to move in. It's a contract that can only be cancelled by one party (the tenant). Wouldn't call that no rights for the tenant. I can't think of other contracts that cannot ever be cancelled ordinarily by one party.
In most other countries the landlord has the right to cancel the agreement with certain notice.
In the UK the key is to make sure that the tenant is Assured Shorthold rather than Assured. Assured tenants can't be evicted (unless they don't pay rent or other similar reasons) and their rent can't be put up unless they agree to the increase. Assured shorthold puts the balance of power in favour of the landlord+. The default (since the late 1990's) is Assured Shorthold tenancy - but if someone tried to play silly legal games as joked about by the GP their tenant might accidentally become Assured.
I am not a solicitor. I am not your solicitor. If you need legal advice on any of these issues stop reading and find a solicitor.
+ (not as much as most people assume because most tenants don't know or enforce their rights - wrongly thinking that it would be difficult when in reality the landlord will usually fold after a couple of letters long before things go to court.)
Scotland and England have differing private landlord tenancy laws so it's worthwhile checking the fine details in this respect. Scotland has a similar agreement to the Assured Shorthold and Assured tenancy:
1. Short Assured Tenancy where [0]:
a) the tenant is entitled to remain in the property for at least six months provided they abide by the conditions of their lease. A landlord can only evict if there are reasonable grounds [1]
b) after the six months is up the landlord can then give notice to quit and the tenant has to leave [2]
In both cases these provide reasonable and fair conditions for both landlord and tenant.
In many cases now, most properties are let as Short Assured Tenancies. Anecdotally, my past three tenancy agreements have been Short Assured Tenancy agreements.
In Scotland:
Tenant deposits are no longer permitted to be held by landlords or agencies and should be deposited into one of three tenancy deposit schemes within 30 days of the beginning of the tenancy [6].
Landlords and agencies are no longer permitted to charge for additional "costs" such as credit checks and "administration fees" on top of a tenants deposit and first month's rent. In England this obnoxious behaviour is still a plague on tenants seeking to rent [7].
Most landlords are now required to register with the Landlord registration scheme run by the Scottish government [8]
Sure but you do get two months notice to quit which isn't too terrible. Most times you'll get a feel from the landlord whether they're serious about long term letting or whether this is a stopgap until they can sell their house for a better price. Most decent landlords are upfront about this in my experience.
If you want additional security you can always contract in for a longer minimum lease, for example twelve months. Alternatively hunt around for a property letting company who's long term business is just letting.
At the end of the day, nothing is permanent if the landlord stops paying their mortgage or other loan secured on the property you're renting.
There is also the social housing sector - Council Housing, Housing Association and Housing Co-op's. These can provide much longer term rentals, however they can be a bit harder to obtain due to lower monthly rents which can cause waiting lists. There tends to be less flexibility on property size and type, i.e. you'll get to rent what is deemed legally and healthwise necessary for your circumstances; for example if you're single don't expect to get a three bedroom home, those will be allocated to families.
> At the end of the day, nothing is permanent if the landlord stops paying their mortgage or other loan secured on the property you're renting.
In Germany, selling the house makes no nevermind to the tenants. Considering how many people rent here, it just makes sense to encourage long-term tenancies, they lead to better communities.
I would very much like that yet, like Germany's rental laws. That way, you don't develop a two tier class system of tenants with no security or attachment to their local community, and owners.
I wouldn't trust reneherse's service. My competing service, "actual home occupancy as a service", is bulletproof; we guarantee that we will occupy your house full time.
Competition is always welcome! We do however build solid relationships with the neighbors and enroll the kids in local schools to provide complete residency simulation. All for one low fee.
So you have someone pick up mail and make it look lived-in, but why would someone not just rent it out then?
Why pay for your service (assuming it's not tongue-in-cheek) when you can pay for a property manager (lets be generous and say 10%) and also get rental income to offset the investment?
Ultimately, that's why the city is doing this; Whether the property is rented or owner-occupied, there will be a consumer who is adding to the economy.
UK/London really has a problem with non-occupance - they should definitely follow suit.
Most investor owners really don't care for the yield. They want to hold for capital appreciation. And rentals are annoying, dealing with tennants. Stuff breaks.
Would you care if you purchased a $1m home cash to flip it in a few years for $1.4m?
You don't get too greedy. Usually there's a reason why bubbles form (e.g. a housing shortage in SF and London, gentrification of a certain area in a certain city etc) and often there are secondary factors as well.
Having both a clear exit price and timeframe in mind when buying is probably a good way to do it. Even if a property bubble starts to collapse, there is usually still sufficient time to get out.
Property is one of those things where people are irrational about purchasing, which is good if you want to make money. Some people don't even care about the price -- they want to buy in 201X, and buy a property they shall.
If you believe property to be (significantly) overvalued, then you should rent instead of buy. If you're at the end of a "boom", then it's not unreasonable to wait it out and see how prices progress. Low interest rates also tend to push residential prices higher, because people can pay off more principal monthly vs less if rates are higher. When buying property it's almost always better to buy when rates are high and refinance later than to buy when rates are low.
Buying high and selling low is also definitely a thing. That doesn't necessarily mean you can't find a good deal somewhere (you can), but it'll be much harder.
Tldr: Unlike what most people believe, property is not a "sure thing" investment.
This obviously depends on the investor, but yes, in many cases, knowing that your money will at least keep its value (or increase with inflation) is sufficient.
> Ultimately, that's why the city is doing this; Whether the property is rented or owner-occupied, there will be a consumer who is adding to the economy.
No, the city is doing this to increase housing supply. We do in fact have a housing crisis in Vancouver, this isn't just political rhetoric. When I was looking for an apartment about a year and a half ago, it was impossible to find one on the open market. Every open house had dozens of people showing up. I was eventually able to get a place through a personal connection; 10000 more units on the market would have made the process a whole lot easier.
I hear that some residents of Monaco who love the low taxes there are maybe not there as many days as they should be out of a given year. I hear they use timers on the lights and so forth to make their home look continuously occupied.
This more or less already exists in the form of anti-squat rental. They rent out empty houses/buildings for very low rent. The only downsides is zero renter protection, you can be kicked out at any time.
This can be a very good option if you need temporary housing. My brother did this for half a year to save on rent while his new house was being built.
Yet another HN-save-money-by-breaking-laws scheme.
The question is whether the house is a principal residence or an secondary residence/investment.
I mean, I guess you could base your business on helping people break laws, like selling dummys for getting commuters the passenger lane, but your customers are no less guilty than they already were.
A fair approach is the Swiss one. Every property is taxed as if it is rented out at market rates, no matter whether it is rented, owner-occupied, or vacant. On the other hand there are (almost) no taxes on the value of the property. This removes most distortions in the rental market.
Switzerland has much more of a sense of unity than the US, which is perpetually at war with itself.
It's also surprisingly egalitarian, or at least against conspicuous inequality; you can accumulate a fortune in a Swiss bank, but you can't build a mansion that annoys your neighbors.
The original vision for the US had relatively powerful small states and a relatively less powerful federal government. There are a lot of reasons to think this is still a pretty good idea.
This would be great tax policy. Unfortunately the 'conventional wisdom' among the leadership caste in my country (Australia) is that this would be political suicide. Pretty much every Prime Minister for the last 15 years has repeated the same mantra like it's some sort of compulsive nervous twitch: 'we would never place a tax on the family home'. Bunch of jelly-backs.
One nit to pick: even with imputed rent, without a land rent tax the property market would continue to distort incentives and mis-allocate capital. Meaning we will continue to see 'investors' chasing capital gains instead of yields (the literal definition of 'speculating'), funded almost exclusively with bank debt. Unless our political leaders grow a spine (and, in many cases, a brain), we'll continue to lurch from one financial crisis to the next as a consequence...
The next one is shaping up to be epic. Like, "it's time for WWIII" epic...
For me, it doesn't seem logical to tax imputed rent but not any other capital good that saves you money from renting the equivalent good. If you own a car, why not tax the imputed income (net of purchase costs) from not having to rent a car?
If you own sports equipment, should you be taxed on the imputed income you could have gotten from renting it out?
That's not fair if rental availability is a positive externality, though Switzerland may not have the absentee investor problem that makes the difference matter there.
They do fairly comprehensive land value + structure value assessments for property tax in many US states. Basically they collect data on every property like square footage of building, size of plot, age of structure, etc and do a regression based on comparables in the area where the real price is known. It's not perfect for every property, but is a fairly straightforward analysis. Individuals can challenge the model's output if it's too far off. The same method could easily be adjusted for rental rates.
In DC vacant homes are taxed at 5% assessed value and "blighted" homes at 10%. It's the city's main weapon against vacant properties. People complain that enforcement is uneven or that sneaky developers find loopholes, but it seems like a good program overall.
I wonder how they picked the magic number of $10,000. (Edit: as mentioned below, the figure is actually 1% assessment.)
Vancouver real estate prices jumped 20% in 2015 -- a $200k gain on a $1M house. If pricing trends continue along that trajectory then Vancouver real estate still looks like a great investment even if you just eat the entire tax.
Still, I'm impressed by how quickly Vancouver is moving forward with these measures (going into effect Jan 1st!). They're sorely needed, and it's great that they don't have to sit in limbo for years before being enacted.
Thanks, I missed that. It's strangely written because it re-iterates the $10,000 figure in the first paragraph of the article, but then notes 1% in the second.
Volume has tanked. Prices are unclear. Everybody's waiting to see what happened.
My intuition, as well as pretty much everybody else's, is that prices will fall, when things start moving again. But it's far from certain yet, because that hasn't happened yet.
Price seems pretty clear to have tanked. Just look at the actual statistics package from the Vancouver real estate board[0]. The last page of that pdf shows a massive drop of about $300000 for the average price of a SFH.
I have no idea how to read the tables in there, so maybe they cover this, but:
Too much information is lost, in the "average selling price" statistic that graph is using, to be able to use it to definitively claim anything like "an equivalent house is selling for less than it would have before".
For example, that graph could just as well be caused by fewer high-end houses being sold, but the houses that are being sold going for the same amount they would have before.
Again, I think it's very likely bordering on totally inevitable that prices will drop, and that that graph is probably showing that. But it's not enough information by itself to make that claim.
While I think it is a step in the good direction, I am skeptical as to how successful this measure will be.
The problem at stake is that Chinese buyers are not buying property in Vancouver for speculative investment purposes only.
They see these properties as safe stores of value in order to diversify their risk profile in case the situation in Mainland China or their own financial situation goes down the gutter,
and / or to support their future potential effort to gain Canadian residency / citizenship for themselves or their kids,
and / or to vacation outside of mainland china once in a while.
Sure, this tax will hurt some of them, but the number of Mainland Chinese people with the means to write off such an amount as the cost of security is massive.
Source: lived in Mainland China for a few years, worked for this specific demographic.
If they're not just in it for short-term speculation, then they can rent the house out and hire someone to manage it. Make some more profit while contributing to the Vancouver economy and rental market.
This would go against the ideas of being able to go to Vancouver on a whim, and finding things as they were left,
or being able to jump on a plane in case of Mainland China Meltdown and directly move into their house/flat.
Those apartments are not meant to be rented, they are safe places.
Contributing to the Vancouver economy and rental market?
This demographic could not care less, this does not factor in their decisions.
(I have only empirical evidence of this mindset, but I would be willing to expand on what I base my reasoning on.)
They are going to try and tie in AirBnB regulation with this as well (sort of). Since places wouldn't be considered occupied when you have 20 of them renting them out as full time AirBNBs.
To get around it you will need a business license for each unit, which is also taxed. Business license #'s must be displayed on the temporary rentals website under the listing. Business licenses can only be obtained with permission from your strata. They think they can free up another 2000+ rentals this way as well.
AirBNB is running an insane ad campaign here that mostly pisses off every Vancouverite I know in my echo chamber of EVERYONE UNDER 35.
I work at one of the big Universities here. It is crazy biking in the summer through affluent ghost neighborhoods. Lots of the older big houses that were tore down were rentals to like 6-8 students at a time, or had basement suites. Now they are empty boxy white McMansions.
Many people complaining that "1% is nothing to Chinese millionaires" are missing the point. These people didn't get rich by throwing their money away. Yes, they can easily afford an extra $10k or $20k or even more a year, but this combined with the recent 15% tax makes Vancouver a lot less attractive. After that last tax, foreign investors are already getting spooked and starting to flood Toronto's housing market instead - this too will have an effect. It's a great start, and I hope to see it in Toronto and other cities as well.
This is a good observation, and supported by even a casual glance at international macro over the past 35 years. "Hot money" flows very quickly in countries with deregulated captial markets.
Wouldn't be sad if that was implemented in NZ - same problems here of ridiculous price rises = land banking. Seeing empty (million dollar +) houses around you is surreal and totally against community spirit we're so widely known for. Good move Vancouver !
I grew up in Vancouver and I think this law is necessary (maybe). The big question here is...how do they tell if the house is unoccupied or if the owner is on an extended vacation? Can it really be enforced?
Well with a gov't power monopoly, they can do things like check power and water utility usage. You can also look at tax return address records for the BC income tax part. Driver license / BCID / immigration records are another. You can also do a 'prove you have a resident in X months or be assessed fines' like many HOAs and mortgage agreements do for various things.
Policies over large numbers aren't about %100 enforcement, a general behavior modification is considered a success usually.
They do this in Monaco as well. I read in an article a while back that some nonresidents have automated timers to turn on/off the lights, turn on the heating, water, etc.
Tax evasion, actually. But yes. Was just implying that checking (or data mining) might not always lead to positives when you're dealing with cunning individuals.
I was going to say this. These rules will drive investment in home automation. I'm also willing to bet that a large portion of the revenue generated from this scheme will be spent on the manpower necessary to enforce it.
That being said I'm happy to be proven wrong, but can we expect any sort of data to support a hypothesis? I'm not sure as I'm unfamiliar with Canada's policies on access to public data.
Home automation won't help in this case, though I suspect there will be some level of falsified leases. It seems that if it's a privately owned residence, it falls into one of two categories: Principal residence or not principal residence. If it's a principal residence, there are likely other documents that would also utilize that address (voter registration, healthcare, drivers license, taxes, insurance). If it's not a principal residence, is it leased out for at least 6 months a year on leases of at least 30 days? If yes you're fine, if no you're fined.
There may be some question with privacy (e.g. proof of leases/lessee), corporate-owned residences, etc. but I'm sure they've factored that into things. The big deterrent to lying about it is probably the magnitude of the penalty for doing that - it's kind of like Martha Stewart: she didn't do time for insider trading, she did time for lying to the FBI (about insider trading).
The proposed fines for trying to defraud the system are much higher than paying the 1%/year tax. It's like parking: pay $5 to park for an hour, or take a 1 in 5 risk of a $100 fine. Most people pay for parking.
EDIT: and the goal isn't to make revenue, it's to free up rental stock. If all the money collected goes towards enforcing the system and 20,000 vacant units end up in the rental market, then the policy is a total success.
> I'm also willing to bet that a large portion of the revenue generated from this scheme will be spent on the manpower necessary to enforce it.
Yep. You can see that with wealth taxes. Most countries that have wealth taxes (e.g. France) make close to nothing from them, because it's inefficient to verify and collect all the data to properly levy the tax, and you need a lot of civil servants for that.
Agreed, and it's likely more about sending signals to the investor class. And make noises like they're doing something about not being able to afford to live here. The government doesn't want prices to crash, because then homeowners would be screaming. But they do want to let the air out of the balloon a bit.
It's not a criminal trial. The burden of proof is low and the onus is on the homeowner, not the city. So if the city decides your property is vacant, you can go ahead and prove you were there, or you pay up.
For example, in the US. Housing associations have staff that run around in cars taking photos of literally everything. Grass too long - Fine. Bins out outside of trash date - Fine.
This happens daily. I know because I used to live at an HOA.
My point being, hire individuals with cars to keep track of houses. Have photos of non-residency and then impose heavy fine to recoup costs.
Easier surely to use existing data such as number of letters delivered, electric bill, water bill, voter turnout, etc.. Amalgamate that and send a person to the property. Requiring property maintenance companies to register the properties they work on, eg "for health and safety reporting", might be useful too.
If you are thinking about having someone driving around to photograph everything frequently, yes. But a couple of cars outfitted like the Google Street View cars, each given a section of the city to drive every other month or so is very feasible. You could also put cameras on any public transit vehicles to keep photos coming in from vehicles that are already being operated by city funds.
It wouldn't be a daily thing. Maybe once every other year at most. The cost would be minimal to the government to hire a few contractors for a one-day thing.
Why not? If you are looking at least 10k/house in taxes, it's very efficient to have a full time staff to check out the recently flipped (well...) MLG houses.
They ask politely, and you either lie or tell the truth.
This is a big difference between the west and a country like the PRC where strong rule of law isn't a given. In the west, they will simply ask, with the caveat that perjury is a serious crime if you are found out. In China, they will figure out another way since trust isn't assumed and lying is considered a much weaker offense. Completely different systems.
(The PRC is trying to go in a trust direction with income self reporting, but it doesn't affect the taxes you pay, oddly enough.)
When you're throwing two million dollars at a house, sight-unseen, that you then let stand empty for years, how difficult would it be to hire a housekeeper to come around the place every week, and make it look lived-in?
If you're an absentee building owner, you don't (can't, really) worry about any of those things yourself. Instead, you lease your building to a property management agency, who handles all of that for you.
I mean, as compared to the cost of making it look lived-in, or just stopping by so as to technically "be occupying it". Rents in Vancouver are at a very low ratio to the cash value of property, as bad as 70:1 (value:annual rent.) In the normal world, it's more usually 20:1. This means that the costs and risks of renting a property in Vancouver are often considered not worth it.
So they will find someone to show up every week or two and turn on lights on, add some furniture, moving things around etc. I feel like the city of Vancouver is going to always lose the free market game of cat and mouse.
No, I'm pretty sure you have to either declare it as a principal residence or you have to rent it out for at least 6 months a year with leases of at least 30 days. Enforcement isn't based on whether the lights are on or not.
And I'd assume that if you're declaring it as your principal residence but you're registered elsewhere for little things like voting it may trigger investigation that could get Very Expensive if you are determined to be lying.
"No, I'm pretty sure you have to either declare it as a principal residence or you have to rent it out for at least 6 months a year with leases of at least 30 days. "
I don't understand - what if it's neither ?
What if you are a plain old canadian who has a home in Vancouver and (for instance) a home in Golden ?
It's not at all unreasonable to have a home that:
a) is not your primary residence
b) you live in for 2-3 months of the year
c) you have no intention of renting out because you go there regularly or sporadically
Pay the tax. Owning a home in a crowded city, not living in it the vast majority of the time, and refusing to rent it out to people who desperately want to live there imposes a negative externality on the city, which you need to pay for.
"Owning a home in a crowded city, not living in it the vast majority of the time, and refusing to rent it out to people who desperately want to live there imposes a negative externality on the city"
It is proposed that doing so imposes a negative externality.
That proposal is not without counterpoints, however.
Specifically: that the owners of those homes not only pay their full property taxes already, but they impose fewer costs on the infrastructure of the city while not being present. They don't drive on the roads or walk on the trails or use the public restrooms, etc.
Look, I proposed a hypothetical situation[1] that has nothing at all to do with Chinese speculators buying up housing assets in a safe haven market. I proposed an unintended consequence on an otherwise innocent, well meaning actor. It's very interesting to note that the response is, basically, "too bad for them".
My parents are in this very position, having bought a condo in Vancouver to live in part time. Their principle residence is in a small town in the BC interior. They're pretty upset about the tax, and it's not hard to see why.
They could declare the condo their principle residence, but then they would encounter complications regarding their vehicles, which are typically not used in the city. (They prefer transit, and trucks don't fit into condo parking spots well)
They aren't participating in property speculation and have owned the condo for around 5 years now.
So, I think they are a good example of innocent, well meaning actors who are being unfairly taxed by a law that is well-intentioned but not quite properly formulated.
I'm suspicious of statement [1] given that you know where Golden is and why people would want to live there. ;)
I think you're right there is probably isn't a loonie cost to the city that can be recouped with this vacancy tax. But I also think your counter-point is moot. Vancouver isn't trying to keep revenues up, it's trying to encourage a certain behaviour, namely more housing and rentals on the market.
While I do think this vacancy tax is a good idea that could help out affordability in Vancouver, I agree with you that it's far from the best that Vancouver could do and is really only addressing the symptoms rather than the cause.
No, sell the house quickly before prices go down too much. Rent a house for the 3 months you stay there. It's going to be cheaper than the tax and you cash in some money.
Or AB&B the house all the time you're not there. Would that count as renting?
Are you sure you've paid enough taxes on your purchase? May be you need to pay twice, or triple because a) you don't really need this thing b) there are people that need it more than you c) you've bought it online d) you're privileged white male in IT.
Why? With two parents one child inherits both of their family houses. This is especially true in low natality countries. The heir will not necessarily be rich and with a high salary job.
So sell or rent out one of the houses. Having a large non-income generating asset that you don't make full use of is a luxury the non-rich can't afford.
Sometimes at least one of the houses is in some rural area nobody wants to move to so there is basically no market for them. Common in the mountains.
Real case: the parents family houses are in the mountains, parents moved to city, children (adult now) live in another city. They'll eventually inherit the 3 houses and they won't use them. The city house can be sold or rented. The other ones, not a chance. If taxes on them would be too high (they aren't now) they could rather destroy those two houses. I don't think this is what we want.
There is always the way out of renouncing the heredity. Then you still get an empty house that nobody wants and nobody maintains.
There's always going to be workarounds. The question is whether the workarounds are worth the cost. I'm sure some people will do that. Others will consider it better to have a friend or family move in (which is desirable).
This is a solved problem. For example, reside in NY state for more than half the year and they'll figure it out and send you a bill for owed income taxes. It will then be your burden to prove that you were not in the state, not theirs to prove you were.
Still makes them spend money which will get spread into the local economy. Might not be as much as the 10k, but it will still be something. Hopefully enough to offset any potential gains investors think they'll make by holding onto the property.
I expect to see a thriving "rental" market. How is a poor home owner expected to know that the person they rented their house to wasn't actually living there?
Can you clarify this? Are you saying that homeowners will create fake "rental" contracts with straw man renters, and then when fined, provide the rental contract as evidence that they tried to comply? My guess is that the city will simply take the position that the onus is on the homeowner to ensure the renter is actually there, which is the correct approach if the concern is that homeowners would create straw man renters.
Yes, I'm talking about straw man renters. Considering that the non-compliance penalty would likely end up being several times the value of the property (1% per day, and you can bet that it will take more than a few months before self-declarations are challenged), I suspect that this bylaw would get thrown out or heavily rewritten by the courts.
That's the point of the "rental" market. It's still real. But maybe I'm happy to rent 2-3 houses for a very low price? I have business in different parts of the city over a week, so that seems like a convenient arrangement. (wink, wink)
That should be fine. They have to declare the rental income as income, and if it's a pure rental property, pay GST as well. Tax authorities already audit for unusually low rental rates vs market. The rent on a 1m house is likely in the 50k+ range, and the taxes on that will exceed the 10k no-occupancy fee. Problem solved.
Ya if you stand at Georgia and Denman on a clear evening, say 9 PM, 3/4 of the West End will have lights on, and 1/4 of Coal Harbour will. It's a ghost town.
I imagine an investor keeping his or her $30M mansion just as a hedge against RMB depreciation and keeping it empty will think nothing of the $10,000 fine.
Why could you not make the charge for non-payment be something like 50% of the assessed value or repossession of the property. Why do you have to leave an easy route out.
A fair question, but it assumes that they aren't already doing this. There is already a great deal of new supply creation and there has been for decades. Vancouver has nimby tendencies just like any other city, but it's not SF. There is lots of new condo construction.
The problem with a supply only solution is that supply takes time to create, and there are limits to the rate of supply creation (ie. how many trades are available). Even if city government really made a push to increase the pace of supply, they only be able to move the needle slightly, and it'll take years for that supply to appear. If the speculative demand is overwhelming it might not have a noticeable affect. I would say this has been the case for the last several years where Vancouver housing starts climbed to the highest it has ever been and yet prices climbed ever higher.
If you want to solve the problem quickly, you need to not only increase supply, but also have a look at curbing speculative demand.
I understand some cities have exuberant property values, for various reasons. Is it that great of a city? I've never been, but what makes Vancouver special to see such high value increases?
Canada's housing bubble hasn't yet popped, and prices are high in many places.
Vancouver itself is attractive to investors because it has a very mild climate, is close to Seattle and the rest of the U.S. West Coast is a short flight, and it's much closer to Asia than the rest of Canada is.
It's also a very beautiful place with lots of amenities for those living there rather than overseas investors or occasional business travelers.
I grew up there and have since moved away but what I loved about it was just how calm, peaceful, and beautiful it was. I think I wouldn't want my kids to grow up anywhere else (if I can jump back in time to Vancouver in the mid 90s).
Vancouver also welcomed multiculturalism which helped a lot.
The city has since moved on (like all cities with time and technology) but I think many people still want that feeling of what it was like in the 90s. It was just a extremely nice place to start a family.
I want to clarify that the $10,000 is not a fixed value. It is simply the 1% assessed value of the house. However, most houses in Vancouver are greater than 1 million.
Interestingly, something similar is already enforced for Alaskan oil tax credits: you have to live in Alaska at least six months of the year to receive them. One could probably look to their enforcement system.
I'm really surprised that this was implemented into law. I remember suggesting it on twitter without hearing anyone say it before a couple of years ago. But I'm guessing what happened is other places might have similar laws.
They really need to crack down on black money flooding into the Canadian economy. This seems like a quick way to assuage the criticism without addressing the core issue.
In the rural US, it's reasonably common to bulldoze unused agricultural buildings like silos and barns (and old houses on the property) to reduce the property value and thus property taxes.
It's also somewhat common to fine owners of unused urban houses because they attract "transients" and cause other assorted problems.
Another thing about Vancouver is the staggering amount of brand new real estate being unsold for years.
Every developer thinks that one day there will be a naive Chindonesian/Eastern European nouveau riche that will buy it no matter the cost. And yes, such people were coming in great numbers
Wow. Should be interesting to see what happens in the next recession. My guess is that property values will get hammered down, and the city will lose much more than 1%. Not to mention the money people will lose selling property in exacerbated conditions.
I'd be worried about unintended side effects here. A lot of places might get rented out to the poor to avoid a fine, but the rental arrangements might be shorter term and force the poor to move more frequently.
Why would that be the case? These places are currently not being rented at all. Why would people favour short-term arrangements? I own 2 apartments and rent one of them (mostly to students). I look for tenants who can stay for longer periods so I don't have to spend a lot of my time finding new people.
"I'll lower the rent until I can find someone to pay more" is the very definition of free market; a free market in which rent rates stabilize downwards, as socially desirable.
Attempting to rent the house for a shorter time is simply going to restrict the target market to transient residents who plan to move away shortly (e.g. students), which is rather orthogonal to being rich or poor.
Owners need to seek a balance between not renting at all, or renting very cheaply, and accepting longer-term contracts; it's never a unilateral decision.
Generally speaking, a homeowner pays the full property taxes if the home is not the primary residence. (Some states offer to reduce the property taxes if the home is the primary residence; this is known as a homestead exemption.)
On top of the property taxes, the homeowner also pays insurance (home + hazard + flood) and the mortgage (principal + interest). If the home is part of an HOA, monthly fees to the HOA are also due. At all times the homeowner is responsible for the full upkeep of house. For example, tree trimming, fence repair, lawn maintenance, etc.
If troublemakers identify a house that remains empty most of the year, be prepared for them to move in secretly and indulge in nefarious activities (like setting up a marijuana grow operation in a state where that is illegal).
All in all, an empty property is a headache to maintain. A professional property manager helps, at which point you may as well rent the damn thing out.
That's definitely one of the more anarchistic approaches, especially if you combine it with adverse possession. The absentee owners will either have to worry about the squatters "stealing" their million-dollar houses or will have to hire locals as security guards. Either way there's some more money being recycled back into the local economy.
This is great (although it's not enough) and more cities should do it. It's an effective use of public policy and a powerful statement and I'm thrilled to see it.
This is the good kind of nationalism, the kind where people band together to defeat the global elite and the upper class/0.1% instead of letting them divide-and-conquer us (Red States vs. Blue, white vs. black, immigrant vs. native, Boomers vs. Millennials).
I wish that our recent display of nationalism in the US had not been one of the disgusting kind.
> This is great (although it's not enough) and more cities should do it.
Something similar is common in the US, and is typically framed as a homestead exemption. Basically, set a high property tax rate and if people prove their house is owner occupied give them a rather large discount. My property taxes are ~$1500/year because I live in my house. People who rent out or do not live there pay $6000-$8000/year in my neighborhood.
There are two types of residents - owners and renters. The renter is just renting from a property owner, who will just pass on the tax. In this example, assume the mortgage payment is $1k / month.
1. If you own the home, you will pay $13,500 ($12k mortgage + $1500 taxes) per year.
2. If you own the home, and want to rent it to a tenant, you must charge the tenant at least $18,000 ($12k mortgage + $6k taxes) to break even.
Renters are in generally less wealthy than owners. Why have this extremely regressive tax? Why should the poor renter subsidize the rich homeowner?
The point is to incentivize the populace to take on stable obligations, the proverbial two kids and a mortgage.
A stable, indebted population is a governable and docile population. Somewhere there's a great quote about how "any man with a cottage of his own and a yard will never be a revolutionary, he's too busy" but I can't find it right now.
A man always has two reasons for doing anything: a good reason and the real reason.
That's a good reason to have the mortgage interest deduction. The real reason is that home owners vote, and promising them money is a good way to get them to vote for you.
I believe that the requirement for > 30 day leases is also an attempt to block the proliferation of AirBnB rentals, which the city doesn't look favourably upon.
ie) You can't claim your house has been occupied for 6 months because you've had 30 one-week AirBnB listings in there over a year.
You're completely ignoring the demand side. This tax, at least in my area, is a tax on the wealthy land owners. They could drop the tax to 0 tomorrow and rents will still go up.
Because if you own the home and want to rent it out, that implies you own another home that you are paying those taxes on, or are otherwise renting yourself.
"... property owner, who will just pass on the tax"
Rental market is more of a market than say, buying a house. It is very much determine by salaries people make in the area. Unlike buying a property, which also has the element of credit availability and willingness of people to borrow, you cannot borrow to pay rent. The point being, owner can TRY to price tax into the rent, but if this prices property too high it will not rent out.
All of the landlords must pay the tax. This means a constant displacement of the supply curve from the untaxed state. The demand curve is unchanged. The new equilibrium depends on elasticity, but I'd be surprised if it doesn't end up with most of the cost passed on to the renter.
You are thinking logically. It's not applied in Vancouver. I rent for just over 2k. If my place was put up for sale, it would be for just over 1 million. Factor in $300 a month strata fees, another $200 for insurance, if they owner has a typical long term mortgage they are renting for a loss. However they bought it 10 years ago, they have done well with the crazy appreciation.
The part about higher taxes for people renting property out seems to amount to yet another subsidy for home ownership over renting—which is not obviously a good thing. A tax just on properties that are unused (ie not owner-occupied or rented) makes more sense to me.
How about "rented by a local landlord with a small number of properties" to get a similar discount? This would also seem to attack the problems of limited property supply allowing the bourgeoisie to profit without work and of a lot of local money moving away because of property ownership by distant entities. Reasonable?
Or allow deductions from this tax for landlords paying for maintenance or improvements, and an exemption if you can show that all maintenance requests were acted on within 30 days and resolved within 90 days (for those that keep their rentals in good shape). I think that might aim it more squarely at slumlords.
Is there no requirement for timely repairs in the USA (or at least in some states)?
Here in New Zealand, I can hand my landlord a 14 day notice to remedy, and if they don't fix the problem within 14 days (or at least start remedying, if it's a larger problem), then I can take them to the Tenancy Tribunal, where they can be ordered to, and sometimes even get fined punitive damages.
The same works the other way. If I leave the house in an unsatisfactory condition (e.g. not cleaning the property, not keeping the garden under control), then I can be given notice to remedy and taken to the tribunal if I don't fix it.
It's a win-win system, both parties can take action against the other for problems. The tribunal is not meant to be biased towards the landlord or the tenant (although in practice they tend to side with the tenant a bit more), and is a neutral third party. They usually try mediation first, before actually ordering people to do anything.
A step further here in Australia, or at least in South Australia where I used to live - not sure about the other states...
If an essential service breaks (toilet, hot water system, plumbing, gas leak) and the landlord doesn't have it remedied in reasonable time frame, you can pay for the remedy and issue an invoice to the landlord (in practice you can withhold the same amount from rent).
Worded thusly: organise to have urgent problems fixed and give the landlord an invoice from an authorised repairer. A licensed professional must do the repairs and provide a report that states the cause of the problem and the work carried out.
A landlord may be breaking the conditions of an agreement if they learn of a problem and don't repair it within a reasonable time.[1]
I firmly believe this is how it should be, and that any reasonable person would agree this is fare.
No there is strong requirements for timely repairs in the US. They are all just local laws so they are varied by location. Landlord tenant laws are usually in favor of the tenant. In some places you can withhold rent until repairs are made. Enforcement can be an issue though and tenants may not know their rights. Not sure.of any state has a Tenancy Tribunal equivalent.
Anyway I am not aware of anywhere in the US where being a slumlord is actually legal or even being a semi-slumlord.
30 days for a maintenance request is absurd, well depending on the request, I guess.
No, it takes money from the owners of the property. Rents are market based more than anything else. I don't care if the tax is 0 or 100k, the owner can only rent for what he can find people to pay. In my area (a vacation spot and college town), they could drop the property taxes to $0 tomorrow and rents will still go up. A high tax does not even really set a price floor since the owner would rather get something than nothing.
>No, it takes money from the owners of the property. Rents are market based more than anything else. I don't care if the tax is 0 or 100k, the owner can only rent for what he can find people to pay.
The subtlety you're missing here is the reduction in supply of rental units.
British Columbia punishes renters, as it taxes 'passive income' (i.e. rent), which discourages owners from renting out existing properties or building-to-rent.
> * British Columbia punishes renters, as it taxes 'passive income' (i.e. rent), which discourages owners from renting out existing properties or building-to-rent.*
There are so many incorrect statements in this sentence, I don't even know where to begin.
Taxing vacant properties does not punish renters. It "punishes" people who buy properties for speculation, or (as the AirBNB trend is going) attempt to control a piece of limited supply.
The purpose of taxing passive income (lazy landlords, rent collecting) more aggressively is because it is not actually work. It is technically wealth extraction. As a renter, 100 percent of your rent is a "tax" (it's not going to offset any of your long-term assets); and when you pay 70-90 percent of your income in rent as a tax (as many minimum wage workers do), it is massively difficult, if not impossible, to save enough to acquire any assets that help you build wealth. On the landlords' side, it's even easier to use all that extracted wealth (from poor people) to acquire assets that build wealth.
No, collecting rent is not work or a job. Even if you have a whole fleet of illegal immigrants scrubbing the toilets, throwing down cheap carpet, and painting the walls of your units every few years. The moment you enter the territory of needing to pay somebody else to manage your asset (even if it is "just" scrubbing the toilets after your AirBNB tenants or renters leave), you're entering passive income territory.
I rent, by choice. My landlord takes the risk of owning the property, and I pay a premium for that. Something breaks, I make a call and it's his responsibility. Just because some landlords are bad people doesn't mean landlords are bad people in general. I appreciate the benefits I get from renting (and, to be fair, from having a good landlord).
By your logic, owning a small company with some employees is passive income and "bad", because you have people doing work for you. Some small company owners are bad people but that doesn't mean all of them are (and, in fact, we tend to consider them fondly from what I've seen).
My landlord takes the risk of owning the property, and I pay a premium for that.
You pay a premium so your landlord can take risk to get the most lucrative profits? Why, you are a benevolent renter, aren't you?
By your logic, owning a small company with some employees is passive income and "bad",
That is not at all what I said; your reading comprehension needs work. Owning a company with employees[1] means you are responsible for allocating the income into business profits among your employees. Most people who scrub toilets and wash sheets for AirBNB rentals are NOT employees or the owners of the properties. Along the same lines: the right way to treat employees involves giving them part ownership of the company they are working for, and thus they are rightfully entitled to some of the income from business-generating assets. Landlords do not do this. They farm out the work required to manage or maintain the assets, and demand the lion's share of the profit.
The definition of employee had nothing to do with my point. Rather, I was saying that just because someone is in a purely "owner and manager" position doesn't make them a bad person for wanting some (or all) of the profits. The profits are what's left after you pay out what's necessary to run the (company, housing, whatever) and, as owner, you get to decide who/what that money goes to. As long as you're paying the people that do the work for you (and it doesn't matter AT ALL if they're employees, contractors, or other) a fair amount, you're doing fine in my book.
> Why, you are a benevolent renter, aren't you?
To some extent yes. I believe my landlord charges me enough to cover what it costs him to pay for/maintain the place I live, plus some amount for the risk he takes on in owning it (major repairs, etc), plus some amount of profit that I find reasonable. Not all landlords set <some amount of profit> at unreasonable levels.
If I own a house but I have a new job far away and I rent a house there and have a tenant in the one I own, that's a zero-sum game (assuming the rent I pay is equivalent to one I get from my tenant). The owner of the house I'm occupying could even be the tenant of my own house. How do you justify economically taxing the rented home more than if we occupied our own?
Maybe I misunderstand the taxation that BC is applying, but why should 'passive income' be taxed or treated any different to regular income for taxation purposes.
i.e if I earn $100 by working at a job, and $100 through renting out a property, shouldn't I be taxed the same as if I earn $200 through my job instead?
I'm also concerned about how arbitrary the line is between passive and active income. Let's say I rent out a lot of properties. I have legal obligations to maintain those properties. That might be a lot of work. A full-time job, even. Let's say I make a lot of money on investments. I might be ensuring the success of those investments by advising and doing research on / for the companies I'm investing in. Both of those things get called passive income, but they very well might not be in reality.
Me too. Distinguishing between passive and non-passive income seems in any kind of technical, legal seems incredibly difficult. It reminds me of the old "I know it when I see it" definifinition of pornography, which is a terrible definition for a law.
I'm actually really curious about the law now. Stock dividends must be considered passive income. So would interest from your local bank savings account. So would a SaaS app that you set up and basically runs itself with minimal maintenance.
Very true! Given a sharp enough tax rate difference between two kinds of income (or two activities), you just generate a ton of socially-useless work aimed at blurring one into the other.
The term rent selling stats with 'rent' for a reason. The maintenance on any single property is miniscule compared with the rent extracted. Added over many properties, sure, might be a lot of work. But you're also getting a lot of rent.
The bigger part of the problem is the tendency to pass on the tax on passive income to the tenant.
This is also why when someone has enough capital to buy enough properties to extract a full-time wage out of the rent, you can be sure they're also not going to be doing the work themselves.
They'll offload it to a property manager/real estate agent to do all that work.
I don't know why the BC government makes this distinction, but it does. The $100 from working at your job is taxed at a lower rate than the $100 from renting out a property, though I should add that there are various schemes to avoid paying the 'passive income' tax.
This isn't actually the case now is it? Are you confusing corporate income tax with personal income tax? Normally if you're renting a place out you'd be doing it through a hold co. As the rental income would be your main business income it would be tax at the very low Canadian Controlled Small Business rate; not the general rate.
Even if you were to take the unwise, for both legal and tax reason, choice to not use a hold co, income from rent is FUNDAMENTALLY different from regular income. In that, if you make a loss, you can claim it. That's just not possible with regular income. I.e., if you rental unit is unprofitable, it reduces your taxes in general -- potentially applied in future years. This is not the with "active" income.
There's no such tax on 'passive income', it's just taxed as business income, which is exactly what it is and taxed no higher than employment income. It's just not taxed as capital gains nor has dividend tax credits, which it shouldn't be/have.
The only tax that discourages renting out is that the portion of your principal residence used for renting out no longer qualifies for tax-free capital gains.
Considering how almost nobody in BC ever declares this, and barely anything is done to curb it, it's kind of a moot point.
There's no good reason for any of this other than simply being able to take more money from people. It's wrong for the government to pick who wins and who loses, and never works how it's sold.
How is it similar? The tax Vancouver is introducing applies if the house is empty, and the tax you describe is concerned with differentially taxing non-empty houses.
Right, I live in Oakland. This is a state exemption. In other parts of the state it may be meaningful, but if you (like me) bought property in the Bay Area in the current millennium then it's insignificant.
You pay capital gains tax on all capital assets you sell, with the notable exception of your primary residence. There is no reason to call it a "penalty".
I agree about this measure - it's a good way to raise income for infrastructure from those who can most afford it and discourage leaving property unused.
But when did the global elite become our new scapegoat? Must we always blame difficulties on an ill-defined enemy who shifts conveniently with the speaker until everyone or no-one is to blame?
To me this global elite sounds just like all those other labels you claim this shadowy cabal are trying to fool us with (no doubt they plot to raise house prices once a year at Davos or Bilderberg or wherever). It's a cheap trick we invent to fool ourselves into thinking someone other than us is to blame for our messy predicament.
I'd say a more specific definition in this case is "people that are using real estate as a place to park money rather than as housing". In many cities like Vancouver, New York, and Miami, the money often is coming from foreign countries. With housing so limited, that has a real impact on people that live in these cities, and the benefit is provided to people that don't even live here.
If people want to park money in funds tied to housing (that have returns tracking real estate) then there are funds like IYR that can do that much cheaper than actually owning a house and paying property taxes!
If someone is buying real estate and leaving the property empty just to park funds... It makes me wonder if these are funds that can't be straight up invested in an ETF and are actually being laundered in some way.
um, yeah, that's the whole point. In addition to all the empty homes, there's so many teenagers driving around in Ferraris/Lambos it's become a joke. Sometimes Mom comes with the kid, other times it's just the kid living alone (typically with a nanny). It's mostly hot money from China. Though to be fair, there are plenty of Mom+Kid from places like Korea who are here for the education & into to the 'West'.
Presumably they pay property taxes and sales taxes (if BC has that)? That should offset some of the lack of income taxes. I'm not sure you can consider them complete freeloaders.
Also, can foreign children just move into Canada without any paperwork? I guess student visas?
Yes, we pay 7% PST on sales tax, which doesn't apply to groceries or restaurants, where presumably a lot of their spending would go. That's a far cry from the income taxes that should be paid if they're claiming resident status:
5.06% on the first $38,210 of taxable income, +
7.7% on the next $38,211, +
10.5% on the next $11,320, +
12.29% on the next $18,802, +
14.7% on the amount over $106,543
Generally, the ones who come over here would fit in that top tax bracket. They immigrate into the country based on a loophole in the immigrant investor program into Quebec, but then end up living here in Vancouver. As soon as they get their citizenship, the husband goes back to China and the wife and children stay here and no income is declared.
Property taxes are municipal, which does not contribute to healthcare and education. They may not be paying nothing into the system, but they certainly take more out of the system than they put in.
What makes this the most egregious is that many of them claim additional low income benefits, like discounted pharma drugs and even collect welfare once they've received citizenship.
There's also several pregnant mainland Chinese women coming into the country before they show, and having their babies here so that they get Canadian citizenship and all the benefits that entails.
Yes, it's fairly easy to get a student visa in Canada. There are tons of ESL (English as a second language) schools around downtown, with tons of latin american, middle eastern, Japanese, Korean, and mainland Chinese young people. Some of those schools are designed so that they don't actually have to show up, but still show up as enrolled for student visa requirements.
I always hear about these people, but I've had a hard time tracking down any data on who they are or how many properties they have bought.
I'm sure there are some wealthy Chinese people who have bought property in major cities as a way to park money. I'm just a little skeptical that it's in any way a significant driver of higher housing prices. I would be willing to bet that there are far more Canadians looking to buy housing in Vancouver than there are foreigners looking to do so.
The fundamental problem seems to be that there are more people who want to move to Vancouver than there are people who want to leave. It would be incredible if there were so many foreigners looking to buy places to park money that reducing their numbers would somehow change this fact.
I've lived in an older but expensive (even by Vancouver standards) neighbourhood with larger houses and lots most of my life, and many of our neighbours have been replaced by mainland Chinese with absentee husband/father.
I'd say the effects are overestimated by locals, but they are definitely around and easily observable by those who live here, and since they buy housing at the top end of the market, they skew the average home sales prices significantly upward. Realtors also espouse a "buy now or be priced out forever" which scares locals into borrowing way beyond their means, and banks in Canada are happy to loan them the money when taxpayers cover the mortgage for them (but not the home owners) through CMHC. Household debt in Canada is at record highs, worse than the US in 2008, and Vancouver is by far the most extreme example especially given that our average incomes are significantly lower than the other major Canadian cities.
Almost everyone new I meet moved to Vancouver from elsewhere. I often get the comment that I'm the first person they've met that grew up here.
Rain is preferable to freezing snow in most other parts of the country, and true Vancouverites don't mind it because it means fresh powder on the mountains for skiing/snowboarding, conveniently located 30 minutes from downtown and open at night with artificial lighting. And there's no place better in the summer, when there's no rain, extreme heat, humidity, or mosquitoes. Just lush green surroundings, and ocean and mountain views everywhere
Interesting. I've known several Canadians who've moved there from elsewhere in BC, and from Quebec. Vancouver's population has grown steadily over the last few decades[0]. Though perhaps it hasn't had anything like the population boom that, say, Calgary has, or the same kind of economic draw that SF has.
What are the places you've found your fellow Canadians tend to move to?
Many homes are being bought out by the Chinese elite. They are desperately trying to get their money out of China before the Yuan devalues or recession strikes.
The same is happening in Hong Kong, Australia and New Zealand.
They are desperately trying to get their money out of China before the Yuan devalues or recession strikes.
The horror!
They're investing their money legally in the hopes of protecting or even (gasp!) growing their wealth.
Yes, there are some downsides to that investment, but there are also upsides, and it's unclear to me why they have the primary responsibility for ensuring that every dollar they invest minimizes harm.
I invest in index funds and I'm sure those dollars do some harm in the world (not net, I hope). Am I a monster?
It's reasonable for governments to take actions like this to protect their citizens. It's their job, in fact.
But it seems profoundly unreasonable to me to get angry at the chinese elites for investing their money legally in order to protect their wealth. Understandable, but unreasonable.
Then it's UNREASONABLE for anyone poorer than you to get angry at you, isn't it? They're all irrational, but everyone with a higher net worth is more REASONABLE than you are, right? And you make exactly the average income in the US, so you're point of view is fair and balanced, isn't it?
What? I have no idea how you made that jump. If you're angry at someone for making more than you (or more than the average income, what a useless metric), then yes, that's irrational. How could it not be?
If you're angry at someone for being unfair to you, then their wealth level is irrelevant.
If you're angry at them because they invested or spent their money in a way that way down the line has some tiny effect on your life that's negative [1], then that's too high a standard. There is literally no one on earth whose actions don't have some negative effect on someone, somewhere.
1. I mean that that individual's actions have a small effect on you, not that the aggregate effect isn't large and meaningful.
So your definition of the global elite is that they avoid tax. Other people would say that they earn over a certain amount, or that they are sneering metropolitans, or that they don't have a home country, or that they own too many houses, or that they make their money from the wrong thing. Most of those definitions would fit Donald Trump or Nigel Farage for example, but of course they are not part of the global elite for many.
That's the problem with this sort of term; it is inflated with so many contradictory meanings by so many people it becomes meaningless.
If people complain that other people earn more than them then they are just jealous. I am talking about fairness. When Warren Buffett complains that billionaires are paying less tax compared to the average Joe then you cant blame the average Joe getting angry about it.
That certainly wasn't a vote against the global elite, since by any of the definitions above (in particular your 'pay less tax' one) he is a fully-fledged member of that elite. I'm sure he'll continue to talk about how he's taking on the global elite, or the main stream media, or muslims/terrorists or whatever other convenient group he can find to deflect blame.
That's what's dangerous about terms like global elite - they lead you away from specific problems and into vicious blaming of some dehumanised other who becomes the scapegoat for all the world's ills.
To be clear, I'm not blaming myself, or you, I'm saying it is a collective problem with collective solutions (like this law, like reforming zoning or planning rules, building more housing etc).
Have you considered that these people payed for their house fair and square and that it's profoundly unfair to charge them just because you and others don't like what they chose to do with it?
This isn't about a house in the woods; this is about homes in a deeply urban environment which have surrounding services and businesses that are reliant on local residents; and public services supporting both the residents and businesses that are reliant on the active use and fees/taxes generated to sustain.
Empty homes attract crime, necessitating more policing resources, empty homes do not support local businesses but drive up prices, making the area less affordable for residents and less lucrative for businesses.
The 'payment' for living in an urban environment goes beyond just the normal local taxes, it involves a participation because the resident who lives in a home in that environment contributes to the environment.
No house is an island in an urban environment (except maybe in Venice).
Participation often results the resident's (large) family moving in, with their 4-5 vehicles, increasing traffic (and pollution) and load on local services (daycare, schools, public transport, hospitals, police, fire departments), all while paying the same level of property taxes as before.
Talk to someone living in San Jose or San Francisco about their daily commute on 85 or 101. They somehow don't profess as much love for densely populated urban environments.
We have decent transit, and bike lanes everywhere. Unlike the US, many people are happy not to own cars and there are at least 4 major car shares and as of the last few months, a new bike share with convenient availability (albeit we're quite late to get one after Montreal and Toronto have had theirs for years). Many of those who do drive carpool. A lot of people also live right downtown, as we have far more residential buildings in our downtown core than most cities. Vancouver is a very centralized, dense, metropolitan city which probably has more in common with New York than Seattle, but much newer and cleaner.
I still get annoyed by traffic, as I can remember when there was barely any back in the 90's. But then every time I drive down to Seattle, I realize how good we have it in comparison.
It's not really as black and white as that. If a city, such as Vancouver, is suffering from large economic and social problems caused by foreign investors sitting on prime real estate then you have to eventually do something about it for the sake of everyone actually living in the city.
The city is for living in, else it's a dying city. This step taken by the city of Vancouver isn't reactive, the problem has been propagating for 15+ years and has started to have a very large negative impact on the people who want to live there.
I myself, and many others that I know, have moved away from Vancouver or are planning to exit because they can't find or can't afford accommodation. It's not like SF where huge salary and booming business jacks up the prices. Vancouver is just a regular city.
There is something you could do, liberalize building permits: if we can build housing, particularly tall buildings, the cost of apartments will remain low. But more importantly, liberalize rental leases.
Why would you sit on prime investment property and not rent it? Because when it comes time to sell, you may end up with a tenant who's not paying rent and whom you cannot evict. The cost may just be large enough to forego the income of having a renter. Laws meant to protect bad renters end up hurting everyone.
Or we could slap more bad laws on top of more bad laws.
How would you liberalize rental leases? The lessor can already kick someone out when they want to sell, I mean they need 2 months notice but I think that is entirely fair. Foreign investors (Chinese millionaires) don't give a crap about rental income. They don't want the headache, property is merely a cash investment hedge for them to sit on care-free.
More liberal building permits? Have you seen downtown Vancouver? There are towers everywhere. Infrastructure already cannot keep up with the pace of development in the city and surrounding it.
The city should have had a much better long term plan and not grabbed easy cash when it was available. Chinese investment was good for cleaning up Yaletown but it's gutted the city as far as I am concerned. Vancouver is a beautiful place but it's like a vapid supermodel. Nice to look at, but not something I could live with.
Wouldnt this problem sort itself out, if an area suffers a downturn because of vacant property, property loses value and then investors would pull out.
I remain very unconvinced on how this is a good thing, but i can see how easy it is to sell to capture more tax.
Long answer: New York City has historically had a policy that NYC is for New Yorkers. There are several aspects to this. One is the cooperative ("coop") structure that came about as rent control was (largely) unwound. Coops are typically owner-occupied and coops tend to have limits on renting out your property or even just not living in it that may require you to sell it. This is (IMHO) a good thing as condos, which don't tend to have the same restrictions, are often ghost buildings (the NYT has done pieces on this where occupancy rates can be 30% or lower).
This has meant that condos in the same area have tended to attract a premium of ~20% versus an equivalent coop. Condo buyers are dominated by foreign buyers paying all cash who are parking money in the US and/or buying an apartment they might occupy a few days a year.
This sort of thing is not good for the city as a whole. These residents aren't funding city services. Foreign buyers have I believe decimated neighbourhoods in other cities (eg I heard of this happening in Tel Aviv).
Now Bloomberg kinda went too far on this as he believe that you should attract the billionaires to the point that someone who owns a $100m condo (of which there are now several) pays only about 10-15x the property tax of a $1m condo. This is something that needs to be reformed.
I'm very much in favour of public policy that benefits residents be they owners or renters.
Now other commenters have pointed out one issue and that is you have to be careful you don't catch landlords in your net. Landlords provide a useful service in providing a rental stock for people to rent. There are various reasonable ways to handle this. Some options:
- Don't tax a property (extra) if it's occupied by somebody;
- Exempt landlords from the higher prices if they're a resident of the state (and paying state income taxes).
This can be a way of handling illegal hotels too. Have much higher taxes for non-active properties and reporting AirBnB type income can trigger whatever housing regulations apply so illegal hoteliers are faced with a choice of paying higher property tax if nothing else.
I sort of agree, but we're being too selective in our choice of crisis.
The people who sold that house for $1.25M also enjoy free healthcare in Canada. I have to pay 40% of my income to foot that. The average cost of our healthcare system is about $3500/citizen, but the high end of the average is typically found with older people in their 70's. Why should I have to pay 40% of my income to pay for the medical costs incurred by that old guy who sold his house for $1.25M to a Chinese investor who will pay almost nothing in Canadian income taxes?
Then, we can talk about the fact that Vancouver is mostly zoned for detached homes. We can say that if a property developer buys a bunch of detached homes and then wants to consolidate the properties to build townhouses, that it's "profoundly unfair" to try to prevent that, but that's exactly what detached home owners have done over and over again, both by lobbying and supporting those restrictive zoning laws and by speaking out against developers at city council meetings. That's why almost all new townhouse and apartment developments in Vancouver are in reclaimed commercial zones.
Let's address the whole problem all at once. Right now people who own houses are having it both ways.
> Why should I have to pay 40% of my income to pay for the medical costs incurred by that old guy who sold his house for $1.25M
Which he won't pay taxes on because it is his primary residence.
Those who happened to get shut out of the property market simply for being born on the wrong place at the wrong time are paying a much larger portion of the tax bill than those who were "lucky" enough before everything went parabolic. It's actually the opposite of a progressive tax, which Canadians claim to love so much (but the real reason they love it is because they think they're sticking it to someone else.....try and take their capital gains tax exemption away and watch their principles on taxation do a 180).
A system that depends on taxing current income vs current wealth will always suffer a possibility of being gamed by those with high wealth but low income. If not foreign moneybags, then retirees.
I am on the same boat as these people that can't afford a home with these property prices. But, I don't blame other people for having more than me. The concept of private property is that anyone can do whatever they want with their property.
That is not the concept of private property. You have never been able to do whatever you want with your property. You can't, for example, build a factory in a residential neighborhood. You can't make your property a fire, health, or safety hazard. You can't partake in activities that significantly disturb your neighbors. You can't build illegal or unpermitted construction. Your construction must follow fire and safety codes. You must follow ordinances about how tall your building can be, how big your lot has to be, and how far back from the street it can be placed. If you live in a historic neighborhood you can't decide on the materials, style, and color your house is. Your house can't be too big or too small. You can't be a slumlord. You can't build a dumpster fire in the backyard. You have to keep your house "up to code." If your property stays blighted for long enough the town will bulldoze it. (This happened to the house next door to my old house). You even may not even be able to water your lawn unless it's a Tuesday. You probably can't even let 8 of your college buddies move into your mansion[1]. If the government decides they want a courthouse or a highway where your house sits it will literally just take it away from you without asking.
About the only thing the government can't force you to do (in the United States) is quarter soldiers during peacetime.
Like the sibling comment said, you live in a society so we all have to play nice with each other.
[1] most cities forbid a large number of unrelated people from living together.
The fundamental flaw with this is, you don't exist in a vacuum. This all has effects on the city and on everyone else who lives in it. At a certain point, no, they can't do "whatever they want" because ultimately it does affect other people.
This "At a certain point" is, however, subjective. Who can say your "point" is right or wrong. Some people have more tolerance than others. Having a mob mentality of dictating what those limits are is dangerous in my opinion.
I would not oppose having a quantitative measure of how empty homes ultimately harm Vancouver's economy in the long term. I think that would be a much more constructive argument to implement measures to curb this trend.
We've kind of decided on using a democratic process, which indeed is a form of mob rule.
As for the danger of this approach....so multi-millionaires have one less global city they can buy property in completely hassle free....I think they'll find a way to survive.
"Ochlocracy ("rule of the general populace") is democracy ("rule of the people") spoiled by demagoguery, "tyranny of the majority", and the rule of passion over reason, just as oligarchy ("rule of a few") is aristocracy ("rule of the best") spoiled by corruption, and tyranny is monarchy spoiled by lack of virtue. Ochlocracy is synonymous in meaning and usage to the modern, informal term "mobocracy", which arose in the 18th century as a colloquial neologism."
Usus, fructus, and abusus have been recognized as pillars of private property since the antiquity. "Abusus" is the right to destroy or dispose of a property. Certainly that would include not using it.
But there are reasonable limits on those private property rights that are commonly accepted.
For instance, I don't have the right to set up a nightclub without permission from the city, and (if I'm not being an asshole) neighbours and other nearby residents/businesses that would be affected.
These limits come into existence because there was a problem that residents of the city felt needed action on. Leaving large numbers of properties empty is the extreme opposite end of everyone running nightclubs.
You have no right to force people to sell their assets at a low price. It's not unfair at all if they exercise their right to their private property in some way, like refusing to sell, that causes prices in the market to increase.
You missed my point. I was giving an example of a rightful exercise over one's own private property leading to market prices increasing. You don't own the market and the extent to which you have a right to influence it is limited to whatever influence your own offers, bids, purchases and sales have.
Maybe there's a justification for an empty home tax, but I don't see it in your argument.
The justification is that people are hoarding limited resources from others and not consuming them. They can still exercise whatever property rights they want. They just have to pay a fee for taking up space and not using it. If they want to participate in a real-estate pump and dump, that's fine, but the voters have decided to penalize such activity.
> You don't own the market and the extent to which you have a right to influence it is limited to whatever influence your own offers, bids, purchases and sales have.
...and to the extent that the government can influence it with taxes and tariffs, which is a perfectly acceptable form of market intervention.
>The justification is that people are hoarding limited resources from others and not consuming them.
All resources are limited. That doesn't justify robbing people of their property rights, by dictating how they shall use their own resources.
The only justification I can see for such a tax is that it involves the usage of land, and the moral arguments for absolute ownership of land being much weaker than for other types of property.
>...and to the extent that the government can influence it with taxes and tariffs, which is a perfectly acceptable form of market intervention.
Politically acceptable, morally totally unacceptable. A tax on private transactions is just extortion that has the support of the majority. Something doesn't stop being authoritarian just because it gets the stamp of political approval or majority support.
> That doesn't justify robbing people of their property rights, by dictating how they shall use their own resources.
Yes, it does, if the voters decide it does. Republic beats market.
> morally totally unacceptable
Ah, yes, beating the "taxes are rape" drum. Since when is the market "moral?!" Also, this isn't a private transaction, it's a property tax. You are paying the government a fee for the protection of your property from bandits, raiders, fire, invading armies, and other malicious actors as well as gaining access to electricity, roads, water, waste management, etc.
If you don't like it, sell your luxury $3M house that you don't live in and buy a house in some other rich coastal town that values property rights. Let the market decide.
EDIT:
A thought experiment: is it within your property rights to dump toxic industrial waste chemicals on your own property? Let's say it is. What about when your chemicals that you have every right to dump on your own property start leaking onto your neighbor's property? Is it still within your property rights when it starts adversely affecting the people around you? Is it still your own personal decision to do what you want on your property even though it is now affecting the people around you?
Having an empty $3M house sitting around invites theft. It invites disrepair. It affects the market value of the homes around it. If your neighbor's house is affecting the market value of your house, is that neighbor within their property rights?
>Yes, it does, if the voters decide it does. Republic beats market.
No it doesn't. People's rights are inalienable. Rights would be meaningless if they're merely created at the whim of the majority.
>Ah, yes, beating the "taxes are rape" drum.
The prisons you send tax evaders to have a problem with rape. You're endorsing doing this to people who don't pay a share of the currency they receive in private trade.
>Also, this isn't a private transaction, it's a property tax.
I was referring to your comment that tariffs and the like are justifiable.
> Is it still within your property rights when it starts adversely affecting the people around you?
No of course it isn't within your rights. At this point you're engaging in an action that is causing toxic chemicals to violate the property of your neighbours.
This is Canada. The fundamental tenet of our constitution (Charter of Right and Freedoms) is to balance the rights of the individual with the interests of society as a whole. These rights that you personally feel are inalienable are not so here, and this is the way most of us would have it.
Rights are not country specific. They're inalienable or the entire concept of rights is meaningless (lest you agree that a Constitution that allows torture of innocent people means that people in that country have no right to not be tortured).
Rights are privileges. Absent modern society, there are no rights. The strongest and the most influential make the rules.
The governing bodies that enforce these so-called inalienable rights are the ones that grant them as well, and it is up to them, and in many cases the people who comprise them, which rights are granted. Rights are not some absolute concept defined by Ayn Rand. They are an artifact of civilized society.
The property rights you describe are not as binary as you wish them to be.
Have you considered that their choice is negatively impacting quite a lot of people, and it is profoundly unfair for them to take housing off the market and drive up prices just because they can?
Their house still occupies space where another full house could stand. Such space is in short supply within the city. It's basically a tragedy of the commons here - an abuse of a shared resource, to the detriment of most.
And it's not even an onerous requirement on the owners. They will just have to rent them out, now. And they can hire companies that will fully manage it all for them, and still make a profit, marginal as it may be. So it's actually better for them as well.
I didn't read the bill, but if it's literally what's on the tin and reported in TFA then I think this is a horrible over-reach.
A property is by far the most expensive asset most people own. Usually "own" in this case means paying a small percentage of the total cost each year and financing the rest. Now there are a million reasons why you might need to leave your house for 6 months or longer where you cannot afford the cost and risk of moving out all your belongings and renting the place to a stranger. Vancouver is saying that they will fine you 1% the value of your house because of this?
Someone commented on the AirBnb thread about how "owning" a home in SF was really just a long-term lease you are very likely but not guaranteed to be able to renew. Policies like this make it crystal clear; you own nothing, even owners are renters, and circumstances be damned they will tell you what to do with your house, and heck probably even have a say in who you rent it to, before the day is done.
Many single family houses cannot realistically be rented for a true net profit if you really account for all depreciation and wear and tear. Oh, and remember, it's illegal in many jurisdictions to even dip into a security deposit based on "normal wear and tear".
Now if any given property had a vacancy budget of, let's say, 3 years, before this kicked in, then I could at least accept this isn't going to screw over legitimate vacancies.
But the idea of an "illegitimate vacancy" on a house I own that I'm paying property tax on... That is truly bizarre. A city should be happy to have the tax revenue with none of the burden.
Here's some math that should make this make sense to non-Vancouverites:
A 1200sqft bungalow across the street from me sold for $2.8mm four months ago; it's now back on the market for $3.2mm. If you put 20% down, that'd be a monthly mortgage payment of $11,500. That's 1/6th of the average Vancouver family's annual income, per month!
I have a feeling that if you're paying $11,500 a month on your mortgage, you're not worried about 1% of the value of your house, and you're definitely not worried about renting it out at a profit. You're just hoping it keeps appreciating enough to pay for interest and this new piddly 1% tax.
That's who this tax is targeting. And I welcome it wholeheartedly.
So $3mm is basically retirement money, right? So why isn't everyone just selling and moving somewhere else?
This sounds to me like real Vancouver residents who bought years ago have just won the lottery. Boohoo my house is worth 10x what I paid?! Tell me more about your problems!
Seriously, cash in the chips and enjoy life until the crash and then move back in a few years, own your house outright, and, continue to enjoy life.
I mean, I don't want to be rude but I'm having trouble wrapping my head around this...
Hey man, my house is worth like $4 million on Zillow.
Yeah, that totally sucks, how are relatable people supposed to move in next door?
Those Ferraris really have loud engines. It's a menace!
How are we going to *fix* this?!
We need the value of our homes to plummet back to equal or less than what we paid. I need noisy neighbors who can't afford landscaping, not just this eerie silence all up and down the street.
For sure.
Please can you tell me how we can get these Chinese investors interested in some nice New England properties?!
I don't think the anger is people bought their home 20 years ago. It's from people who rent; people who grew up with their parents and want their own place in the city; people who have moved to the area for a job and cannot afford to live within a reasonable distance of work.
Having property that no one lives in despite people wanting to seems like a poor allocation of land. (Mind you, it may not be a poor allocation of resources for the people investing)
A 1200sqft bungalow across the street from me sold for $2.8mm four months ago; it's now back on the market for $3.2mm.
That's incredibly frustrating, I get that. I'd love to live in the Bay Area again, but it's too expensive to be worth it to me.
What you're describing is a classic bubble. Speculation divorced from the underlying asset value. Presumably not enough Vancouverites would think that $3.2mm for a 1200 sg ft house is worth it to keep that value there. So it's temporary and will eventually pop. Bubbles hurt a lot of people while they run up and when they pop, but it's not clear that price controls do anything other than shift the pain elsewhere, usually while making it worse. I'd rather try and understand what's driving the underlying bubble and fix that if we can. The vacancy is a symptom, not a cause. That said, that's probably not something Vancouver can deal with directly, as it seems more tied to global macroeconomic conditions.
> I'd rather try and understand what's driving the underlying bubble and fix that if we can
Foreign real estate investment? Driven by economic forces in foreign countries? I don't know if you can really "fix" that, but you can sure as hell tax it while it's happening. And 1% isn't bad at all if the houses are gaining that much in value over such a short period of time. Whoever's flipping these is certainly beating inflation still.
EDIT: Read some more comments, particularly emptybits':
> It's an experiment. Much like our recent 15% foreign buyers tax reported a few months ago. We're all watching the experiment. Perhaps our role is to serve as a lesson to other cities?
So it seems as though they are trying to curtail the bubble caused by foreign influence, and my comment about "fix"ing it was made in ignorance.
However, I still think it makes sense to tax both ends of the spectrum...the buyer tax limits new purchases, the "living here" tax limits houses already bought.
>there are a million reasons why you might need to leave your house for 6 months or longer //
Could you give a few examples? I know some rich middle-class (UK) people who have left their home for a couple of months whilst they've had renovations. And I know a few people, again pretty well off, that have travelled extensively abroad or lived abroad and rented out. Beyond that though?
I do think they should adjust to allow small-scale local-owner rental.
>Policies like this make it crystal clear; you own nothing, even owners are renters [...] //
I think they make it clear that peoples housing needs are being preferred over rich peoples right to profit from those same housing needs.
It could be to care for a sick, disabled, or mentally ill relative. Or because the resident gets sick and needs to move in with a relative.
It could be some sort of seasonal work transfer, or an unexpected work transfer that you are forced into until finding a new position back home. Or maybe you are taking a sabbatical. Or a stint in the peace corps (I think that's usually 18 months).
3 months is a long overseas assignment in most roles, I guess your company would have to pay you enough to make it worthwhile. That's not the city struggling for housing stocks problem.
Military deployment, seems reasonable, I wonder how many deployable military are living in these houses; also wouldn't the location remain your primary residence and so avoid the tax?
Wanting to live somewhere else? That's exactly what the tax is for - pay up or change your residence.
You asked for reasons why someone might choose to move out of their house for 6 months or longer rather than rent it out. I gave a few; nothing more. By all means, I support the local government's right to pass whatever laws/policies/incentives they want as representatives of the residents and a policy could be good on balance even if it screws over a few edge cases.
BTW, most of our overseas assignments are 2 years initially. 3 months seems more like a long business trip, not an overseas assignment to me.
> A city should be happy to have the tax revenue with none of the burden.
This is true. The city (actually province & city) receive the tax revenue.
Unfortunately, rental stocks are so low in Vancouver that it's very difficult to find a place to live among all the (apparently) empty condos and houses owned by people who don't live here. The average house price is $1.4 M. A small 2 bedroom condo will still set you back half that. Thus, the pressure is on the rental market and finding/encouraging a larger rental supply.
So while the government is fairly paid by absentee home owners, there is an argument that the government should be doing something for its resident citizens.
It's an experiment. Much like our recent 15% foreign buyers tax reported a few months ago. We're all watching the experiment. Perhaps our role is to serve as a lesson to other cities? :-)
Honestly, you aren't the problem. The problem is speculative investors who are buying lots of property in nice areas and sitting on them: not renting them, not living in them, but just letting them sit vacant.
For a city like Vancouver, that drives up the cost of living for everyone as it drives the price of real estate through the roof, which is exactly what those speculative investors want. They have a perverse incentive to buy up all the property and not rent it out.
A tax at a percent of the property value destroys the motive to do that, which is in the best interest of the city. There are exemptions for primary residencies and properties that are rented for at least 50% of the year by month are exempted.
Sounds like all you need is a primary address exemption. IE, a property needs an associated primary addressee, rather than occupancy. You would not be able to claim a primary address for your second or third home, so if it goes unused it can then be taxed.
The sooner some of you guys get the idea that you own nothing, the sooner NA will become a better society. Living inside a society means your rights are not granted by the god or by nature, it is granted by other people around you, by the society. The right and law of ownership is the same. It is merely a consensus how the society distributes its wealth.
The issue you described doesn't really exist in Vancouver, where it has one of the lowest vancancy rate in the world (0.6 percent), it's a seller market and rent is high enough comparing to local income/maintenance cost.
BTW, Switzerland has the lowest house ownership in Europe according to [1]
Good nationalism would have been forbidding rich Chinese investors from pricing-out average everyday Canadians from their own housing market, in the very first place. Drastic, calculated measures; that "disgusting kind" of nationalism is what ends up making the real difference. The nationalism you are proposing is just spinning the wheels.
The global elite are not the cause of high housing costs. Housing prices have risen globally - NYC, Mumbai, Vancouver, London, etc. There just aren't enough wealthy people to take much housing out of circulation.
I did some calculations a few months ago; if every wealthy person in NYC bought 10 homes, that would have the same (negligible) impact on the housing supply as building another NYU.
This is not an effective use of public policy. It's just an attempt to find a scapegoat while ignoring the real problems - exclusionary zoning, low density and bad local regulations.
Vancouver has an annual average income of around $70,000. At current benchmark prices of ~$1mm, we're paying 14x our average salaries for homes. That's roughly as unaffordable as Hong Kong — the world's most unaffordable housing market.
Whether or not zoning and high density would bring housing prices down (it almost certainly would), you gotta ask: if Vancouverites can't afford these places right now, who can? People who have a lot of money.
A government passes a law limiting the number of cars that can be sold. Manufacturers switch to exclusively luxury cars as they have much higher margins. Rich people buy them because they can afford them and need them. Everyone gets mad at the manufacturers and the rich people instead of the idiotic legislation. If we killed zoning laws, allowed modular housing and dorm housing, rents would drop very quickly.
Yeah, it's hard to get this across to people who live in a city where it feels like supply is increasing fast (because it's in huge, highly visible towers), but as a percentage of the total stock, is growing quite slowly.
I lived in Vancouver for a while, and though people were totally on board with the idea that increases in demand for housing would push up prices, they were highly skeptical of the idea that increased supply could decrease prices.
What was the latest data on citizenship of home purchases in Vancouver? 10% foreign, 90% Canadian. And almost 30% of those Canadian purchasers were speculators.
Are the Chinese causing home prices to go up in Vancouver? Probably a little. The much bigger problem are the Canadians over extending themselves by speculating on home values.
Perhaps you don't about the situation in Vancouver BC, but it is a very common place for wealthy Chinese nationals invest in a "safer" place outside their country. This is well known to the locals and those in the region.
I've got a home in Boston. Zillow tells me it's appreciated 45% in several years. Since I (1) got a very low interest rate and (2) got a house in a hard to come by area and (3) would have to pay realtor fees to sell, why wouldn't I just rent it out when I decide to move somewhere else?
If other people keep doing that in their lifecycle (move further out when deciding to have kids), you end up with many homes as investments where the home owners have no intention to combat high housing prices, as that only leads to higher rents and more profits.
Which is why in Boston (5th most expensive US housing market), I get 50% discount on my property taxes, because I actually live in my house. If the house was an investment property, I'd pay 2x as much in taxes.
People make similar claims about NYC, Mumbai, etc. The numbers just don't add up. There aren't that many rich Chinese people.
In any case, suppose you are right. Why not keep building homes and selling them to those dirty chinamen? They want to throw money at Canada, why not take as much of it as possible?
Oh right, exclusionary zoning. Which I'm sure is also somehow the fault of evil foreign scapegoats rather than nice white middle class Canadians.
Maybe you guys should build a wall, and make the Chinese pay for it. Make Canada Great Again!
There are lot of rich Chinese people. A friend of mine in a Vancouver suburb sold their place three months ago to a buyer from China who paid cash and who left the house empty. That's a fact. Another story I heard which may or may not be fact :) but I tend to trust is that someone came in to a local insurance office to insure 30 houses they owned. Houses in the Vancouver suburb I live in went from about 700K to 1.4M in two years in direct correlation with the arrival of foreign buyers. Some of those actually do live in those houses but a lot of houses are left empty.
China owns $1.25 trillion of US debt. I think this gives a window into the amount of money sitting there. That's a million $1M houses. Vancouver has 47K houses...
China has 1M+ millionaires. Assume 10% have enough disposable cash and motivation to go shopping for foreign real estate. It doesn't take much effort to look across the Pacific and home in on the politically easiest place to escape to. If 10% of those people choose Vancouver that's 10K units locked away from local residents.
So how come housing prices have been skyrocketing in most global cities as well? You seem to want to blame Vancouver's problem on foreign scapegoats, but Vancouver's problem is hardly unique.
If all these evil Chinese folks are going primarily to Vancouver, what's the cause of SF, NYC, Boston, Mumbai, Delhi, Bangalore and London's high housing prices?
And why is Houston somehow immune to this global phenomenon?
The total housing inventory available in all these cities is just not high enough to satisfy the demand of investors. It seems there are certain cities that attract attention while others do not. Seems to be about where the marketing effort is and what the screening criteria is on the buyer side.
This is nothing to do with evil. It's just business/common sense. If I had a lot of money and I was living in China where there's a large risk and I was looking to make a similar investment I'd probably go the same route. A lot of wealth was created in a short time and those wealthy people like any normal person are concerned about preservation of that capital and some sort of safety net.
The total housing inventory available in all these cities is just not high enough to satisfy the demand of investors.
But why is the inventory not high enough? Certainly we could easily build more.
Oh yeah, exclusionary zoning in NYC and SF. FAR limits of 1.33 in Mumbai. Mumbai and Delhi have half the density of Brooklyn, Vancouver about a third - there's plenty of room for more inventory. Even in Manhattan we could fit a lot more inventory in.
We don't do this because the middle class don't want it.
It's mostly single family homes that investors are after in Vancouver and that have appreciated the most in value. Vancouver is landlocked between mountains, sea, and river. You can't build many more single family homes in Vancouver. I imagine with most other cities building more would be either more sprawl or more density both of which can create problems.
Canada isn't densely populated so why should the Vancouver people need to squeeze into apartments while houses are sitting empty? So you're right. The middle class doesn't want it.
It's true that not everyone can have the "American Dream" house/garage/car any more but at the same time having a bunch of expensive houses sit empty is worse than them having someone live in them.
I think part of the solution might be building new cities, something that doesn't seem to be happening.
Yeah, it's like regulatory capture. The owners in the cities want to keep what they have, and vote for it. I'm sure some of it has to to with propping up house prices, but I don't think all of it does either! It's an interesting problem when it comes into conflict with a city's growth.
Boston does not have enough affordable housing. There is a ton of building in the city, but most of is it high end housing and very expensive towers/hotels. Good luck finding a freestanding house for under $800K.
When the market prices are high, and land is expensive, and you have the slow zoning/permitting process of Boston, developers are going to only build luxury housing, until the city changes the permitting/zoning process and requires them to build more affordable housing units.
Chinese buyers are not restricting themselves to Vancouver....
There are also a good number of wealthy Russians and Middle Easterners paying cash in the cities listed. If you've followed NY or London real estate news for the past decade, you would know that what's happening in Vancouver has been happening in other cities as well.
60% Chinese rich people plan to buy house overseas, US most preferred - "About 1.34 million Chinese people who own at least 1.5 million USD took the survey from August to October, 2016." - http://usa.chinadaily.com.cn/china/2016-11/09/content_273251...
It does not have to be wealthy people, just people who make substantially more then the locals. Housing prices have risen in my city(2nd tier city) in India. Most are brought by NRI's/outsiders, many vacant. There are numerous flats coming up. For locals it very difficult to acquire one, hence they are buying out in smaller cities, and prices have risen in smaller cities as well.
And even the libertarians should be on board with this tax, because it's correcting a huge negative externality: empty units are bad for a neighborhood. Occupied units support local merchants, reduce crime, and generally make a neighborhood more fun and interesting to live in.
None of those sound like particularly libertarian-centric issues. A government fine regarding how a persons decide to use their private property sounds quite anti-libertarian to me.
Umm, I don't see a market here. I see the government charging a fine for behavior they find objectionable. If the government decides that you shouldn't drive more than 55 mph and they catch you doing that and write you a $100 ticket, you haven't participated in a market transaction in any way.
Libertarian means do what you want as long as you're not hurting others. Gary Johnson ran on the platform of 'keep the government out of our pocketbook and out of our bedroom'. Not sure how taxing home use aligns with that.
>even the libertarians should be on board with this tax
No, Libertarians would not support this. The reason why there are empty properties is that there are capital controls so severe that it's more lucrative to buy a house (and not rent it) as a store of value than a currency/stock/precious asset (gold,bitcoin etc). A law -- which didn't account for the second-order detriments -- created this perversion in the market. Adding another law -- which again won't account for the second-order detriments -- is not going to fix it. Less is more, when it comes to economic law.
Enact a Land Value Tax. In a squeezed market like Vancouver most of the value in houses is the plot of land underneath them, not the "bricks & mortar". By taxing the value of the land rather than the property on top of it you won't penalize people for renovating or knocking down an old building and replacing it with a newer one. Hopefully the tax is high enough to put off speculators and bring prices to a more reasonable level (because massive swings in land value of 20% per year will increase the tax burden).
You're making a huge assumption that capital controls are the cause. It's more likely that people believe real estate is a better investment than currency, stocks, precious assets. Or perhaps they just want to diversify their holdings. I'm considering buying some investment real estate, and it has nothing to do with capital controls.
I think DD must be right, because there are funds like IYR (I don't know about Canadian equivalents) that would be a much less expensive way to get the same real estate market exposure, so the question is why isn't the money going there?
The Canadian government subsidizes home-ownership by not taxing the capital gains on a primary residence.
I know the article is about empty properties, but it's actually a lot more common to send your 18-year-old kid to study in Canada and wire him $1 million to buy a primary residence in his own name.
So what you're saying is... the rich will aptly avoid this tax just like they do all the others, and the hapless hoi palloi who might have to leave their home vacant for 6 months (e.g. to care for a dying relative) would be stuck paying the fine. Sounds about right :-(
You can certainly get a "mortgage" on a stock portfolio. It's called trading on margin and the interest rates are even better.
But it's true you can't get quite as much leverage and the dividends and capital gains are not tax deductible like they are for your primary residence.
Zoning doesn't make empty units. If you took away all zoning strictures, you'd still be left with the fact that people who buy just as an investment aren't doing much good for a neighbourhood and a city.
Zoning is the cause of high housing prices. This is only an issue because there aren't enough houses to meet the demand. Zoning laws are artificial restriction to prevent deflation of home values. They also prevent people from building what has been dubbed as "tiny homes" that would allow poorer people to provide a substantial improvement to their living conditions. That is where this issue stems from.
The inability to a) provide for yourself reasonable living accommodations, and b) the surprisingly huge spike in prices of homes due to the lack of homes that are required.
This is what a libertarian believes (disclosure: I'm a libertarian).
I don't think that's true in most places though. In Australia we have crazy unaffordable house prices, and economists and politicians often say the problem is supply, but a group called LF economics did a study recently and found that our fastest growing markets were in oversupply for more than half the time the price has been rapidly rising.
As far as I can tell, the idea that it is a supply problem is just an assumption, assumed simply because neither neoclassical nor Austrian economics appear to have an understanding of credit and money creation by banks (through lending, which creates deposits) that lines up with how modern banks and the real-world monetary system works.
Some of the post-Keynesian models seem to match the real-world situation a lot more. The house prices seem to be so strongly distorted by speculation based on easy access to credit that the price statistics don't correlate almost at all with the supply surveys, but does strongly correlate to the amount of money created by lending. This explains pretty well what we're seeing, including how lowering interest rates will inflate asset prices instead of stimulating the real economy. But many people refuse to believe the data and the conclusions it leads to just on principal, because the idea of market prices not being set by supply and demand is blasphemy!
Australia is a different case due to the lack of many urban areas. If development where allowed to continue at a faster pace with no red tape most of Australia could no doubt be turned into an economic super power much like Japan. The country is huge, has an extremely smart population, and is already known for engineering prowess. The heel that is Australia's weakness is high import tariffs on pretty much anything, poor ISP quality due to monopolies, and a select few urban areas.
This is also coupled with how great of a place Australia is to live to create a pretty high bar in housing prices. To be honest, if some things where changed about Australia I'd move there. It's got low crime, great politics so far, and a lot of things I like. It's just too focused on a select few areas and too pricey.
Zoning is just one cause of high housing prices. If zoning allowed for greater supply, we'd have lower housing prices. No argument from me there. But if we believe that housing isn't meant to be an empty investment that pushes out local residents, we should regulate uses of housing that don't actually put roofs over heads.
Honestly, if you take your (a) point seriously seriously, I think you have a moral prerogative to regulate the market in that way. It decreases demand and absolute prices, sure, but trying to accommodate both investment and residency is exactly what Vancouver's been doing for the last 20 years, and it's why we're where we are now. Our local GDP is largely based on real estate. It's not great.
> But if we believe that housing isn't meant to be an empty investment that pushes out local residents
As a libertarian I feel that protections of any free trade are the cause of most of these problems so no, I do feel that housing is meant to be an "empty investment" as you put it. I don't believe in government protectionism.
To me it looks like you are saying "I want more people to be able to afford houses" then following up with "oh that person? No they're too poor, they don't deserve a house" as that is where this sort of "necessities-as-an-investment" thinking leads. A house should only be worth what a house is worth, nothing inflated by a restriction on the homes created.
> we should regulate uses of housing that don't actually put roofs over heads
Do you think that anyone would buy a home that doesn't have a roof? I could actually see a few situations for doing this (installing your own roof after purchasing is one). I don't think government should mandate safety scissors. This is again another protectionist mentality that ruins freedoms of decisions.
In my ideal world I'd go to a reputable inspector, have them inspect one of the thousands of new homes in a development, then based on their comments buy or not buy the home. No one should tell me I have to live in this home. What if I want to use it as an office for a doctors clinic that's built in the center of the town? No one should be able to tell me that isn't allowed other then the person selling me the home. Government involvement in this is a) just to increase price and b) just red tape that keeps "those people" out of "my" neighborhood.
> Honestly, if you take your (a) point seriously seriously, I think you have a moral prerogative to regulate the market in that way
I don't see how wanting someone to be allowed to build a home for themselves, or allow someone to build homes for the poor/homeless as a charitable prospect, on land that isn't currently developed requires government regulation.
> but trying to accommodate both investment and residency is exactly what Vancouver's been doing for the last 20 years, and it's why we're where we are now.
Again, I don't think a property is an investment. Then again I also don't believe in bailouts or other protectionist viewpoints. It would be beneficial to you to read up on libertarian viewpoints as your characterizations aren't correct in these cases. I don't believe any investment should be protected as every investment is to be a compensation for the risk that was taken in making it.
To a libertarian this looks like a ruling elite class oppressing the poor minority in an attempt to make themselves rich.
> Our local GDP is largely based on real estate. It's not great.
I don't see why property sale being a large percent of GDP is bad. If a country was made of 90% diamonds selling the land to diamond mines would be very profitable and as such a large percentage of the GDP would be from land sales. This isn't a necessarily bad thing. It just depends on who it's benefiting. Currently this benefits the ultra-rich and the government and that's just doesn't fit in my world view.
I know a lot about libertarian viewpoints. I think they largely ignore reality in favour of positing stronger property rights as an unfalsifiable solution to what have proven to be systemic and intractable problems. You don't appear to live here, so you get the benefit of being able to idly perform that sort of theorizing. There's a lot you could learn by engaging with the situation Vancouver has built itself into, but I haven't learned a lot from being told (many times before now, too) that libertarianism will solve every issue we have.
The thing, too, is that I agree that zoning is usually the problem with housing prices. San Francisco and the Bay Area have decided to opt out of building enough places for many decades, to the point where some communities there prefer to push jobs and businesses out and away in favour of getting higher housing prices.
But we aren't San Francisco, because we have no underlying economic engine that's driving in-migration and pushing up housing prices. We're just chilling here, broke as ever, wondering how on earth even a small condo could have gotten so out of reach.
I think in the absence of zoning, the affected neighborhoods would have HOAs by contract limiting building freedom. What's the difference as to whether the contract is imposed by the local government or a private council that is attached to the property?
The problem is that there's no effective way with (currently constituted) zoning law to 'trade' the externalities of density. You can't compensate your neighbours for shadows or traffic or other impacts in exchange for being able to build larger. So the choice faced by most residents is:
1) Acquiesce to high-density development, and receive zero compensation, or
2) Fight high-density development, and probably get zoning laws imposed at minimal personal cost.
You can see why this setup incentivizes people to push hard for "static neighbourhood" zoning law.
3) Agree to high-density rezoning, endure the construction noises and shadows and whatnot for a couple of years, then sell your house to a condo developer for a massive profit and never have to work again.
This isn't a hypothetical, I saw it happen on the street I lived on in college. The detached houses fell like dominos and were all replaced by high-rises until there were none left.
Sure, if you want to sell. But if only some of the people want to sell, then the problem of non-compensated externalities arises again. It's a classic collective action problem arising mostly from the fact that things like air rights, street space, and so on, are barely tradable.
If the HOA is a corporation with the residents as shareholders, then Walmart or whoever can go to the council and offer to buy out the area or make an exception. The local neighborhood can vote on whether to allow it to go through, or ask Walmart for money to compensate them for the disruption. There's very little friction if Walmart is willing to come to an agreement with the neighborhood. The worst case is that Walmart buys the HOA corporation, and there's always some amount of money that will buy people off.
If the local city manages it, then it's a long drawn-out process of lobbying for zoning controls that apply city-wide. And offering the citizens money to vote for it might be illegal in some jurisdictions. Even if Walmart and the local citizens are okay with it, a couple hold-outs or people from other neighborhoods can delay the entire process by complaining to the zoning board.
> the affected neighborhoods would have HOAs by contract limiting building freedom
Then I wouldn't sign those contracts or I would not move into their properties. I'd move to the outskirts of their neighborhood and build there.
Governments have a perceives authority to enforce their regulations on everyone. No one perceives Joe-blow as having the same power. It is because of this that society can keep people in check when these situations arise but no one can control the government as they are presumed to have abilities ordained allowing them to (unfairly) arbitrate these situations.
It appears zoning rules, which prevent Vancouver from building up to Brooklyn levels of density (approx 3x as high), is keeping 400k units off the market.
In contrast, unoccupied housing is keeping only 10k units off the market.
But I'm sure the rich Chinese people are secretly to blame for this too.
You're focusing on yet another externality of vacant units, that they increase the price of housing. I agree with you that this is minor compared to the way that restrictive zoning drives up the price of housing, but what about all the other negative externalities I mentioned in my comment?
Not at all. Adding more supply is definitely part of the solution.
The problem is that adding supply takes time, there are physical limits to the rate at which supply can be added, and the level of demand is unknown.
This means it's hard to know when a supply only solution will result in decreased prices and it can take a long time. (Vancouver is not SF, it adds plenty of supply and yet there is still housing shortages and high prices)
If you want to fix the problem quickly, policies that increase supply and limit speculative demand will achieve results faster.
No, the fact that the whole lower mainland has 30% the population of NYC is why Vancouver proper has 1/3 the density of Brooklyn.
Increasing density in response to rising populations is great. Increasing density in response to rising investor demand is what we've done already, and it's why we have incredibly lonely, dead neighbourhoods like Coal Harbour.
The logic is that zoning makes for a housing shortage, which means it's profitable simply to hold on to properties without renting them, because the rent would be such a small portion of the investment gains. If supply increased, and moderated the price increases, then people would rent out more because they wouldn't be seeing huge year-on-year home value increases.
That's definitely an alternative response. Here, we've decided that we should instead cut investors' demand of housing, rather than increasing supply proportionately in response to investor demand. Like raldi says above, it's an approach that's a little more sensitive to the fact that we have to live in the hollow feeling city that an investor class can make.
I understand the response, certainly. But I don't think it's going to make housing (rental or ownership) substantially more available or cheaper in Vancouver - it'll just shuffle a few people around. And rich people don't just evaporate because you limit housing supply; they can arbitrage their way around most of these limits pretty easily.
I'll allow that ignoring or abandoning private property is generally the measuring stick that libertarians use to justify seizing it, but as others have said, if the real estate market in Vancouver were less regulated, this wouldn't have happened in the first place.
If somewhere like SF will adopt it although, they will have to make their rent control at least follow inflation. Sub inflation %0.5 rental limit increases are a bit crazy. Even %2/yr is relatively low.
If the picture is accurate, it looks like they're mostly worried about single-family homes. The investment market mostly values properties based on how much money they can make, so it's far more rational. Single-family homes aren't part of the investment market, and only exist in a housing supply shortage due to restrictive zoning laws.
I don't know enough about Canada to say why they have restrictive zoning laws. In the US, it's mostly government-backed mortgage programs and covert racism.
I don't care how rich the Chinese are; those properties would be demolished, rebuilt as apartments, and rented if it were allowed. Because the value of the property is directly proportional to its expected profit. It's only when the government disconnects the two that you ignore the rental profit. The Chinese government's currency controls probably don't help, either: The Chinese are willing to lose money as long as it's free from their government's currency controls.
Does Canada offer government-backed loans that are available to foreigners?
I personally am worried not about single family homes, but about maybe one day getting to own a condo. That'd be cool. But new tiny units start at $600,000.
But what happens if you just chop down SFH and rebuild with higher density, and you don't also put restrictions on investing in the new units? You just end up with the problem we have now. We're building tons. Our local GDP is largely based around real estate. Not that we don't have a NIMBY problem — but there's only so much building you can do before you look around and feel like you just built more empty houses for people who don't live here.
You should always ask for a copy of the HOA bylaws before buying a condo. You might prefer to pay extra to discourage empty investors, and that could certainly be written in. Even without that, you might also ask how many of the other buyers are pure investors or otherwise ask people how they like it there.
Though, it seems like a condominium complex that is 50% empty would give you a greater density of neighbors than a SFH suburb that is 50% empty. And you can get the Chinese to pay for your new roof, to boot.
Somehow I doubt even the Chinese have enough money to turn a high-density city into a scene from 28 Days Later, though.
Anecdotally, I lived in Coal Harbour in Vancouver when I first moved here. The newest waterfront condos were ~30 stories tall, and on average, you'd see three lights on at night in them. It's not like that everywhere here, but it is really strange.
Based on Dublin's experience. I think that a tax on unused but already zoned residential land would be more effective than one on "empty" homes.
Though in both cities it is bad planning laws, outwards not upwards growth, NIMBYism and other problems that are more of an issue than the fairly limited supply of empty homes.
> a tax on unused but already zoned residential land would be more effective than one on "empty" homes.
Don't know how much you know about Vancouver's geography, but there's not much of this kind of land.
> Though in both cities it is bad planning laws, outwards not upwards growth, NIMBYism and other problems that are more of an issue than the fairly limited supply of empty homes.
An influx of foreign capital (excess demand) and zoning (not enough supply fast enough) are the biggest drivers of this in Vancouver.
You say it's not enough, but doesn't it just need to be enough to make real estate underperforming compared to other asset investement opportunities? Even during good times, home appreciation isn't much more than 3-5%. Taxing that by a percent makes even money market accounts look palatable.
A home is more than an investment. You live in it. Homes aren't competing with other investments, they're competing with renting or being homeless in some form.
> Homes aren't competing with other investments, they're competing with renting or being homeless in some form.
If you have $1 million, you can buy a house and live in it "for free" or you can buy stocks/bonds/ETFs, maybe earn $50k a year in dividends and capital gains, rent a place for $30k a year, and pocket the difference.
So yes, buying a home does compete with a combination of (other investments + renting).
Sure they are. If homes are cheap, you buy a big home and save little. If homes are expensive, you invest in a car and commute or buy a "cute and cozy" home, and invest the rest.
the kind where people band together to defeat the global elite and the upper class / 0.1%, instead of letting them divide-and-conquer us (Red States vs. Blue, white vs. black, immigrant vs. native, Boomers vs. Millennials).
Why is this kind of us vs them against "the wealthy" acceptable to you? The upper class / 0.1% constitutes millions of people, some bad, most good. Just like every other group. Would you be comfortable putting any other words in your sentence above instead of upper class? Like men, women, the elderly, the poor, minorities, etc? Why is bigotry against the wealthy ok?
Not all wealthy are greedy. But enough of them are, like not all blacks are criminals and not all Hispanics are illegal, and actually to a greater extent. Language is imprecise and trying to police it belies a fundamental lack of respect or empathy.
But enough of them are, like not all blacks are criminals and not all Hispanics are illegal, and actually to a greater extent.
You're making my point. Presumably you wouldn't generalize "blacks as criminals", even though some are, but it's OK to generalize wealthy as greedy, even though not all are? Not saying you've generalized that way, but OP did.
Thanks for the lecture on respect and empathy, but I'm not trying to police language. I'm trying to understand why some people who are otherwise quite empathetic and respectful think it's OK to generalize and stereotype other groups of people.
In this case the wealthy, good or bad, man or woman, black, white, brown, or otherwise are using their resources to artificially drive up prices in a marketplace where they do not have to live with the consequences of their actions. Essentially, they are using a place where people are trying to live as a giant real-estate pump and dump scheme and completely screwing up the local economy in the process.
Individually, each of these wealthy persons are just looking out for their own interests, as they should, but as a group they are causing harm, and as such are garnering ill-will from the locals. So the GP's words could have been better chosen as "defeat the global elite who are using our town as a get rich quick scheme" instead of using a blanket statement, but I honestly think that was kind of implied here.
Also, I don't really think an us vs them mentality is extraordinarily harmful at a time when wealth disparities are so astronomically high. In fact, I think ignoring the issue is what's causing us (and not "them") great harm.
There's lots of development, but it takes time to see the effects of that. The recent spike in prices has been extremely fast, up by 20% in 2015. Also, the city has to approve any increases in density, which doesn't happen overnight. Faster than silicon valley, though.
Would you want a bunch of conservative Canadians flocking to America every time they get an elected official they don't like? Why do you think Canada wants you?
"I manufacture T-shirts. Hand made T-shirts which are not spectacular, but kind of unique. I have been selling them for a long time, but in the past few years, people from other places are buying all my T-shirts, more than the ones I can make. I increased prices because of it, but I still sell all the T-shirts I have. Maybe i can make more T-shirts, but right now this is the amount I can make. Maybe, i should tell Bob to go check if my customers are using the T-shirt, and if they are not using it, well, they must pay Bob or Bob will take the T-shirt away. "
We're talking about regulating the use of a limited-supply common good: the land in a city. The residents of that city have the authority to regulate the use of that land to ensure that it is providing the desired benefits, in this case housing. They mechanism by which the residents can regulate land use is taxation imposed by an elected municipal government.
More broadly: the only sense in which one can "own" property is within the framework that society has created. If there was no society or government, your land title would mean nothing and anyone with more physical power than you would take your home as soon as they so desired. Fortunately, we live within a civilized society which enables ownership in a sense other than immediate possession. However, that framework of ownership has a caveat that allow property to be reclaimed if the public good demands it (cf. eminent domain). The framework could have been built without that escape hatch, but that would have caused its own problems.
This example isn't specifically eminent domain, but the same principle is at play: regulation of common goods by a collective. Any introductory class in game theory will provide half a dozen examples of why this is necessary.
There are many points where I disagree, and I wrote several but prefer to keep it short.
This is a tax to gather funds, and the housing situation is a collateral.
This tax revenue is not going to be used towards any cause, let alone efficiently, to reduce the housing problem.
If this tax is levied, and then economists see that it is ineffectual to housing, or even makes it worse, but the tax does produce revenue, it will not be reversed.
If the housing situation improves in the future either because of this tax, or because of market conditions (like more dwelling units being built, or change in global trends of property) this tax will not be removed.
This extra tax revenue does not come with a reduction of taxes in other areas.(it is not a shift of the tax burden, its an increase).
A short list to at least question the intentions and effects of such policy:
1) There is an ill-shaped enemy that must pay (Rich foreigners)
2) It uses a justification that applies to many other use cases but its only applied here (we can decide to tax you on what you do with your property, and the only one we do right now is to you X group, because you do Y.)
3) It doesnt represent an understanding or a solution to the underlying problem.
Maybe it's a larger home (say 5 bedrooms) and it's not near a university or college so students wouldn't want to live there, and the market for huge rentals like that isn't very good. Or maybe the market rent for the type of house is lower than the expected price appreciation /and/ you can sell it for me if it hasn't been lived in, so it's worthwhile to sit & flip rather than rent it out.
Instead of maintaining a facade that people still have a right to property they might as well announce that government owns everything, you know just like communist countries.
How can you be said to own anything if you are forced, basically 'extorted' by government, into occupying your own house or not? I guess it is whether you believe in property rights.
If you inspect your property to see squatters or others haven't criminally occupied it, and you maintain it so that it does not cause any harm or damage to your neighbors homes, why this?
More pressure to not own/maintain and just rent or leave the community.
How can a neighborhood that's basically empty fetch any high rents for the units that are not empty and for rent?
Just out of curiosity are you Canadian, from the US, or other? I ask because there is a cultural difference between what people in the US and Canada expect from their government.
The essence of the problem is the low occupancy rate and rapid inflation of housing prices in Vancouver, fueled largely by foreign nationals buying Vancouver property as an investment rather than actually living there. This prices Canadians out of the market.
Generally the Canadian attitude to government focuses on asking it to solve these kinds of problems in an "interventionist/activist" model: intervene in the market to affect change.
In the US, I found people generally prefer the government to focus on "freedom-to": erring on the side of providing people with too much liberty to do as they please, rather than too little.
I think this is just a cultural difference and not so easy for Americans to understand. I hope this comment was helpful in conveying the Canadian perspective.
I am American, and thank you for your viewpoint. Does a 'Canadian attitude to government' translate into enforceable legislature? Even in the US, it's a mix of attitudes, but one consistent law needs to prevail.
I have lived overseas for 8 years, and in Montreal for a year. As a libertarian I do believe you should be free to do things, unless those things impinge on somebody else's freedoms.
Being priced out by foreign investment does not seem to be a reason to have government intervention. Empty houses en masse should lead to big drops in property values after the initial buying spree spike.
Keeping your home up to code and paying taxes is one thing, but enforcing occupancy is another. How about if you travel 6 months out of the year for work? Why should you be penalized/fined for not staying home?
What is the period of occupancy - 4 days a week; 1 week per month; 2 months per year? Who decides, and how to gauge it?
I always think of the following ab adsurdum-like argument: Most crimes occur at night. Government is responsible for everyone's safety. Curfew is mandated for your own good from sundown to sunrise. Just a thought.
There are many places in the world that have close to none in property taxes. You just a flat rate city services / council tax. Property tax was partially created to incentivize the usage of unused land to reduce the externality of it.
"fueled largely by foreign nationals buying Vancouver property as an investment rather than actually living there. This prices Canadians out of the market."
The majority of property is bought by Canadians. The last time I looked it was 15% foreign, 85% Canadian.
However those numbers are for home sales overall, not a survey of who owns unoccupied homes. In addition, in many ways it's not much better if a house is foreign-owned or not if it's empty, since it still takes much-needed property supply off the market and artificially drives up housing prices.
Even if you can sell a bunch of different things there are still things you are legally liable for, and for the most part those things end up making a lot of sense.
> How can you be said to own anything if you are forced, basically 'extorted' by government,
There are a huge amount of things you can't do with your own property. You can't erect a 300m tall tower. You can't make loud noise at 4am. You can't operate a tannery in the middle of the city. And so forth. If society believes this tax is a bad idea they can protest and vote them out.
Which was what I said without the examples: as long as your freedoms don't take away from the freedom of others.
I am for paying taxes to have a standing army, so I don't have to protect my own border, but I guess the line between libertarianism and socialism is that I don't want government trying to legislate intelligence, or non-precedentedly passing prophylactic measures for "my own good"; I'd like to decide those things on my own.
I fail to see how policing occupancy is just in this case, but there are those who have decided their are limits to how much wealth you can have and how you can spend it. They know what's best for you.
So if the owner sells the $1 million dollar home, what a "poor" person can snatch it at $750k? I'd like to see the logical conclusion to this thinking.
Given these are 85% Canadian-owned, how is it a measure against the 15% foreign-owned properties? And isn't xenophobia part of that type of legislation?
> Which was what I said without the examples: as long as your freedoms don't take away from the freedom of others.
One could argue that living somewhere is a fundamental freedom. In a situation like this, when there are no places to rent, trying to force the empty ones to be available for rent is a way to ensure that fundamental freedom. The government -- in normal places, we are not talking Trump here -- is carefully evaluating the limitation of rights vs the freedom of others and they found this a good idea. Once again: if the voters disagree, they can protest and vote.
There is a saying, if you want to find out who owns your land, stop paying the mortgage. The same is true with property taxes. A few years ago I looked to see if there was anywhere in the US that you could buy property and truly own it in perpetuity. There were a few places in Nevada at the time but they may have changed the law by now to eliminate this.
Property taxes are a good deal though. Even in rural areas you usually get a road that goes to or near your property. Police will come if you're in trouble. The fire department too. In cities the benefits are way more obvious.
OR you could take the money from property tax and use it to pay for private police! And private firefighters! And you could build/maintain your own private road!
The government has always enforced rules on how you can use the things you own. How is "you can own a house in vancouver, but you can't let it sit empty" any different to "you can own a supercar, but you can't drive it at 200m/h on public roads"? other than one is a new rule, and one is a common rule
As I wrote above if your freedom does not harm or impinge others freedoms. Speed limits are for all riders safety including your own, and there are people who don't believe in speed limits.
You own the car, but not the roads they are driven on: they are public. You supposedly own your house.
Authorities have always had a say on real estate matters, but I think this is different.
I don't know how you can say it's "extortion". This is a tax aimed at wealthy people, who can afford to own homes they rarely use and are taking the space away from people who could use it.
I think taxing waste is generally a good example of socialism.
You "own" what you own because the government protects it from the hoards of barbarians constantly trying to take it from you. In exchange for this protection, you pay taxes. Yes, it's a classic protection racket. If you don't like it, there are various places in the world where you're welcome to grab a gun, stake your claim, and pay nobody any taxes at all. You can enforce your own "property rights." But this has been done before, and inevitably people got tired of fending off the barbarians all day and decided they'd rather do other stuff, like read books or fix cars or whatever it is they like doing MORE than worrying about getting killed every day, so they form governments and pay their god damn taxes.
Also, a 1% "I'm rich enough to buy property in a really expensive place and not live there" tax is fairly minuscule.
You've mentioned lots of stuff, but I'm responding to this bit:
> How can you be said to own anything if you are forced, basically 'extorted' by government, into occupying your own house or not? I guess it is whether you believe in property rights.
This is a tool to soften the impact of speculation on less-wealthy people trying to live in Vancouver.
I agree that it limits property rights, in the sense that it imposes a tax on a particular way of using something that you own. But rights aren't an on/off switch in this case. Freedom to do whatever you want gets balanced against the community's judgements for what should be protected.
Vancouver (or at least Vancouver's government) decided that they want to protect people from being tossed around by the forces of real estate speculation. That does not mean they've ditched property rights entirely. Thinking of it that way, without nuance, is sloppy.
No need to sell since I don't own property in Vancouver, and given this legislation, I never would buy there.
Given most of the owners are Canadian, and only a small percentage are foreigners, I find some of the related news on this xenophobic more than for the better of the community.
It's not a new concept. Most cities tax property you live in differently than property you rent out, or property used for a business differently than property used for a residence.
I agree that it's not great, but I think it's still necessary, given all the infrastructure and public services there are. My question is whether there are better ways to do it than as a percentage of property value. Is there a fairer way to do it so that the family with the view pays as much for public services as their neighbor without one? Would that be fairer?
Without a government, there'd be no way to register your claim to land in the first place. The concept of owning a bit of area on the earth is entirely abstract.
It's hardly clear how this will help much. Vancouver has a population of about 600k people. According to the article, 10k houses are empty. This will, at best, increase the housing supply by 1.6%.
Meanwhile, Vancouver is extremely low density - 13k people/square mile, about 1/3 that of high-rise megacities like...Brooklyn.
Great work guys! Scapegoating a few rich Chinese people with second homes while ignoring the massive self-inflicted harm that locals do.
Prices are set on the margin. Knowing that it is "only" 1.6% of the houses (by the way, that's a big number) means nothing without also knowing how many more people are willing to live there by current prices.
Vancouverism-as-high-density only applies to the small downtown area, and tiny slices of land near transit stations. Nearly all the city's area is single-family homes on tenth-acre lots.
Vancouver voters simultaneously want:
a) a low-rise, spaced-out city,
b) rising property values for people who already own, and
c) low home prices for people getting into the market.
If you point out that you can only have two of these three things, you will not have any electoral success there.
Not because patents are empty, but because this would create the incentive for patent owners to assess a real value to them, and not "bajillion dollars", which they do now.