November 8, 2017 | Too Late

So the assault on the right to own property, which you don’t have, entered a new phase this week. First Vancouver, then Toronto. Not only does government strictly control rents. Now it seeks to control property owners. This should probably alarm you.

“The city will not sit on the sidelines,” thundered YVR mayor Gregor Roberston to the deplorables, “as more than 25,000 empty and under-occupied properties hold back homes for people who live and work in Vancouver. We need a tax on empty homes to encourage the best use of all our housing, and help boost our rental supply for locals.”

And there it is. North America’s first tax on people who own houses but don’t use them enough. The actions this week were, well, Stalinesque. City Hall sent letters to property owners insisting they declare if a dwelling is used as a principal residence, or rented out for at least six months of the year. Anyone who does not send the letter back will have to pay the vacant-house tax equal to 1% of assessed value – which in delusional Van averages $920 per month. If they don’t answer truthfully, they’ll pay a fine of $10,000 a day. Plus an extra $250 penalty just for the hell of it.

The tax is an absurd attempt to get more rental units on the market in a city where real estate speculation became an obsession, then a disease. There’s no proof people owning under-utilized properties will immediately look for tenants, or sell them off because of the tax. Nobody knows. And critics correctly point out this is just, really, a tax on the wealthy masquerading as a benefit to the renter class. Someone with a condo in downtown Vancouver because staying there for business three nights a week is cheaper than a hotel, will be whacked. So will those Amazon employees who need a place in town plus one in Seattle. Or folks who spend their summers in Whistler and their winters on False Creek.

Mostly it’s the principal which is unnerving. People who bought personal-use properties, paid market value, shoveled out closing costs and foot ongoing property tax and financing charges are now looking at a staggering tax just for staying there less than 50% of the time. The tax also casts them as social pariah when, in fact, it’s the opposite. A guy living part-time in his Yaletown condo is shelling out the same money for occasional use of city services as the family of four living one floor below who suck up much more. He pays 100% of the tax and yet draws 50% less. The dude is also likely walking to work, not grinding his way across the Port Mann bridge, which is an obvious environmental benefit.

So how, exactly, do people like this rent out their houses or units to avoid the vacant-homes tax? Simple. They can’t. And showboating Gregor knows it. This is just another levy on the rich in a place where social status is measured in real estate. At least for now.

Of course, if Canadians had the actual right to own land (as the Yanks do), such a tax would be unthinkable. But we don’t. Just one more glaring reason why people who put their entire net worth into a single immovable asset – that they don’t really control – are taking a gamble most do not understand. The 180,000 owners receiving those letters this week never imagined such a thing might be possible in a democratic, capitalist nation.

Meanwhile, Toronto watches.

There mayor John Tory is said to be leaning towards a similar tax, aimed mostly to those specker and flipper condo owners who have already been sideswiped by newly-imposed universal rent controls. The province has granted municipalities the right to tax under-used properties and Toronto has a task force working on the scheme, after public consultations plus a survey during the summer.

Government diddling in extremis. The foreign buyers tax. Universal borrowing stress test. Broad-based rent controls. Vacant home tax. Meanwhile mortgage rates creep higher and the population has never been more in debt. What a formula for market implosion – which is exactly what housing affordability advocates want.

The right to own property, were it granted, would be a collar on capricious, kneejerk political action. And that is why the politicians will never grant it.

Garth Turner November 8th, 2017

Posted In: The Greater Fool

Next: The NEXT Czar within our Fed System! »