Overall I think these ideas are super interesting and may be good in the long run. But I'm also curious about what the unintended consequences will end up being.
I would imagine that one unintended consequence is that very few homes (read: zero) actually sit empty for a whole year. In fact, I would imagine there's a local property manager right now offering to rent your house out with "very light use" for exactly 31 days every 6 months while offering "maintenance services."
Check out this proposal for a surtax which more targets the issue from a different direction, with a more simple implementation than foreign buyer or vacancy taxes.
> One example is the Immigrant Investor program, where those wishing to immigrate would make an interest-free loan to government of $400,000 in exchange for landed immigrant status. UBC geographer David Ley has shown that investor immigrants in the Vancouver region represent nearly 10 per cent of the Vancouver region’s population. That population paid, on average, $1,400 in income tax 10 years after immigrating. This is less than refugees.
> …
> A property surtax is an elegant and legally safer way to reduce foreign capital flows into Canada’s cities than the new foreign buyer’s tax. A one per cent surtax would work like this: if you own a $1 million house, you will receive a surtax bill for $10,000. If you have already paid equivalent income tax, are on a disability pension, or if you are a retiree on CPP, the tax is a full deduction—you’ve already paid, thanks.
They don't report their global income. There's a term in the Chinese investor immigrant community: "astronaut dads". Kids get Canadian citizenship and a good education, dad might keep working in asia, or may have made enough. During the 5 year immigration process (and also after receiving citizenship) people are supposed to report worldwide income, but the Canadian government has very limited resources and capability to investigate.
The interest-free loan of $400,000 to the Canadian government was also a weak test for 'investors'. The Canadian banks would front the money on behalf of the immigrant, if they prepay the interest on the loan. I was told by a banker that this was at a pretty high rate of around $120,000. This amounted to paying $120k to a bank in exchange for a clean citizenship path. Lots of people benefited from this system (banks, property owners, developers) so it went on for a long time. Ottawa ended the program in 2013, but one of the problems is that Québec hasn't--they control their own immigration policy to an extent. So it became common for investor immigrants to apply to Québec but then move to Vancouver.[1] In theory, immigrants that bring a lot of wealth with them sounds great, but I was also shocked by the stat showing that they paid less taxes than refugees after 10 years.
> “Quebec gets the benefits from that loan, which lasts for five years. It’s a very lucrative program as far as Quebec is concerned but the downside is that the people don’t actually end up living there. There’s plenty of data that shows 90 per cent of those arrivals actually end up living elsewhere. I think it’s fair to estimate that a large majority end up living in Vancouver.”
TL;DR People who try to launder money and escape capital controls in China have a high overlap with people who cheat on their taxes in Canada.
Keep in mind if you get capital gains you pay tax twice to both governments. You make it sound like it is a huge deal but factor in the increased accounting costs and in most cases the advantage isn't that great at all.
Until I see actual statistics about empty houses, I consider this policy as a useful empty gesture. It's an opportunity for politicians to pretend that they are doing something about housing prices, while avoiding actually doing anything, and hence avoiding the unintended consequences.
The article looks at one empty building in London, but how many dwellings are in decent areas versus shitholes / the middle of nowhere? I doubt that all of them are Russian oligarch money havens.
We can play similar games in the US with abandoned houses - there are probably enough abandoned homes in Gary, Indiana to house the entire US' homeless population. Said homes, unfortunately, happen to be in Gary.
I agree the ideas are interesting, but I wonder how easy it is to detect that the house is empty (and who has the burden of proof). Unless there are some pretty draconian / invasive inspections I wonder if the law has any teeth. Not a criticism of the root comment, just curious.
Looking at the power consumption should be enough in most cases unless they generate their own electricity which should also be easy to figure out... from my home I can wirelessly read the power meters of about 30 of my neighbors (updated every 1 to 5 minutes) using a cheap rtl-sdr and a raspberry-pi (I probably could do better if I placed the antenna outside of my house or if I optimized the antenna for the frequency)
Hrm . . . I guess I'm struggling to think of a good reason to keep a house empty for a year. Presumably there is a remodeling exception . . .
The only thing I can really think of is that it might force people to divest in a very down market where it is difficult to find renters, but it doesn't seem like a huge tragedy for people who have at least two dwellings to be forced to sell one of them or else eat losses.
Leaving the property empty can be worthwhile if you make more from the capital-gains than you would from {rental income, minus repairing problems caused by the tenants, minus maintenance, minus property management fees, minus income tax}.
Don't you make the same gains on the property regardless of if its rented or not? You might not need the money from renting it but its still going to be more money above the gains from appreciation...
