Hearing about Vancouver BC’s housing Vacancy tax, I noticed that there is no real way to determine if a house is vacant. To give you an example, I can have an empty house and claim that I am renting to a Pikachu for $10/month. Based on that, the house is being rented out.
Unless the Mayor of Vancouver is going to set a minimum rent price requirement, landlords are going to find loopholes in Vancouver’s Vacancy Tax to minimize the payout to the City of Vancouver. For example, if collecting $120/month in rent results in $5 of rental income, while the Vancouver Vacancy Tax is $1200/year, landlords will collect $120/month in rent to pay the lesser amount.
If it is determined that there is no way around Vancouver’s Vacancy Tax, many will choose to pay the tax since an investment property is there to preserve his/her capital. The last thing a real estate investor wants is to rent out his/her property to find out that the cost to repair the damage by the previous tenant is more than the rent collected. Furthermore, if a property was used as a marijuana grow-op, the value of the property decreases, and the property is harder to sell at an inflated price. Also, the owner may not want to live in that house in the future if he/she knows that the electrical wiring is a fire hazard from the former tenant’s grow-op. Therefore, for many real estate investors, the risk of property damage is not worth the reward of collecting rent.
I look forward to seeing the first revision of the Housing Vacancy Tax in Vancouver’s Charter. It will, most likely, have loopholes.