Vision candidate proposes speculator tax
Vision Vancouver mayoral candidate Gregor Robertson has proposed that Vancouver implement a speculator tax to deter condo speculation. In this case speculation is defined by the condo unit being left vacant rather than by flipping or simply taking on more debt than you can handle based on the hope of future gains.
Robertson justifies the need for this tax by referring to the BC Hydro grow-op study that found 18,000 vacant condos in Vancouver, which is equal to half the total number of condos in the Downtown Westend. This number is said not to include units that are part-time occupied as second homes or vacation properties, only units that use no electricity through the year.
The obvious difficulty comes in defining the criteria by which condos would be taxed at the business rate. Taxes on speculation are often based on ‘flipping’ rather than holding an empty condo. How do you determine if a condo truly is empty? Would there be penalties for ‘faking’ occupancy? What are your thoughts on this proposal, would it help or hurt the Vancouver housing market?
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June 17th, 2008 at 7:49 am
I’d rather just let the market take its course.
That being said, the Vancouver market could be in the crapper by the time the election comes along, and Robertson could get huge votes based on this. It might turn out to be a great vote getter rather than realistic policy.
June 17th, 2008 at 8:08 am
To avoid the tax, people will just put a TV in their empty suite and either leave it on, or put it on a timer.
June 17th, 2008 at 8:21 am
On the contrary, the way to go about this is to offer a tax break to those who own condos but rent them out. In effect it would be like a kind of home renter’s grant, similar to the home owner’s grant.
June 17th, 2008 at 8:36 am
The real problem as others have pointed out is the unenforceability of the proposal. A flipping tax is based on sales within a set amount of time which is provable. I don’t see how you can PROVE a condo is vacant without an invasion of privacy.
June 17th, 2008 at 8:40 am
Unoccupied would fall into secondary home and should be taxed accordingly.
Second factor is residency. If you’re not a resident of BC and not renting the property out, then it should also be considered 2nd home and taxed accordingly regardless of the level of occupancy.
June 17th, 2008 at 8:54 am
The bubble blowing boomers not going to be economic engines for much longer. Their kids are less well positioned than they were to help their now poor parents as they retire, and the wealth of the middle class gets skimmed off the top and concentrated in each bubble.
Market forces are the self-same agents of hysteria and mass delusion that lead to this bubble. The market is a mob.
Although I think the market will self regulate over time, I think it’s also quite possible that the amplitude and severity of the demand/supply swings get big enough that society becomes destabilized - because if people get too vulnerable, they start chucking rocks. If the pendulum in the market swings back during all the boomers retiring and the global climate changing and the heartland producing less yield, then the market may well take social stability down with it.
June 17th, 2008 at 9:10 am
As for the administration of the tax, it will not be difficult. All RE that is not a primary residence will be taxed unless the homeowner submits a residential tennancy agreement signed by both parties to prove that the home is occupied.
Like the Income Tax Act, the speculator tax will be a self assessment system. Anywone who fails to report an empty condo by the reporting deadline will be subject to penalties of perhaps two to three times the tax otherwise payable. There could be greater penalties for intentional evasion.
No doubt, a tips line will be set up for people to inform on their friends and neighbours. Is it fair that you pay the tax while your buddy flaunts the rules?
Some people will submit a fraudulent agreement but there are allways people who submit fraudulent tax returns. The penalties for them will be very high.
Determination of what is the principal residence that is not subject to tax is easy. It is done in the administration of the Federal Income Tax Act all the time.
If anyone disagrees with their assessment, they can appeal it with ultimate recourse to the courts, as is the case with all taxes.
June 17th, 2008 at 9:35 am
When the condos tank, and we all agree that they will, I guess we’ll be giving the speculators tax credits for their loss? Get real!
June 17th, 2008 at 9:40 am
June 17th, 2008 at 9:41 am
Personally, I’d rather just have Mr. Market do its work. Speculating carries risk. Taxing speculators when they’re doing well is like taxing good luck.
By the time we’re done defining the whole thing, the only ones making money will be the lawyers.
June 17th, 2008 at 9:44 am
June 17th, 2008 at 10:01 am
June 17th, 2008 at 10:13 am
1. politician trying to get elected? check
2. promises are cheap? check
3. ‘nuf said
June 17th, 2008 at 10:38 am
By the time Robertson is mayor (I believe he will win), the mood in Vancouver will be even more receptive.
Even in wealthy Westside ‘hoods, people will see abandoned houses with waist-high grass on their streets. Whether it means going after speculators or banks, Robertson will happily take action.
Also, there will be huge stresses for renters because of the Olympics, as people get displaced by greedy landlords and suddenly realize they will have to pay much steeper rents. The pressure will be on to make this empty housing stock available ASAP.
June 17th, 2008 at 10:40 am
http://www.canada.com/vancouve.....0883a29500
June 17th, 2008 at 10:48 am
June 17th, 2008 at 11:10 am
home owner
Tue, Jun 17, 08 at 01:05 AM
Obviously the 4 of you don’t own a home.
ANOTHER HOMEOWNER
Tue, Jun 17, 08 at 09:45 AM
I agree with HOME OWNER
must be regulars
ditto…
ditto ditto….
June 17th, 2008 at 11:10 am
June 17th, 2008 at 11:15 am
But maybe that’s the strategy - bait the Liberals and the NPA into explicitly supporting the RE speculators instead of tacitly as they have been doing.
June 17th, 2008 at 11:18 am
This bubble was not the market taking it course. Government interference actually created this bubble, and government interference will be needed to reverse some of its damage.
June 17th, 2008 at 11:24 am
Can someone provide me with a link to the primary source of this info?
June 17th, 2008 at 11:41 am
But why would the city have a problem with empty units? They use no services, but pay full property taxes. Shouldn’t the city be happy with this?
I do get that empty units decrease the housing supply and put pressure on prices, but I’m not convinced the city will do a better job than the market of sorting that one out.
June 17th, 2008 at 11:42 am
i heartily agree, YT and CH make for great living. Did you know that there are 181 sushi places in DT Van. I’ve tried 15 so far.
Renting down here is awesome!
June 17th, 2008 at 11:43 am
Can you please provide me with a link to the primary source of this info? I find it hard to believe “everybody” wants to spend all their time in cafes and restaurants. In fact, i find it stupid and a waste of money.
June 17th, 2008 at 11:49 am
Are you saying you don’t like eating, drinking and sitting around? I’d be down there right now if I didn’t have to work for a living.
June 17th, 2008 at 11:49 am
June 17th, 2008 at 11:52 am
June 17th, 2008 at 11:53 am
What about landlords renting on the low and not declaring the income? Sure, you can’t write off the interest on your mortgage but what if there is little or no mortgage; I have met too many first-time landlords that are pocketing rent without declaring; and they brag about it???
June 17th, 2008 at 11:53 am
All they need to do is impose the tax on anyone who buys and sells within a two-year period — that’s how it has been successfully done in Germany, and that’s why Germany hasn’t participated in the world-wide housing bubble.
June 17th, 2008 at 11:57 am
scoop, we don’t vote for a city, we vote for a candidate.
I’m all for it. No need for me to go on as Charlie and Patiently Waiting said it best for me.
June 17th, 2008 at 12:00 pm
Are you suggesting landlords will kick people out to get Olympic renters? Any idea how hard it is to get a tenant out of a place, even if they’re not paying the rent?
Maybe landlords with places that become vacant in late 2009 will hold off on renting to the general public until after the Olympics. But Olympic rents won’t make up for more than a couple months of the place sitting vacant. And if that happened there would be a glut of stock in March 2010.
It’s actually renters who are in the driver’s seat as they can easily vacate and sublet their place for 2 weeks.
June 17th, 2008 at 12:20 pm
I didn’t say “everybody” wants to do anything. And there is no primary source because it is an OPINION, my opinion.
So does anyone have the primary source for the 18,000 number? Anyone at all?
The closest I could find is this: BC Hydro: 18000 grow-ops suspected.
http://www.canada.com/vancouve.....mp;k=63953
Is it a coincidence that the numbers (18000) are the same?
June 17th, 2008 at 12:45 pm
i’m saying it’s not likely to be the primary reason for “everybody” to choose where to live. like you said, you have to work. some people have to raise families. some people prefer MOUNTAINS!!! the OCEAN!!! the OLYMPICS!!!
deciding to mortage your life away for the sake of COFFEE!!! strikes me as really incredibly silly.
i suppose if one were single and didn’t need much beyond their next shot of caffeine, that might be the life. but even then, picture yourself doing nothing but drinking coffee all day for the rest of your life… well… i mean, even retirees sometimes decide they have too much time on their hands and choose to do something else other than drink coffee.
June 17th, 2008 at 12:46 pm
my point exactly.
June 17th, 2008 at 12:47 pm
I find it interesting that anyone would suggest we copy Germany, the country has been on a downward spiral for almost 2 decades now. But lets not let facts get in the way.
Those that say the market will take care of the problem are correct. Government intervention always, I repeat always makes the problem worse. Cough *rent controls* Cough.
June 17th, 2008 at 12:48 pm
As far as I know, we’re still waiting on getting the official confirmation from the city. That said, if it were untrue I’m surprised no one has come forward to challenge it.
I recommend taking a look at Mr. Gray’s presentation. It’s a good read.
June 17th, 2008 at 12:57 pm
http://communities.canada.com/.....ility.aspx
As far as I know, BC Hydro has never published the report in question.
June 17th, 2008 at 1:11 pm
Yes, some landlords are going to try to make a killing, but most will fail. Also, many tenants don’t assert their rights. They will get tricked or pressured to leave for a few months.
Example: One guy I know has agreed to leave his apartment around the time of the Olympics at the request of his landlord. He believes his rent is below market and will stay that way when he moves back in. I suggested he stand up for himself, but he says “landlords are like gods in Vancouver”. Sighhhh
June 17th, 2008 at 1:13 pm
June 17th, 2008 at 1:51 pm
It seems to gibe with other data points. Look at immigration, supply of new units and people/unit ratio. It looks to me like Vancouver has been producing more places for at least 5 years than we have people to fill them.
June 17th, 2008 at 2:02 pm
June 17th, 2008 at 2:05 pm
“that is really beside the point of wither or not this is a good idea”
I agree with you that it is beside the point, but I disagree that a speculation tax is a bad idea.
I think that there should be a tax so more people can enjoy downtown Vancouver, and get into the action here.
June 17th, 2008 at 2:22 pm
June 17th, 2008 at 2:22 pm
On a related note, I’d be all for regulations that require CMHC to increase minimum downpayment whenever price/rent multiples go above a certain threshold. That would have kept the situation from getting out of control. CMHC is the real culprit.
June 17th, 2008 at 2:24 pm
If rates go to where inflation is back under control and risk is correctly repriced, the actual cost of holding a vacant property come to bear and this issue will be moot.
June 17th, 2008 at 2:27 pm
“I think that there should be a tax so more people can enjoy downtown Vancouver, and get into the action here.”
I thought you were leaving? Didn’t you say a couple of weeks back that you’d had a job offer elsewhere and you were outta here? The only “action” that Downtown has that other parts of Vancouver don’t also have is drug peddling, prostitution, extremely high levels of panhandling.
I live a 20 minute drive from Downtown and yet I have a theatre, many nice restaurants, a wide variety of grocery stores, a dozen or so coffee shops in walking distance. Nearly anything that I could want is within walking distance in fact. Certainly anything you can reasonably claim as an advantage there I also have here.
June 17th, 2008 at 2:33 pm
June 17th, 2008 at 2:40 pm
I’m pretty sure you’ll get your wish in a few years. Note there are private MIs in the market as well, not just CMHC.
June 17th, 2008 at 2:47 pm
Can the blog be fixed so that whenever he makes a comment there’s just a link to this clip instead? It would be more entertaining, and at least it would make SOME sense.
The high pitched woman’s voice is like something out of The Exorcist.
June 17th, 2008 at 2:56 pm
Yeah, that is a head scratcher for sure. Why would private money join this tax payer funded race to the bottom?
I always make the point of reading Genworth’s financials and check out their conference calls. So far no alarms or concerns out of Canada. Rather they were pleased with profitability of Canadian operations.
June 17th, 2008 at 3:12 pm
June 17th, 2008 at 3:20 pm
The US Fed broke the rules backstopping Bear Stearns for JPM to stop its counterparty risk for all the CDS’ they wrote. There is now an expectation for central banks to bail out “too large to fail” institutions. I understand this was in the USA, but what would Ottawa do if something big like CMHC, CDIC, or a bank like RBC or TD failed? There is just too much moral hazard when a Government acts as an underwriter.
June 17th, 2008 at 3:24 pm
“What if the market forces in question, unconstrained in their freedom, begin to impact the market negatively?”
Unconstrained corporate freedom could be a bad thing? Never!
Just think of all the things we’d have if the government dropped regulation down to US levels.
Two to three times the healthcare costs. Unexpected illness the #1 cause of personal bankruptcy.
Pharmaceutical companies could charge twice as much, and they’d sped less on that pesky testing!
Phone companies could charge unsuspecting customers hundreds of dollars for a few short intra-continental phone calls.
Wal-Marts could shut their staff in overnight in Canada too!
We could ALL hire an illegal immigrant to be our personal dogsbody. *Cheap!*
Hey we could go to Iraq, rape some women and laugh it off when someone brings up the, “legal repercussions” of our actions. Hell there aren’t even any employment repercussions!
Wow, de-regulation is the way to go!
(*note these are all true stories.)
June 17th, 2008 at 3:28 pm
In the UK, Northern Rock was nationalised so that thousands of Britons wouldn’t lose their homes. Is it better that those households, while fiscally irresponsible, suffer the consequences of a lending system that has proven itself to be dysfunctional? And what of the economic consequences of foreclosing all these people out of their homes? I should think that the consequences should also be negative for those of us who are careful not to borrow beyond our means.
June 17th, 2008 at 3:34 pm
“Privatizing the profits and Socializing the losses.”
pretty much sums it up.
June 17th, 2008 at 3:34 pm
No thanks, no speculator tax, no socialist idiot ideas, please dismantle or sell CMHC to investors, and abolish the Agricultural Land Reserve.
Eventually the price will find its equilibrium, and as long as land supply is not artificially restricted, the price will adjust to levels determined by local incomes and population.
June 17th, 2008 at 3:43 pm
June 17th, 2008 at 3:44 pm
June 17th, 2008 at 3:46 pm
There was an article in Business in Vancouver magazine about how financing of high end (commerical) Vancouver properties went from requiring 70-75% LTV in ‘07 to 60-65% LTV now. The global tightening of credit is indeed affecting certain local properties and I’m intrigued how this seems so separate from financing other parts of the local property market.
June 17th, 2008 at 3:47 pm
It’s not a beluga whale or a spotted owl.
“Are they beneficial to market participants as a whole?”
No.