In Vancouver, empty units evade new tax amid fuzzy definitions

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Last year, Belvedere Court was in the news when residents held a rally to protest the attempted eviction of a senior, Steve Williams.

The eviction went to arbitration and Mr. Williams won. The case also brought to light that a portion of the 39-unit apartment block at 2545 Main St. in Vancouver is untenanted.

Long-time tenant Derya Akay, who is also an organizer with the Vancouver Tenants Union, says he knows of several empty units in the building. He says his previous unit in the building is empty, as is the one underneath him, and kitty corner to him.

"My hallway is pretty empty,"Mr. Akay says.

The city defines properties as empty if they've been declared unoccupied or underused for at least 180 days during the tax year, or if the property owner has failed to make a declaration. The city says the total number of empty homes is 8,481, or 4.6 per cent of all "Class 1" – or residential – properties.

As part of its attempt to address Vancouver's housing crisis, the city imposed a tax on what it considers empty or underutilized residential properties equal to one per cent of the property's assessed taxable value. The purpose is to incentivize property owners to rent out spaces instead of letting them sit vacant, in a housing market with a near-zero vacancy rate.

However, the empty rental units in the Belvedere would not have been counted in the city's latest empty homes tax (EHT) declarations data because the entire building would have counted as one single property. As long as a single unit in the building is occupied, the owner is exempt from the tax.

Don MacPherson is a landlord-tenant consultant, acting on behalf of the Belvedere landlord. He says there are approximately six units empty because the owners are doing major repairs in the basement and planning upgrades to the other floors. The units will stay empty for some time, he says, because landlords are no longer allowed to use "fixed-term leases," which give them the right to evict a tenant after a period of time. Instead, all leases continue on a month-to-month basis, making it much more difficult to vacate units. He said it's his understanding that the building is exempt from the EHT.

"They are leaving them vacant in order to get the work done," Mr. MacPherson says. "These are good owners, and they are keeping the rents low. I think the highest rent is $700.

"The City of Vancouver has said a one bedroom should be going for around $1,900 a month. So these guys are pushing the envelope. They are getting cheap rent."

Liam McClure, a VTU tenant advocate and volunteer, says the issue of empty homes shouldn't just concern ownership properties, but should look at empty rentals as well. After all, he says, the tax was intended to help renters find homes. And the Belvedere isn't the only partly empty apartment block. He knows of other buildings that are half empty or almost entirely empty in Mount Pleasant and the West End.

"There are a lot of rental units vacant in this situation, either by attrition or actively evicting tenants, by whatever means, just to get the building empty so it can be rented [at higher rents]," Mr. McClure says. "But it's definitely a problem in that there is ostensibly affordable rental housing sitting completely vacant."

It might not make intuitive sense, he says, from a business perspective, to leave a building empty. However, Mr. McClure says it appears that some landlords would rather take the loss and clear out the units to make it easier to increase rents. Some landlords will offer tenants money to leave, he says, or tell tenants they are doing a major renovation that will make it impossible for them to continue living there.

Mr. McClure says the problem will likely intensify in Mount Pleasant because the area is under tremendous pressure to gentrify with the new Emily Carr University of Art and Design campus nearby, and the upcoming extension of the SkyTrain along the Broadway corridor.

The empty homes data, which include houses that have been divided into suites and contain some empty units, need to focus on landlords that are sitting on empty rentals, says Mr. Akay.

"It's tied with ownership right now," he says. "It's about land value, not about tenancy and renters, and housing as a human right. I don't really think it has any solid connection to rentals, and to tenants, and it should encompass the other 50 per cent of the city."

The days when landlords owned buildings for decades and simply expected a steady return on their investment are slipping away, Mr. Akay says.

"Landlords own many buildings, and it becomes a game plan; how can I make the most money from housing? We are seeing these neighbourhoods transitioning from working class through gentrification and new condos, and the value of land is increasing."

Although the city's count of empty homes has its limitations, some observers say greater clarity on the size of the problem is finally emerging.

"After 10 years, the debate about empty homes in the City of Vancouver that generated so much heat is finally seeing a glimmer of light through new research and measurement," says Andy Yan, adjunct professor and director of the Simon Fraser University city program. "Yet, there is still a sizable shadow cast on the consequences for renters, either by accident or design."

Analysts used Statistics Canada census data released last year to determine that about 25,500 housing units in Vancouver were either empty or used by foreign residents or temporary residents in 2016. That number, much higher than the city's estimate, has been criticized as exaggerated. Prof. Yan says the Statscan survey included all units in rental buildings because the census uses all dwelling units as its measurement. Another study, by the energy analysis firm Ecotagious and commissioned by the City of Vancouver, determined, based on electrical usage, that there were 10,800 empty housing units in Vancouver.

The examples illustrate the broad differences between data sets, and the challenge in pinpointing the number of empty homes in the city. But taken together, Mr. Yan says, they paint a useful picture that tells us that the percentage of empty homes is probably somewhere between 5 and 7 per cent of the 309,418 total private dwellings in Vancouver – or 15,470 to 21,659 empty homes. A rental market with a near-zero vacancy rate would get a huge boost if that many homes were accessible to the market.

"It's important to understand the limitations of all these measures," Prof. Yan cautions. "We know there could be many more dwelling units than "Class 1" properties. That explains the big census number. That's why you can't say there are 25,000 empty homes, and you can't say there are 8,500 empty homes, either, because the unit of measurement is so different. That's the nature of social statistics.

"What's interesting is that, when we understand this as a range of very different techniques, showing slightly different percentages, they are effectively the same.

"We know the city is between 5- and 7-per-cent empty, which is significant when you have a near-zero vacancy rate."

A crucial distinction is that the census data for 2016 include unoccupied private dwellings, as well as those occupied by a foreign resident or a temporary resident, someone who might have a principal home elsewhere in Canada. By deducting "private dwellings occupied by usual residents" from total private dwellings, according to 2016 census data released last year, Mr. Yan counted 25,500 such homes. That's about 8.2 per cent of the number of total private dwellings. A City of Vancouver report on the empty homes tax, prepared by planning director Gil Kelley in June 2017, showed that of the 25,500, about 86 per cent were unoccupied. Temporary and/or foreign residents occupied the remaining 14 per cent of dwellings, according to the report, which was based on a custom Statscan tabulation. In the report, Mr. Kelley cautioned that the census data has its limitations, such as the fact that it doesn't offer insight on the length of time that a home has been occupied or unoccupied. As well, census occupancy is based on a specific day, May 10, 2016.

Statscan confirmed that the unoccupied and temporary and/or foreign resident occupied numbers don't meet the same rigorous standard applied to the standard private dwelling numbers that they certify and publish.

Jeff Randle, housing analyst for Statistics Canada, said they don't break down the data into unoccupied units, but could do so in the future. He's getting feedback that there's a demand for it.

"It seems intuitive to want to make that distinction," he says. "And I think that has a lot to do with the attention that's being paid in places like Toronto and Vancouver to vacant dwellings that are being used as speculative investments, so I understand the desire to have that piece of information that can inform you, or can inform that topic, but unfortunately that is not really what the census or the dwelling counts can inform on.

"They can give you a broad idea - like somewhere therein lies what the census would estimate as the unoccupied count – but without being able to pull apart the dwellings occupied by temporarily present persons or foreign residents, you are left wondering where the balance is between it."

According to the census, there were 309,418 private dwellings in Vancouver in 2016. By comparison, the Ecotagious study from 2002 to 2014 looked at 225,000 total private dwellings in the city.

The city received 183,911 property status declarations for the tax year from Jan. 1 to Dec. 31, 2017. Another 2,132 properties were undeclared, adding up to 186,043 total property owners. It's a lower base number than the census total number of private dwellings number because, as mentioned previously, it doesn't include all dwelling units, such as rental apartments.

Josh Gordon, assistant professor at Simon Fraser University's School of Public Policy, says no matter which data set you use, the number of empty units is surprisingly high. He adds that people need to consider that the city's empty homes tax data is also unreliable because it relies on the honesty of property owners.

"There shouldn't be too much made of the discrepancy between census and the city of Vancouver data, because they are comparing apples to oranges," Prof. Gordon says. "But to the extent that you are encouraging potentially a couple of thousand rental units back into the market, and getting a bunch of revenue from the rest, as long as it can be enforced, why is that a bad thing? Those units could easily be rented, so the fact that someone is deciding not to rent them out is pretty telling. The issue of empty homes is a real one."

And it's an ironic issue for renters who are witnessing partially empty buildings that are exempt from the tax.

"They apply the empty homes tax by the property parcel rather than an actual analysis of the individual dwelling units, which is clearly a problem because the whole point of an EHT is to incentivize people to rent the property and use it productively," says Mr. McClure. "And if it's not being applied in a way that actually catches all the available dwelling units on a given property, it's not fulfilling its purpose."