The speculation and vacancy tax’s was introduced to British Columbia by the provincial government three years ago interventionist policy assisted in accelerating the conversion of around 20,000 condominiums in Metro Vancouver turning them in to rental properties.
This conclusion is based on the recently published commissioned report by the provincial government, which was independently created by UBC professor Tsur Sommerville and Jake Wetzel of Stada Analytics.
the SVT, the tax rate was set at 0.5% of the assessed value of homes considered to be vacant for all owners. In 2019 the rate increased to 2% for foreign owners and satellite families.
SVT revenues totaling over $230 million were paid to the Province for the tax years ending in 2018, 2019, and 2020. SVT was paid by foreign owners and satellite families on average five times more than by British Columbians. According to the report, All revenue from the SVT in B.C. is invested in affordable housing solutions in the regions where the tax applies.
Over 99% of BC residents do not pay the SVT.
The independent findings of the provincial government align with a CMHC report from 2020, which estimated that a record 11,100 condominium homes were added to the rental housing supply in Metro Vancouver in 2019. This number includes 8,800 rental homes converted from existing condominiums and 2,300 rental homes from new condominiums finished in 2018 and 2019.
The provincial government’s independent findings also align with a 2020 report by CMHC that estimated a record 11,100 condominium homes were added to the rental housing supply in Metro Vancouver in 2019, including 8,800 rental homes converted from existing condominiums, and 2,300 rental homes from new condominiums completed in 2018 and 2019.
Condominium conversions were the single largest source of new rental rental housing housing supply, greatly outpacing the supply produced by new purpose-built secured rental housing developments.
The findings of this study show that the SVT appears to be effective because it has reduced international demand and increased the supply of rentals. Further SVT expansions may be necessary if the government wants to see further moderation of demand and/or increases in the number of units added to the rental market, as the number of property owners liable for SVT decreased between 2018 and 2019 and appears to be “levelling off” between 2019 and 2020.
“Though there may not be a high instance of foreign ownership or vacant properties in more rural areas, expanding the SVT will provide a disincentive for future speculative investment that can lead to further demand and increases in housing prices,” reads the BC government report.
“Several factors should be assessed when considering an expansion to the SVT to new areas, including assessed values of residential property, population, requests for inclusion, proximity to other SVT specified areas, and whether the municipality is primarily a vacation area. Proximity to existing SVT areas is important because speculative behaviour can be subject to ‘regional drift.’”
Both the provincial government’s SVT and the local government’s Empty Homes Tax are issues for homeowners in the City of Vancouver.
In 2021, the purpose-built rental apartment vacancy rate dropped to 1.2% in Vancouver, from 2.6% in 2020, according to CMHC