Sunday, April 06, 2014

Our housing problems: Should we charge an Inflation Tax on absentee home owners?

Charlie Smith: Thought-Provoker
We all agree with the principle that Polluters should pay for the impact of their pollution. So why not make those responsible for the inflated prices of homes in our cities pay a tax – the Inflators should pay principle?

Consider this question posed by a London city council for debate by its residents:

It also asks: “Do you agree with Islington Council’s intention to require owners of properties which are kept unoccupied to make a financial contribution to the council, which would be used to deliver affordable housing elsewhere in the borough?”

Charlie Smith in the latest Georgia Straight has an intriguing article on the steps being taken by the Islington city council to grapple with the problem of the lack of affordability of homes in its region.

Should we adopt similar penalties for similar situations in our major cities (Vancouver, Toronto, Calgary spring to mind)?

If not, why not?

Consider these facts in the Smith article:

  •       A study of Vancouver housing found that one in four (a whopping 25%!) of condos  in the downtown were either empty or occupied by nonresidents for only part of the year – that’s the possible size of the problem of our current Buy-to-Leave laws;
  •        The discussion paper of the Islington council states that overseas buyers paying cash “are causing a ripple of price inflation spreading throughout London” – haven’t we heard that about Toronto, Calgary and Vancouver?

Among other findings in the Islington study (accessible via hyperlink in the Smith article) are these:

The council frames the issue as one of tackling inequality and exclusion in the borough, and seeking to ensure that local residents share in the prosperity of London.

That council has an objective of securing a supply of housing which encourages mixed communities, where the main priority will be maximising provision of social rented housing.

Also, as a whole, a ratio of over 10 (median earnings to median property prices, or a price-to-earnings ration) across inner London has created a significant problem for first-time-buyers with no equity or upfront capital. 
In paragraph 3.8 of the Islington study, we find this:

The issue from a planning perspective is not overseas ownership per se, but rather new housing supply being ‘wasted’ by being left empty – so-called ‘buy-to-leave’. This is a phenomenon that seems to be particularly associated with overseas buyers, many of whom see London property as an asset investment.

The Islington proposal is a tax of £60,000 ($109,000) on such homes.

The council is proposing to place the responsibility for demonstrating occupancy on the owners of individual dwellings to which the new planning obligation will apply. This could be via submission of evidence such as utility bills where it is suspected that properties are left unoccupied.

How about it, Mayors of Vancouver? Toronto? Calgary?

Let’s get this discussion going.

And a tip of the hat to Charlie Smith for yet another thought-provoking contribution to municipal affairs.

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