For the past 2 years, I’ve been reading articles the lack of housing affordability and the impact of an empty-house tax. In short, fewer and fewer people can afford to rent property at current prices. This is troubling for a lot of reasons. Allow me to say that I’m not an expert in this area. I’m not giving you advice about what I think you should do. This article is just a few of my rambling thoughts about the proposed solutions that I’ve heard thrown around.
A Couple of Basic Premises
Renters have seen rental rates skyrocket since the end of the pandemic. As I understand what’s being reported in the media, it’s becoming increasingly common for people to face rent increases of hundreds of dollars if they want to renew their leases. Moving to a new place is also a shock to the system. The next place is not going to be any cheaper than the current one, and is likely to be even more expensive. Some renters would prefer to buy, if they could.
The law of supply and demand is also at work. When there are insufficient rental homes to satisfy rental demand, then the cost of rent goes up. Conversely, when there are more rental properties than there are renters looking for a home, then the cost of rent goes down.
If the empty-house tax doesn’t increase the supply of rental accommodations, then it similarly will not decrease the cost of rent. I’m happy to be proven wrong on this point.
Empty-House Tax
One of the proposed solutions is to force owners of to pay an empty-home tax if they own more than one property. I think the idea behind this proposal is that the owners will rent their empty homes to someone in order to avoid the tax. Personally, I don’t think that will happen on a grand scale. (And if I’m proven wrong, then I’ll say that I was wrong.) What I think will happen is this.
The Very Rich who don’t want anyone else using their pied-a-terre while they are living elsewhere will view the tax as a nuisance and pay it. The same applies to the Somewhat Rich and the Barely Rich. Those who have the money and don’t want others living in their property will simply pay the tax. This means the home stays empty and doesn’t go on the rental market. Renters will not have access to those homes, just as they don’t have access to them now.
The Very Rich, the Somewhat Rich, and the Barely Rich who don’t want to rent their properties will be motivated to sell their properties to someone else. Such an action means that the houses will not be sitting empty. There is no guarantee that the next buyers will add those houses to the rental market. The next buyers might actually want to live in those homes. In such a situation, renters are no better off. Some of them might be able to buy a few of the empty-homes. After all, an influx of homes for sale means an increase supply so the price of homes should fall. This doesn’t help renters though. It helps buyers.
At the end of the day, it would be dumb to believe that homes sold to avoid the empty-homes tax will become part of the rental pool. They won’t, which means that they will not help to drive down the price of rental accommodations.
The Very Rich, the Somewhat Rich, and the Barely Rich who want to keep their property and avoid the empty-home tax will add their properties to the rental market. However, I’ve yet to hear from anyone who has the hard data of whether there will be enough new homes on the rental market for everyone who wants one to get one.
Remember, real estate investors who want to rent their properties are already doing so!!! The empty-homes tax is targeted at people who can afford to have one home sit empty for considerable periods of time. I would venture to guess that this a much a smaller pool of property owners. They’ve already signalled that they don’t want to be landlords. For whatever reason, their properties sit empty. Owners of these properties know that money could be earned yet they choose not to become landlords.
Even if every single one of them rented out their empty-home to avoid the tax, I’m doubtful there would be enough new rental properties to satisfy the current demand or to appreciably drive down the price of rental accommodations. In other words, only a few renters would benefit and the problem of unaffordable rents would remain.
Increasing the number of rental properties
In my humble opinion, the empty-home tax does not appreciably increase the number of rental properties available to renters. Similarly, it doesn’t decrease the cost of rent.
I don’t have any good answers. Truly, I wish I did. Renters deserve to have homes, just like owners. Having a safe, clean, and comfortable place to live is something that everyone should have. Again, this is just my opinion. The empty-home tax does little, if anything, to ensure that renters have greater access to the kind of living conditions that they want. I’m willing to be persuaded otherwise. It strikes me that the empty-home tax might increase the number of homes available to buy. I’ve yet to be convinced that it will increase the number of homes available to rent. The empty-home tax does not help renters in any appreciable way.