Would a Vancouver-style tax on empty houses help Seattle?

Anyone hoping to flee a Trump administration by moving to Vancouver should be prepared for some sticker shock. As expensive as housing is in Seattle, Vancouver, B.C. is the most expensive market in North America.

Much like City Hall here, Vancouver has been searching for policies to try and moderate the increases, and in November, the city council there implemented its latest attempt, a tax on vacant homes.

Vancouver will impose a 1% tax on vacant properties based on the value of the home. There are some exceptions for people who might be traveling, having medical problems, or at least trying to rent or sell their home. Properties are vacant if there’s no one living there for at least half of the year. Renting it out will allow the owner to avoid the tax, but the rentals must be for at least 30 days at a time basically precluding Airbnb-style weekend rentals.

Would the plan work in Seattle?

A study in Vancouver found 10,800 year-round empty homes in Vancouver, and the city estimates that there could be as many as 22,000 that are either unoccupied, or occupied by temporary residents (temporary meaning more like Airbnb rentals). There are so many empty, there’s actually a Tumblr of photos of empty homes.

Implementing a Vancouver-style tax on empty houses in Seattle might not add up. According to the U.S. Census Bureau, in 2015, there were an estimated 667 housing units, classified as “Vacant, current residence elsewhere” out of 328,528 total units in Seattle. If these all came on the market in the short term, there could be an impact. Zillow lists 1,140 homes for sale in Seattle as of this writing. While that would be a quick boost to inventory, Zillow also reports more than 11,800 units being sold in Seattle in the last 12 months, meaning that those less-than 700 units would be a drop in the bucket over the course of a year.

How many vacant units there are in Seattle is anybody’s guess. The city gets involved if a neighbor calls to report a squatter or other unsafe conditions, but no one tracks empty units. The closest might be the census bureau, which estimates 17,320 vacant units in our city overall. The government definition of vacant, however, includes new units that may not yet be habitable; older units that may be vacant for a month or two while they’re on the market or waiting for a sale to close; and housing that’s empty while in the midst of a renovation. Any of those would end up exempt from the sort of tax Vancouver is imposing.

While related, the tax measure is separate from the Airbnb rental issue. In Vancouver, and locally, leaders fret that short-term rentals can take units off the long-term market, exacerbating the housing crunch in both cities.

Vancouver is also considering regulations for Airbnb rentals. If it approves what has been generally proposed, the measure would effectively end the practice of renting out a unit as an Airbnb full time. Instead, it would limit such rentals to no more than 90 days per year, and only allow them in an owner’s primary residence.

Seattle is looking at its own measure aimed at restricting Airbnb rentals, treating them more like a bed and breakfast or hotel, and requiring those who rent out full time to register as a business.

Other numbers don’t look good for an empty-home tax having much of a Seattle impact. The census estimates a vacancy rate of 5.2%. That number is the lowest the rate has been since 2006, when it hit 8.2%.

So, over the past 10 years, even as prices and rents have generally gone up, the vacancy rate has dropped. For there to be some giant well of empty houses that the city could tax as a way of persuading owners to start using them, it would seem the vacancy rate should have gone up, or at least remained stable, over that period.

For now, we can watch how things play out in Vancouver where the CBC reports “the city will conduct random audits to catch cheaters, and property owners who try to skirt the rules will face penalties.”

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6 thoughts on “Would a Vancouver-style tax on empty houses help Seattle?

  1. This is ridiculous, and not the solution to housing affordability. What’s next–fining people who buy a car and don’t drive it?

    • That’s a pretty good idea — thanks! One percent of an unused car’s value or one percent of its owner’s income, whichever is greater.

    • There’s already rules against abandoning a vehicle on a city street and they actually get enforced – a car left for more than 72 hours will eventually get towed.
      OTOH – try to get action on an abandoned house. They can be falling to pieces and occupied by squatters and wild animals for years without anything being done.