In many of the world’s most expensive cities, the housing shortage is more than just a shortage of buildings. There is also a shortage of homes being lived in as homes.
Investment apartments, which sit vacant between short-term lets or are left empty as owners wait for prices to recover, have become a political target. Governments are responding with a blunt but growingly popular weapon: an annual tax on residential property left empty.
It’s a simple case. In major cities, housing is a scarce public resource. If an owner can keep a valuable apartment empty, everyone else pays the price, in the form of higher rents, longer commutes, and a smaller supply of homes available to local residents.
Vancouver was an early adopter . It launched its Empty Homes Tax in 2017 at 1 per cent of a property’s assessed value, a rate that has since been raised to 3 per cent. Homeowners are required to declare how their property was used during the previous year, and the city can ask for proof. Vancouver says the policy has generated revenue for affordable housing and led to some owners renting out vacant properties, but researchers still debate how much of the change can be attributed to the tax versus wider market conditions.
Toronto also brought in a similar measure for the 2022 tax year, initially taxing 1 per cent of the assessed value of a home. The rate increased to 3 per cent for the 2024 tax year. All owners of residential property must register a declaration even if it is not occupied. It is not only a method of raising money but of building a database of housing use, something cities often lack.
France has had a national vacancy tax since 1999. In areas of housing pressure, properties left empty for over a year will be taxed at 17 per cent of their rental value in the first year and 34 per cent thereafter. Paris also levies a separate tax on second homes which can be as high as 60 per cent of the normal housing tax.
There are issues with the policy. “Empty” means a property in major renovation, caught up in probate, temporarily uninhabitable or used occasionally by a family. Cities thus grant exemptions. But any exemption leaves room for disputes and evasion. Good records, inspections and cooperation by owners are also needed for enforcement.
Nor can a vacancy tax build homes. It works best as one part of a larger housing strategy that includes construction, tenant protections and restrictions on short-term rentals. Its purpose is narrower: to make holding an unused home expensive enough that putting it on the market becomes the more rational choice.
The principle behind the taxes is increasingly influential: in a housing crisis, ownership may be private, but the consequences of leaving homes idle are public.