New taxes designed to push homeowners into renting out all or part of their empty homes are achieving the goal – at least while the housing market in B.C. remains soft.
Lower Mainland property managers and realtors say they’re seeing an increase in the renting business, now that homeowners in urban areas can’t leave properties vacant without incurring the province’s speculation and vacancy tax.
Vancouver homeowners also face the City’s empty-homes tax (EHT), which was a response to the affordable housing shortage.
“The point of [the tax] was to make it so the homes weren’t being unoccupied and being used for the population that lives and works here, so in that sense, it does seem to be achieving its purpose,” says Jessica Lee, co-founder of new property management firm Bodewell, which launched a year ago in anticipation of a growing rental market.
Donald Mackenzie, company president, says that business is growing at about 50 per cent per month. They work with realtors who are advising clients to hold until the market goes back up. The expectation is that the client will then return to the realtor to sell the property, Mr. Mackenzie says.
“We enable them to hold and keep making a return until the market has picked up again and maybe in three or four years they will be selling,” he says. “And there are a lot of good tenants out there. It’s working.”
Mr. Mackenzie said that they were also motivated to launch their firm when they saw all the condo completions coming online, such as the Tate tower downtown, where they have many client investors holding units and now renting them out.
Laneway house builder Jake Fry says that for the first time in his long career he got an inquiry from someone looking to avoid the EHT.
“The first question was, ‘If we build laneway on this property will we avoid the empty homes tax if we rent it out?’ I have never had that question before,” he says.
He says an effect of the market downturn has been a return to business on the west side of the city. When extreme wealth started pouring into west side neighbourhoods such as Point Grey, Mr. Fry’s business moved eastward because west side homeowners looked down on the idea of a laneway house rental, he says. Now that the market has slowed, new owners on the west side are open to the idea of a laneway house as a mortgage helper.
“When prices jumped up and people were paying exorbitant rates, those Point Grey people wouldn’t talk to us anymore, because why would they have a rental unit? It was déclassé,” he says. “So our work was moving steadily east. And now we are going back and finding more and more projects on the west side, because these homes are now staying as family homes.
West Vancouver realtor Dez Tsourpi says the bulk of her clients are investors and she is also a property investor.
“But I’m unique in that I purchase rental properties specifically to rent out – I’m not a flipper. I buy them specifically as part of my retirement plan to get a renter in there, pay [the properties] off eventually and have income down the road, because I’m self employed and I don’t have a pension. This is all part of my wealth building plan,” Ms. Tsourpi says.
She’s been referring her clients to property managers such as Mr. Mackenzie because they aren’t flipping presale condo assignments or newly built units as they used to. Ms. Tsourpi says investors have typically bought around transit such as SkyTrain and in walkable, desirable areas.
A low vacancy rate means they can demand high rents, she says. A typical one bedroom downtown is about $2,100 a month.