The Empty Homes Tax is doing what it was designed to do, the City of Vancouver said on Friday, as it published its annual report for the 2021 vacancy reference year.

The Empty Homes Tax first came into effect in 2017, and the City says that as the tax is reaching the end of its fifth year, the amount of vacant properties in Vancouver is now at 1,398, which is 36% less compared to when it was first implemented.

The City says that 1,755 residential properties were identified or declared as vacant in 2020, but 49% of those have then became occupied in 2021.

The City also highlighted rental market data from the Canadian Mortgage and Housing Corporation (CMHC) that showed that rental stock has continued to increase every year, with over 5,900 units added in 2019, 2,455 added in 2020, and 615 added in 2021. The City did not address the fact that the number of units added every year is declining.

Revenue from the tax was at $39.1M in the tax's first year, $41.2M in 2019, $37.9M in 2020, $27.8M in 2021, and $68.8M in 2022. (The revenue from each year is for the preceding calendar year, or "vacancy reference year.")

Tax revenue decreases, such as that from 2019 to 2021, are often viewed as a negative, but in the case of the Empty Homes Tax, it's an indicator that the tax is doing what the City was hoping it would do when they created it, which is to decrease the amount of vacant properties in the City.

Last week, the Province of British Columbia published its own annual report regarding its similar Speculation and Vacancy Tax, which showed that it has also had a similar effect.

RELATED: Data Dive: BC’s Latest Speculation Tax Revenue and BC Housing Investments

The tax rate was increased from 1.25% for the 2020 vacancy reference year to 3.00% the following year, hence the substantial increase in revenue in 2022.

Data from the City's report last week shows that the amount of vacant homes subject to the tax has decreased from 0.92% in 2019 to 0.90% in 2020 and 0.71% in 2021.

The amount of homes being used as a primary residence has somewhat decreased, from 68.79% in 2019 to 67.79% in 2020 and 67.92%, but the amount of homes being rented out increased from 28.10% in 2019 to 29.05% in 2020 and 29.11% in 2021, which explains the decrease.

By neighbourhood, Shaughnessy, West Point Grey, and the West End had the highest proportions of vacant homes, at 5% (but not the highest amount). Most the neighbourhoods on the eastern side of Vancouver had the lowest proportions of empty homes.

Vancouver empty homes tax 1(City of Vancouver)

Some of that can be attributed to the desirability of those neighbourhoods, but also to density, which is higher closer to the downtown core.

According the City, 56% of vacant properties (including those exempt from the tax) are condominiums.

Where The Money Goes

When Vancouver introduced the Empty Homes Tax in 2017, the City said the goal was to "return empty or under-utilized properties to use as long-term rental homes for people who live and work in Vancouver" and to "relieve pressure on Vancouver's rental housing market, as our city has one of the lowest rental vacancy rates in Canada."

The tax was also one of the actions the City implemented to contribute towards its Housing Vancouver Strategy, which sought to making housing more affordable and to shift Vancouver's housing supply more towards an emphasis on rental units.

Revenue from the tax first goes towards the City's annual operating costs, but the remainder is then allocated towards affordable housing initiatives. One such initiative is the Community Housing Incentive Program (CHIP), which provides grants to non-profit housing providers, with the funding contributing towards operation costs as well as development.

In 2022, through the Program, a $5.5M grant was awarded to Brightside Community Homes to redevelop Alice Saunders House, which will add 82 new units to the site. A $6.0M grant was also awarded to Soroptimist International Vancouver to redevelop a 21-unit apartment into 135 new units for women.

Declarations are required every year, and the deadline to file declarations for the 2022 tax year is February 3, 2023.