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Some houses, apartments, and other living spaces can remain unoccupied for most months in the year.
Meanwhile, America faces a dilemma of affordable housing options.
As government officials grapple with potential solutions that will ensure people can afford a physical home, one study suggests implementing an empty-house tax can change the housing crisis status quo. Cities that have implemented such legislation have seen positive results in their economy and rates of unoccupied homes.
“Housing prices are impacted by supply, and if there are thousands of homes that sit unused, even a fraction of that becoming available will have a real impact on prices,” Alex Tran, Housing Community Development Commissioner of San Jose told the San Jose Spotlight. “We are looking at these ideas because we are in a housing crisis, and that requires us to put all solutions on the table and figure out what makes sense.”
Using Taxes to Adress Housing
Jonathan Bourne, a Ph.D. Candidate at Bartlett University College, sought to answer critical questions in low-use property issues.
His research focused on London, where housing prices have risen, and homes are less available due to increased international investment in the city’s housing market.
Using national data, Bourne calculated the rate of empty homes throughout the U.K. He discovered that more than 40% of English and Welsh residents live in towns, neighborhoods that contain many high-expense, low-use homes.
This, among other findings, suggests that reducing the number of unoccupied homes, versus building new ones, could be a practical step in addressing a city’s housing crisis.
At the local level, there has been some progress with passing higher tax rates on empty properties. Their law states, “if a property remains unoccupied and unfurnished for two years or more, council tax increases to 150%.”
That tax has raised more than $38 million in city revenue, all of which was spent on affordable housing programs.
American Vacancy Rates
In the U.S., empty-home rates rose by 26% between 2005 to 2010 — that’s a 2.5-million-home increase, according to a report from the Lincoln Institute of Land Policy.
Further research suggests this is an issue impacting significant cities throughout the country.
An estimated 100,025 households are sitting vacant in the San Francisco (15.3% Latino) metro area, which is the country’s housing crisis epicenter.
Data from LendingTree found that three cities in Florida (25.6%) had the highest vacancy rates:
- Miami (72.2%) – 17.5% vacancy
- Orlando (29.7%) – 15.93% vacancy
- Tampa (25.1%) – 15.25% vacancy
Cities Thinking About and Implementing Taxes
The city of Vancouver implemented its first empty-home tax in 2016.
It resulted in success, and officials recently reported that the city vacancy rate dropped by 15% between 2017 to 2018. Furthermore, the initiative generated $38 million — most of that money will be funneled into other affordable housing programs.
Now, city officials are looking to bolster that legislation, which could increase the tax rate or charge a different price for foreign owners. If enacted, properties deemed empty will be subject to a 1% increase of the property’s 2018 assessed value.
“The year-over-year numbers are very encouraging,” Mayor Kennedy Stewart told the Vancouver Sun.
South of the border, Oakland, California (27%) voters approved a tax that addresses empty homes. It raises the taxes of properties that are vacant for more than 50 calendar days.
Oakland’s City Council says it would raise $10 million annually, which can only be used for homeless services, affordable housing, programs to fight blight and illegal dumping, administer the tax and defend any possible lawsuits.
Vacancy is a Problem for Everyone
In the U.S., the most expensive neighborhoods can have a 30% empty or low-use housing rate.
In some places, vacant homes and storefronts can lower neighboring property values by 20%, according to Curbed. Moreover, vacant properties can result in a $3.6 billion citywide household wealth reduction due to adverse effects on nearby homes and businesses, according to the Philadelphia Inquirer.
In the most expensive cities, there aren’t enough homes for everyone, and those places do need to build more homes. Yet, if available housing is attractive to people looking for a second home, it doesn’t do much for low-income residents.
A tax could potentially be a more useful tool in those cities than new construction.