There is a steady stream of heartbreaking tales about the effects of Australia's housing shortage. People are being priced out of their communities, forced to forego necessities in order to pay rising rents, or compelled to relocate to potentially hazardous conditions. Advocacy organisations and government officials have proposed several remedies to the situation, such as a rent freeze, better zoning restrictions, and tax incentives for property owners.

Vacancy Tax Legislative Changes

A vacancy tax is another possibility; this fee would be paid by the owners of vacant properties. Amy MacMahon, a Greens state legislator in Queensland, proposed a bill in 2022 that would levy a 5% tax on owners of unoccupied houses. She claimed that the law will reduce rent and property prices in Queensland by releasing thousands of empty homes into the rental market. A vacancy tax, however, has been called political posturing and an inefficient solution by its detractors.

Is This a Viable Solution to Australia's Housing Shortage?

Put simply, a vacancy tax is a levy placed on vacant properties. An extra tax is imposed on property owners who choose to let their homes sit empty. The hope is that this tax would discourage landlords from leaving their homes vacant, therefore increasing the available rental units or providing much-needed funds for housing infrastructure improvements. Because it is not widely used, there is little data on its efficacy. 

Welcoming visitors to British Columbia, Canada, the "Best Place on Earth," according to a sign posted in the woods. The housing crisis in British Columbia prompted the government to impose a vacancy and speculation tax in 2018. However, one of the few sources that backs up the tax is the province of British Columbia. A recent study issued by the Canadian Ministry of Finance found that the tax had helped alleviate the housing shortage in Ontario since it was implemented in 2018.

Tsur Somerville, a professor at the University of British Columbia and a co-author of the study, said to ABC RN's Sunday Extra that the tax was designed to stimulate the housing market and reduce prices for buyers. Professor Somerville adds that throughout that time period, between 15,000 and 20,000 dwelling units were added to the rental housing supply. Revenue in British Columbia increased by a modest CA$230 million ($256.6 million), while foreign ownership of homes fell by the same amount. Housing unaffordability increased less quickly than in the rest of the nation.

What Makes Canada an Attractive Option?

Australia, like British Columbia, is experiencing a housing crisis due in part to a shortage of suitable dwellings. Tsur Somerville, a bearded elderly guy in a blue shirt who is beaming with happiness, claims that a vacancy tax in British Columbia has resulted in the introduction of 20,000 more homes. In May, the average vacancy rate throughout the nation was 1.2% (the number of properties that were unoccupied). A vacancy rate of less than 3 percent is seen as ideal. The actual number of vacant homes in Australia is unknown, however the 2021 Census estimated that over a million dwellings were sitting unused.

Some Taxes and Levies Already Apply to Empty Homes around Australia.

Vacant properties in 16 different Melbourne council areas incur an annual fee of 1% of the property's value from the state of Victoria. The Greens' Victorian state MP Gabrielle De Vietri has challenged this method of enforcement, which relies on owners notifying this to the government, as being ineffectual. Short-term rental taxes have been implemented in recent years in both Brisbane and Hobart. However, there is a major contrast between these Australian methods and those used in British Columbia. Every year in British Columbia, homeowners in some areas are obliged to report whether or not they use their house as their primary residence, and those who fail to do so face penalties.

People in Vancouver and the rest of British Columbia have experienced a housing crisis similar to that in Australia. Foreign owners of unoccupied properties are subject to a 2% annual charge, while Canadian citizens and permanent residents pay an extra 0.5% of the value of their property each year. Those who do not report their immigration status must pay a 2% tax. Professor Somerville states that "everyone is essentially liable for this tax" unless the property in question is the primary residence of the taxpayer, a member of the taxpayer's immediate family, or is leased out for at least six months of the year.

The Housing Problem in British Columbia: Was it Solved by a Tax?

Professor Somerville argues that the vacancy tax helped a little, but ultimately didn't alleviate the housing situation in British Columbia. It made a difference. However, "[a vacancy tax] is not moving the needle and solving the problem in and of itself when dealing with affordability crises," he argues.

For one day, John Francis chose to be silent. A 'great' 17 years passed with hardly a peep from anyone: "I don't believe there was any anticipation that this [tax] was miraculously going to cure all those issues, but at least contribute to diminishing the incentive for individuals to own property. Things deteriorated further, although not as rapidly. To paraphrase, "[A low vacancy rate] was a part of the problem, but is in no way the nice simple answer."

Professor Somerville argues that although a vacancy tax may assist alleviate the housing crisis by preventing homeowners from letting their properties sit unoccupied and so increasing supply, it is only a partial answer. More cheap and social housing is necessary to solve a housing crisis like the one in British Columbia or Australia. (John Gunn, ABC News) He argues that more social and affordable housing must be built as part of a comprehensive strategy to alleviate the housing issue. "Everyone wants to have some simple answer," the speaker says, "that blames somebody who is easy to blame, rather than dealing with the complicated things of building a lot more units in people's neighbourhoods."

Summary

Whilst a simple vacancy tax is not one silver bullet to ease housing pressures in the Australian market, it can aid in a multi-level approach to not just affordable housing, but also to ensure assets are being utilised for their purpose. That is properties are used as shelter and home, rather than just an investment vehicle for the rich. In certain regional areas, even a slight increase in vacancy rate may assist, so it is definitely an option that should be considered, is easily integrated, and is fair targeting only a relatively small proportion of property investors, but may positively affect a larger part of the population.