19 September 2022

Slapping a vacancy tax on empty rentals would have minimal impact on market: housing advocates

| Lottie Twyford
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Aerial suburban housing view

Housing is – as always – a hot topic in the Territory. This time, a vacancy tax is up for discussion. Photo: Michelle Kroll.

Imposing a vacancy tax on investors whose homes are sitting empty in the Territory would not have a great effect on housing and rental affordability, housing advocacy groups have said.

Both ACT Shelter and Greater Canberra are concerned there just aren’t enough ”rentable” vacant homes in the Territory and say the Government would do better to focus its public sector resources, time and taxpayer money elsewhere.

An ACT Legislative Assembly inquiry into rental and housing affordability in the Territory is considering a proposal from ACT Greens crossbencher Johnathan Davis for a vacancy tax that would be slapped on landlords – both commercial and residential – with properties sitting empty.

Mr Davis suggested the tax would operate as an incentive for landlords to bring tenants in.

Johnathan Davis

ACT Greens MLA Johnathan Davis floated the idea of a vacancy tax earlier this year to try to stop owners from leaving properties vacant for long periods of time. Photo: Region Media.

But Greater Canberra would instead like the Government to focus its efforts in the space on planning law reform so more homes can be built in existing suburbs with ease.

Group convenor Howard Maclean acknowledged this would not be free, but it would be a cheaper and better use of the Government’s finite public service resources than imposing a new tax.

Mr Maclean told the committee’s first public hearing on Friday (16 September) that while the group provided in-principle support for the idea of a vacancy tax, it wasn’t convinced that was the most effective policy lever the Territory had at its disposal.

The residential rental vacancy rate was 1 per cent in Canberra earlier this month, according to Domain.

“An additional tax on off-market vacancies would be a good tax but its impact would likely be modest,” Mr Maclean said.

“There simply aren’t that many habitable, well-located homes that are kept off-market at the moment.”

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Mr Maclean said the Territory’s rental woes were largely being driven by a scarcity of homes in areas people wanted to live and he was “realistic” about what kind of an impact a vacancy tax would have on the market.

He also questioned whether changing the tax system would be the best use of government resources if it would only lead to a couple of hundred homes coming onto the market.

“We do think a vacancy tax would increase the number of homes coming onto the market, we’re just not sure the quantum would be [very big].”

Data collected by Icon Water for the ACT Government’s submission to the inquiry showed about 2400 homes could have been empty between March 2021 and February 2022.

That was measured by identifying sites where water usage was equal to or less than 50 litres a day. But it could not include units or apartments, nor whether a dwelling was actually habitable.

Mr Maclean said even this could be overstating the number of empty homes in the Territory, noting properties would often sit vacant for complex reasons.

“If somebody owns a home that is fit to be rented out … there isn’t a better market for landlords right now,” he said.

“One of the [most common reasons] may be the resident is very elderly or recently deceased and the estate is in the process of disposing of the home.”

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He further noted any landlord with a property sitting vacant was being charged a tax “implicitly” – because they were paying land tax and general rates on it.

The Government’s submission confirmed it did not currently see vacant residential homes as a significant issue for Canberra, simply because they only represent 1.9 per cent of dwellings.

Its submission also noted it would cost the Government both time and resources to manage the new tax, which it estimated would be about $20,000 a year.

ACT Shelter, another housing advocacy group, also noted the impact of a vacancy tax was likely to be “modest”. Like Greater Canberra, the group did not oppose the introduction of a vacancy tax in and of itself.

Research and policy coordinator Deb Pippen said supply was the big issue and vacant stock was only a small part of the housing affordability problem.

A vacancy tax is imposed by the Federal Government on foreign investors who leave their properties empty. The ACT Government also imposes a foreign ownership land tax surcharge of 0.75 per cent of the average unimproved value per year.

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Incidental Tourist12:37 am 24 Sep 22

“Vacancy tax” is insane. What’s next? A vacancy tax on unoccupied bedroom in your own house perhaps? Why not? If you can’t prove that each bedroom in your own house is occupied every night, then someone should move in – this will definitely help with the rental crisis. Don’t forget about new “fair” tenancy law. You can’t evict that “tenant” from your spare bedroom simply because you want your bedroom back.

Capital Retro11:12 am 22 Sep 22

Currently, if you sell your home to downsize, you are only given 90 days Land Tax exemption on the (non-investment) house you leave behind. This is unrealistic as the average time it takes to move, prepare, market and sell a home in Canberra is 120 days and with interest rates rising it could be 6 or 12 months.

HiddenDragon6:53 pm 20 Sep 22

What a cute little game of good cop, bad cop we have going on here.

Greens MLA floats the idea of an additional vacancy tax which gets some people shaking their fists in anger and muttering about socialism and then, abracadabra and hey presto, nice-sounding community group (i.e. densification lobby group) pops up and says a vacancy tax is not the best idea, what we really need is ” planning law reform so more homes can be built in existing suburbs with ease”.

Just to be clear, what “Greater Canberra” wants, according to their 2022-23 Budget submission, is for “the ACT Government to allow unit-titled duplexes on up to 60,000 existing RZ1-zoned properties, and upzone areas near rapid bus routes to allow more townhouses and small apartment buildings.” They also want to abolish “merits review” of planning decisions. [https://www.greatercanberra.org/blog/newsletter-update-august-2022/]

This is Big Australia, and now Big Canberra, not so much knocking on the door of every suburban home in Canberra as approaching those doors with a sledge hammer.

Had the Greens stuck to the concept of a sustainable population for Australia, which they used to advocate for, instead of becoming a bunch of useful idiots who green-wash Big Australia, they would not now need to be proposing desperate ideas like a vacancy tax regime, nor would they need (as Ms Vassarotti did on radio today) to be emoting about moths threatened by proposed Defence Housing in Canberra.

If I own a property, it is an asset that I have paid for. What I choose do with that property is entirely my business.

The Government has no place imposing a tax on me, if a property I own is vacant.

If the Government wants to increase the availability of rental stocks, release more land and build some public housing instead of spending our taxes on LR.

Incidental Tourist10:27 pm 19 Sep 22

It is rather strange to see Greens to be involved in rents and real estate taxes to a greater extent than immediate environmental issues around ACT. Even grass was hardly mowed in Canberra since Greens presence in the Assembly increased. Instead they are more preoccupied in wrecking havoc in the rental market by acting in opposite to every recommendation of the REIACT. It can only be compared if Greens would be building their health policy contrary to every recommendation of the College of GP for example. I mean why don’t Greens mind their business of playing more active role in looking after their immediate Environmental agenda with some tangible and visible benefit of the Territory. They can start with regularly mowing grass, removing dead trees, cleaning reserves around ACT this season for example.

Leigh Whitaker5:30 pm 19 Sep 22

Why dont they do something about the boarded up empty government houses currently in Canberra. There are two in my street in Weston Creek and probably plenty of others. Look in your own backyard first before slugging landlords.

Excellent point Leigh!

“Data collected by Icon Water for the ACT Government’s submission to the inquiry showed about 2400 homes could have been empty between March 2021 and February 2022.”

Well, my home was one of those empty houses last year for five months during the lockdown when I stayed away from Canberra! No water, gas or electricity was used during that time. Does this mean that if a vacancy tax was in place, I would have been hit for it?

Is this the same government that puts up the hand for increased immigration? where is eveyone going to live?

Barr sees increased population as a revenue stream. However that’s less of everything to go around and higher prices. There is no long term plans, look at light rail is it a 10-20 year project or 50-100 years?

at the rate we are going a commercial office will be dead in 20 years and living in the country will be very appealing.

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