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.
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.”
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.”
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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