The Empty Homes tax proposal and the “Fear of discouragement investment”.

Homes are meant to be lived in, not left vacant. Empty homes taxes help bring life back to our neighborhoods.

Too often, we hear about the fear of discouraging investment as an excuse to avoid implementing regulations that could democratize the market and address pressing issues, like the current housing crisis in Queenstown.This time, the idea that investors might flee if we imposed limits on them, leaving New Zealand in a state of uncertainty, has been used as a counter-argument to the empty homes tax proposal

Is the 'fear of discouraging investment' a legitimate concern? Who are these investors that we should safeguard, even if it means compromising human rights and living conditions for the population? Could implementing an empty homes tax be part of the solution to the current housing crisis? What are the pros and cons of implementing vacant property tax in New Zealand"

Empty homes taxes: The beginning of the debate.

One innovative idea making waves in the region is the concept of Empty Homes Taxes. Put simply, the empty homes tax targets property owners who leave their homes vacant for extended periods, typically ranging from 6 to 9 months. This idea could potentially alleviate the housing crisis and regulate practices like land banking. So far, it is not a formal proposal, but just a debate where waters are beings tested. 

In New Zealand, to enact an empty homes tax, a decision must come from the national government. However, at this juncture, there is no institutional will to push the proposal at a local level. Both, Queenstown’s Mayor Glyn Lewers and Southland MP Joseep Mooney, are reluctant to endorse it. “We need to fix the rental rules so people can rent their properties out, rather than disincentivising people from building and owning houses that they can rent out.” Mooney said. 

Is rental the main purpose for those owning houses in New Zealand? Should the debate be framed as choosing policies for vacant homes over policies that incentivize rental? Why is there not a more open discussion about the possible effects of  a vacant property tax in New Zealand? 

Vancouver’s leading the battle for taxes on empty houses.

To gain insight into the potential impact of an empty homes tax, we can look at Vancouver's successful implementation. Vancouver introduced a tax that charges owners three percent of a property's value if it remains unoccupied for more than six months. Since its launch in 2017, this initiative has generated $NZ141 million ($CAD115 million) in tax revenue, which is then channeled into affordable housing initiatives.

How many empty homes are in Queenstown?A calculation of the economical benefits of implementing an empty homes tax in New Zealand.

A report from Emptyhomes.co.nz in 2018 identified 3,105 empty homes in Queenstown. To understand the potential revenue, Julie Scott from the Queenstown Housing Trust used a calculation based on 5,000 unoccupied homes and a median Queenstown house price of $1.7 million. The potential annual revenue from implementing an empty homes tax in New Zealand is $255 million, applying the same three percent tax rate used in Canada. While these are not official numbers, even if we consider only 3000 units, the figure remains significantly substantial.

Who owns the houses in New Zealand?

Since the fear of discouraging investment continues to cast a shadow over a tangible solution to the housing crisis in New Zealand, we must ask: Who are these investors that we aim to protect? Who owns the land in New Zealand? Who owns the houses in Queenstown? Do we really have to take care of foreign investors rather than local workers?

According to the Valocity report presented by Stuff in its series “Mega Landlords”, a specific group of major investors collectively possesses more than 22,100 homes, which, as the news portal remarks, is equivalent to the populations of cities such as Invercargill or Nelson. These properties are held by only 906 individuals or private companies, and their property portfolios are continuously expanding. James Wilson, Valocity's head of valuation, emphasized that all governmental attempts to level the playing field for first-time homebuyers have proven ineffective. 

The data also  highlights a decrease in the market share of first-time homebuyers, with 11,603 fewer homes owned by this group compared to 2015, translating to a 4 percent reduction in their market presence. Wilson attributed the decline in homeownership to the struggle of first-time buyers to afford surging house prices, worsened by competition from existing property owners expanding their portfolios using their property's increased value.

Additionally, the study reveals another data point: investors with three to five properties possess over 41,000 more homes than those holding just one or two properties.

New Zealand under an unfair housing market.

In simpler terms, what we have is a housing market with policies that favor major investors and private companies. Those investors whom we should aim to encourage for continued investment are, in reality, the ones dominating the market, making it challenging for first-time buyers to enter. Simultaneously, these types of investors perpetuate practices like land banking, which essentially removes more houses from the rental market. Why not applying a policy that could make the game a bit more even?

Rather than safeguarding private investors and large corporations, the focus should be on democratizing the housing market. It's time to prioritize the needs of the people and address the housing crisis head-on, without allowing the fear of discouraging investment to hinder progress. Accessible housing should be consistently part of public discourse, and, given the current situation, a prospective empty homes tax should be at the center of the debate.