Just like other Canadian cities, downtown Calgary seems to be experiencing a real estate development boom. However, most of these gleaming high rises remain unoccupied for various reasons. City authorities are now eyeing the empty buildings to impose the so-called vacancy tax. It will boost not only Calgary’s housing supply but also its coffers. However, one question remains unanswered: will residents also be forced to pay more taxes?
Tax Rates and Vacancy Rates in Downtown Calgary
According to reports, Calgary is currently experiencing its highest vacancy rates since 2008. Nearly 30% of buildings in downtown Calgary are empty. Real estate experts point out that the low occupancy rates resulted from Alberta’s decision to do away with the tax advantages that had made it attractive to businesses and residents.
Before the tax policy amendments, Calgary’s corporate tax was lower than other major Canadian cities. When the new corporate tax rate got enacted, those attracted to Calgary by the previous tax advantages started to look elsewhere, thus lowering the occupancy rates. The higher taxes are perceived to repel rather than attract investment.
Implications of Vacancy Taxes On Occupancy Rates
The proposed vacancy taxes will require building owners in downtown Calgary to declare their occupancy rates. According to city officials, this will discourage building owners from leaving their properties empty, given that there’s a housing shortage in Calgary.
Doubts still exist as to whether taxing property owners will improve occupancy rates. The current crisis resulted from Alberta’s decision to do away with the tax advantages that corporations enjoyed in the province. By compelling businesses to pay higher taxes, most of them relocated, thus causing the low occupancy rates.
Rather than taxing owners of empty buildings, it would help if Calgary reverted to the tax advantages that made it attractive to corporations, especially oil companies. In doing so, owners of vacant buildings won’t have to pay vacancy taxes to make up for the revenue shortfalls that the city is experiencing due to its unfavourable tax policies.
Authorities insist that Calgary residents won’t have to pay extra taxes, but there’s a caveat to it; their buildings should be occupied. Thus, if you live in your condo, you won’t pay the vacancy tax. Likewise, you won’t get subjected to the extra taxes if you rent your downtown condo to someone. The looming taxes will have a minimal impact on Calgary’s real estate market. The new tax policy aims at solving the city’s housing shortage.
However, the enactment of a higher corporate tax isn’t the only cause of low building occupancy rates in downtown Calgary. Thanks to the COVID-19 pandemic, the city’s real estate market has ground to a halt. Slowed immigration and restrictions on short-term let’s have suppressed the market. Thus implementing a vacancy tax will impose further hardships on landlords who are already struggling to rent their properties.
Will Owners of Residential Properties Pay More Tax?
Most highrises in downtown Calgary house offices are imposing vacancy taxes to improve occupancy rates and solve the city’s housing crisis. Besides, the residential condos are also way up the property ladder for those who need affordable housing. Although the tax could boost city revenue, it may discourage real estate investment in the future.
According to city authorities, Calgary’s ordinary property owner won’t be forced to pay extra taxes. The new tax policy primarily targets those who own buildings in downtown Calgary. Most property owners in Calgary either use the properties as their primary residence or rent them out. Therefore, the vacancy tax applies to those who can afford to own the typically expensive property in downtown Calgary.
However, those who oppose the new tax policy argue that it will punish owners of Calgary homes. Property owners already pay a lot of money to the city in maintenance fees. Thus, they already have an inherent incentive to lease out their property instead of losing money on high upkeep costs. Vacancy taxes will add even more stress to property owners. The taxes are punitive and will only hurt property developers and owners while making it even harder to improve occupancy rates.
Rather than imposing a blanket vacancy tax on Calgary property owners, city authorities should implement measures for improving occupancy rates. Re-establishing the abolished tax advantages is one such measure. Besides, the taxes should only apply to those who deliberately leave their buildings vacant for speculative purposes. In cases where owners refused to rent out their properties, a tax penalty won’t be punitive.
The world is facing its worst economic downturn since the 2008 financial crisis. The financial uncertainty brought about by the COVID-19 pandemic has hit the real estate market hard. It is attested to that; currently, we sell homes at a slower rate than before. With fewer people buying or renting a property, Calgary is facing low occupancy rates.
A vacancy tax has been proposed to eliminate empty housing spaces. However, this tax is primarily perceived as punitive since it unfairly targets property owners without addressing the city’s housing crisis. Indeed, it’s essential to improve occupancy rates, but property owners shouldn’t bear the burden.