There are about 40,000 ‘ghost houses’ in Auckland. Cat MacLennan asks if a tax on these empty homes could help house homeless people and low-income workers.
Tall white rose bushes line both sides of the path leading to the front door of the immaculate-looking villa. There are curtains at the windows and no signs of neglect or decay.
Yet this expensive, inner-city home is one of Tāmaki Makaurau’s “ghost houses” – properties left empty long-term at a time when the country has a housing crisis. No one has lived there for years and a neighbour is paid to maintain the garden, while the owners wait for capital gains to accumulate to the point at which they plan to sell.
According to the 2018 Census, there are approximately 40,000 empty private homes in Auckland. That is 7.3 percent of the total, up from 6.6 percent in the previous Census in 2013. And Auckland is not the only place in Aotearoa with vacant homes at a time when accommodation is expensive and in short supply. There are ghost homes in other cities, in towns and in rural areas.
Many unoccupied houses are holiday homes, dwellings awaiting demolition or renovation, or properties located in remote places where there are few jobs.
But a significant number are empty simply because the owners are focused on capital gains. This is now an international phenomenon. In England it is called “buy to leave,” in New York it is described as “warehousing,” while in British Columbia it is known as “wealth storing”.
Property prices in London trebled between 1996 and 2007, meaning that homeowners made huge capital gains and did not pay the income tax they would be levied on other forms of earnings. For these people, putting tenants into properties would be a negative because it would make their investments less liquid and therefore less valuable. Vacant houses are worth more because they offer owners more flexibility and can be sold speedily.
Perhaps the most alarming aspect of this phenomenon is that it means that building more houses might not, in fact, mean more people obtain homes. Counterintuitively, rather than providing shelter for the homeless, constructing more homes might simply be increasing the pool of investment properties.
Until we stop viewing houses as investments and go back to regarding them as homes, we will not solve our homelessness crisis. Houses are for living in, not for wealth investment.
This calls into question the rationale and effectiveness of government and local authority policies and targets for providing more housing, both in this country and overseas. It also makes it clear that a broad range of measures is required to address our housing crisis effectively.
In New Zealand, the Government and Auckland Council are examining how vacant houses in the city could be used for the homeless or low-income workers. Mayor Phil Goff has spoken to ministers and says several thousand vacant homes could be pressed into service, perhaps for the Housing First programme, which finds shelter for homeless people, or for workers such as teachers, nurses and police officers who find it hard to obtain affordable accommodation.
We should look overseas to see what is being done there. Reoccupying existing homes is much speedier and cheaper financially than constructing new dwellings – in Scotland, for example, the average cost of renovating an empty property is between £6000 and £25,000, compared with the average new build outlay of £120,000.
In addition, it is less harmful environmentally to renovate than to construct from scratch.
A number of countries now tax homes left vacant for long periods. This raises revenue that councils can use for empty homes work but, more importantly, it is designed to nudge property owners into turning their houses back into homes.
Vancouver was the first city in North America to introduce a tax on empty houses. The 1 percent tax was levied on 2538 vacant homes in 2017, but on only 1989 properties in 2018. A 22 percent drop in the number of vacant homes taxed occurred at the same time as the number of properties rented to tenants climbed by 7 percent. There was also a 21 percent leap in the number of condos being rented out in the city.
It is very early days for the tax and there are many reasons for variations in property occupation statistics, but the first results from the levy are encouraging.
The approximately C$38 million a year Vancouver raises from the tax is spent on affordable rental projects and modular housing programmes to address the city’s homelessness crisis. Vancouver’s empty homes tax increases to 1.25 percent this year and British Columbia has now introduced a vacancy tax for the whole province.
Paris, Scotland, Hong Kong, Washington, Oakland and Melbourne also have empty homes taxes and they are being considered in Honolulu, San Diego, Los Angeles and San Francisco. Heavy lobbying by real estate agents sank such a tax in New York City.
In Scotland, statistics published last year showed that 108,000 of the country’s 2.6 million dwellings were unoccupied. However, there has been concern for over a decade about the number of empty homes, sparking actions on a number of fronts.
The Scottish Empty Homes Partnership was set up in 2010 and aims to bring the country’s 40,000 privately-owned, long-term empty homes back into use. The partnership is funded by the Government and encourages each of Scotland’s 32 local authorities to have a dedicated Empty Homes Officer. There are currently 24 officers who work to bring vacant homes back into use by providing advice and information, and encouraging social landlords, community groups and private bodies to engage in empty homes work.
Around 100 empty properties a month are being returned to occupation across Scotland. The partnership signed a new contract with the Government in 2018 providing for additional funding to increase grants, fund research into innovative approaches to bringing empty homes back into use, and expand the reach of digital and advice service provision.
A parliamentary committee held an inquiry into empty homes and in late 2019 recommended that the Government introduce compulsory sale orders to tackle empty properties. Scottish councils can already make use of compulsory purchase orders but seldom do so, as they lack the funding to acquire homes or the resources to deal with them once they are bought.
The Orkney Islands and Perth and Kinross Councils have Empty Property Matchmaker Schemes to help prospective buyers and sellers of vacant properties to find each other more easily. Perth and Kinross’s Local Housing Strategy 2016-2021 also provides for grants of up to £7500 per bedroom to help owners of long-term empty homes to bring them up to standard, as well as advice on selling, renting or converting properties. The council has an Empty Homes Loan Fund which offers interest-free renovation funding of up to £15,000 to owners of private properties which have been empty for at least six months.
In England, there are 226,000 homes that have been empty for longer than six months, with 11,000 of them unoccupied for over a decade. A hundred thousand of those properties are in London, where local authorities spend £700 million a year on housing the homeless in insecure temporary accommodation.
The Government in 2010 announced a £100 million fund to bring empty homes back into use. As long ago as 2004, it legislated for empty dwelling management orders, provided for under the Housing Act to enable local authorities in England and Wales to take over management of unoccupied properties and use them for housing. English councils can charge taxes on empty homes, with the amount doubling if the property stays vacant for two years. Some councils now want to quadruple the levies after four years.
Research released by doctoral candidate Jonathan Bourne of University College London in early 2019 examined the relationship between unoccupied homes and housing affordability in different parts of England and Wales. He collected statistics covering 23 million residents and 340,000 low-use properties, revealing that between 39 and 47 percent of the population lived in areas where low-use property was more expensive than homes occupied by full-time residents. The areas with the least-affordable housing also tended to have the highest demand for low-use property.
Bourne concluded that an empty homes tax might be more effective at providing housing than building more homes, as the key issue was intense competition for desirable properties, rather than a lack of properties. He suggested that an empty homes tax of 1 percent could encourage occupation of properties and raise an additional £1.2 billion in taxes.
In Australia, 300,000 of the country’s 9.8 million homes are vacant. Approximately 153,000 new homes enter the market each year, meaning that the vacant properties represent close to two years of new supply. A 1 percent tax applies to unoccupied Melbourne houses.
In the United States, New York City’s 75,000 vacant apartments would be enough to house all of the city’s homeless.
The Secretariat of New Zealand’s Tax Working Group in 2018 prepared a paper titled Taxing vacant property. It took a negative view of such taxes, describing them as difficult to enforce, contentious to define and likely to involve high administration and compliance costs.
In short, the document had nothing good to say about empty homes taxes. That is a pity and does not seem borne out by the overseas experience.
The Tax Working Group’s final report released in February 2019 recommended the introduction of a capital gains tax in New Zealand. However, the Government swiftly put the kibosh on this suggestion, making no attempt to sell it to the electorate even though it is obviously an essential tool to rebalance investment away from housing.
It would be very helpful for New Zealand to introduce a tax on empty homes, to create Empty Homes Officer positions in councils, and to encourage the owners of vacant properties to bring them back into use.
But until we stop viewing houses as investments and go back to regarding them as homes, we will not solve our homelessness crisis. Houses are for living in, not for wealth investment.