Implementing Vacancy Tax: A Solution to Australia’s Housing Crisis?

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The ongoing housing crisis in Australia has been a significant cause for concern, with homeownership becoming increasingly challenging and rental prices skyrocketing. As policymakers and experts wrangle over potential solutions, one suggestion that has frequently surfaced is implementing a vacancy tax. However, as Sam Nichols and Jack Revell suggest in their respective articles, the efficacy of such a tax remains a topic of debate.

In a bid to ameliorate the housing crisis, Queensland Greens state MP Amy MacMahon introduced legislation in 2022 that would charge owners of vacant properties a 5 per cent tax1. As Nichols reports, MacMahon believes this would bring thousands of vacant properties into Queensland’s rental market and lower both rent and property prices. However, there are concerns that this could be merely political posturing or an ineffective solution.

On the other hand, Revell notes that the Australian Bureau of Statistics (ABS) figures revealed that there are approximately 10 million homes in the country that are unoccupied, a staggering 10% of Australia’s total housing. These properties, left vacant, make for attractive investment choices, particularly in suburbs where prices are climbing. A vacancy tax could disincentivise investors from keeping properties vacant, therefore increasing the supply in the rental market.

However, both authors acknowledge the limited evidence to support the effectiveness of such a tax. One promising instance comes from British Columbia, where the implementation of a vacancy tax in 2018 reportedly made a positive impact on the province’s housing crisis1. As Nichols points out, “over three years, between 15,000 and 20,000 homes were entered into the rental housing stock,” according to Professor Tsur Somerville of the University of British Columbia.

Despite this, Somerville is quick to temper expectations, stating, “It [had] an effect. But when you’re dealing with affordability crises, [a vacancy tax is] not moving the needle and solving the problem in and of itself,”

Revell concurs, noting that while a vacancy tax could play a role in resolving the housing crisis, the impact is expected to be small2. After all, Victoria’s attempt at implementing a vacancy tax in 2017 does not appear to have made a significant difference in the city, where rental vacancies are a low 0.8%.

Given the multifaceted nature of the housing crisis, Nichols underscores the need for a range of approaches. As Professor Somerville puts it, “Everybody wants to have some simple answer … that blames somebody who’s easy to blame, as opposed to dealing with the complicated things of building a lot more units in people’s neighbourhoods.”

While a vacancy tax may indeed offer some relief, a comprehensive solution would likely require measures on multiple fronts, including building more social and affordable housing, restructuring zoning and density laws, and adjusting financial regulations. As Australia grapples with its housing crisis, one thing is clear: there is no easy fix.

References:

Nichols, S. (2023). Vacancy tax could improve Australia’s housing crisis but isn’t the only solution, expert says. Retrieved from https://www.abc.net.au/news/2023-07-20/vacancy-tax-housing-crisis-australia-solution-canada/102593244 

Revell, J. (2023). There Are 10 Mill Empty Homes in Australia — Would a Vacancy Tax Fix the Housing Crisis? Retrieved from https://thelatch.com.au/vacancy-tax-australia/