Victoria to tax owners for leaving homes vacant as it tackles housing crisis

The Victorian government has decided to impose a tax on homeowners who leave their properties vacant in a bid to make housing more affordable in and around Melbourne, taking a leaf out of Vancouver's Empty Homes Tax.

The Vacant Residential Property Tax will be levied at 1 percent, multiplied by the capital improved value of the taxable property. 

The new rule is designed to coax owners who "unreasonably" leave their properties vacant to make them available for either purchase or rent.

If the property has a capital improved value of $500,000, the amount paid will be $5,000.

The new tax is expected to raise about $80 million over four years, according to a report in The Age. The changes will address the number of properties being left empty across inner and middle suburbs of Melbourne.

Late last year, the local government in Vancouver announced the Empty Homes Tax, which says, “Homes that are deemed empty will be subject to a tax of 1% of the property's assessed value. The Empty Homes Tax will be applied annually, with the first tax year beginning on January 1, 2017.”

The Vancouver council says that most homes will not be subject to the tax, as it does not apply to principal residences or homes rented on a long-term basis.

The city was high on the index of un-affordability, ranking third behind Sydney and Hong Kong in an international study by Demographia.

As for Victorian Vacant Residential Property Tax, the only word so far is that there will be some exemptions, owing to the fact that some properties are left vacant due to legitimate reasons, such as holiday homes, deceased estates and homes owned by Victorians temporarily overseas.

The tax is among several measures the government has announced to make housing more affordable, including scrapping stamp duty for first home buyers on properties worth up to $600,000.

The 1 per cent tax on vacant properties will encourage owners to either sell them or fill them by renting them out, says the government.

According to a study by Prosper Australia last year, more than 82,700 residential properties — or 4.8 percent of Melbourne’s housing stock — sit empty, while many people struggle to afford to buy or even rent accommodation.

The study estimated the number of unoccupied properties based on water use of less than 50L per day during 2014, from data provided by City West Water, South East Water and Yarra Valley Water.