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Sydney council proposes tax on empty homes

In an effort to combat the housing affordability crisis and increase the availability of rental properties, the Inner West Council in Sydney has put forward a proposal for a tax on empty homes.

The council has also suggested banning no-fault evictions, extending tenancy periods to up to 10 years, and imposing higher rates on retail landlords who leave their shopfronts vacant, according to The Sydney Morning Herald.

With nearly 10 per cent of homes in Sydney’s inner west sitting unoccupied, the Labor-led council recently voted to convene a roundtable discussion on renters’ rights to gauge support for the vacant homes tax.

Councillor Chloe Smith expressed optimism about the change in government, stating, “The change in government presents an opportunity to re-engage with a fresh set of policy priorities on how we can improve tenancy laws and renters’ rights”.

Victoria introduced a vacant residential land tax in 2018 to address housing supply issues, with the tax applying to homes in inner and middle Melbourne that have been vacant for more than six months in a calendar year.

Foreign owners of homes in Australia are also required to pay an annual vacancy fee if their dwelling remains unoccupied or untenanted for at least six months.

Lane Cove Council called for reforms last year, proposing higher council rates or land taxes on empty homes.

The 2021 census revealed that there were nearly 300,000 unoccupied homes across New South Wales, with 9.9 percent of private homes in Sydney’s inner west being vacant.

The Inner West Council’s meeting agenda said the empty property tax had the potential to boost the rental housing pool and other documents suggested the money the tax raised could be channelled into social and affordable housing.

Although NSW Housing Minister Rose Jackson expressed support for a conversation about vacant homes last year, a spokesperson for the minister told the SMH that the NSW Government was not actively considering a vacant property tax.

Housing research and policy professor Hal Pawson from the University of NSW cautiously endorsed the idea of a vacancy tax, particularly targeting homes owned for speculative purposes or as second, third, or fourth properties.

According to the SMH Mr Pawson noted that implementing empty property taxes can be challenging, requiring a legally sound and politically acceptable structure.

However, he cited the success of Vancouver’s 5 per cent tax on empty homes, which generated significant revenue and brought more than 4000 homes back to the market.

The Tenants’ Union of NSW Chief Executive Officer Leo Patterson-Ross said one of the most effective forms of encouraging owners to use their properties was with a broad-based land tax.

The Real Estate Institute of NSW (REINSW) cautioned against taxing empty homes, arguing that it would infringe on property rights and investment decisions.

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