The Canadian housing market is in turmoil. Supply has lagged far behind demand as the population surges. This imbalance has led to soaring property prices, high rents, and increased homelessness.

The situation calls for urgent action, and while long-term solutions, like building more homes, are essential, policymakers are also deploying short-term measures—most notably, vacant property taxes. As these policies are becoming increasingly popular, the potential impact and drawbacks of such taxes call for careful examination.

My new C.D. Howe Institute publication with Enrico Miglino aims to shed further light on this matter by using Vancouver’s empty homes tax as a case study. Implemented in 2017, Vancouver’s vacant home tax was originally set at 1 percent and has now risen to 3 percent on homes that are unoccupied for more than 180 days in a year. We examined this tax’s impact on the key dimensions that animate the policy debate: housing availability, affordability, and new construction.

To do this, we compared neighbourhoods right next to one of the city boundaries. On one side of Boundary Road, within Vancouver, homes are subject to the tax, while just across the road in Burnaby, they are not. By looking at these two similar areas before and after the tax was introduced, we were able to retrieve what the true impact of the tax has been.

Our results indicate that while the tax significantly increased housing availability, it did not spur new constructions. In fact, the tax lowered the vacancy rate by 1.5 percentage points, which translates to 5,355 fewer vacant units in Vancouver from 2016 to 2021, without affecting the number of new dwellings being built.

The other side of the coin, however, is that despite its positive impact on housing availability, the empty-homes tax has not produced the desired effect on rental prices.

Contrary to what economic theory would suggest—that an increase in housing supply should lead to a reduction in rents—the average rent in Vancouver has remained stable. This outcome raises questions about the broader effectiveness of the tax in addressing the issue of housing affordability.

One possible explanation for this lack of impact on rental prices is that Vancouver, as a high-demand “superstar city,” may be caught in a bad equilibrium where landlords are confident that their rental rates are safe, regardless of any increased supply. Additionally, landlords could pre-emptively raise rents to cover potential future costs associated with the tax, thus passing these costs onto their current tenants.

These findings highlight both the successes and limitations of Vancouver’s empty-homes tax. If the tax has effectively reduced the number of vacant homes, improving availability, it also seems to have had no effect on affordability.

The empty-homes tax alone is clearly insufficient to address the full spectrum of challenges facing the housing market, meaning a broader strategy is needed.

Supply-side measures—such as setting mandatory municipal housing construction targets and reforming upfront development charges on new housing—could play a vital role. Furthermore, initiatives to improve access to affordable housing and support increased housing density could help better balance supply and demand. These are all fundamental steps in creating a more resilient housing market that ensures that housing remains accessible and affordable for all Canadians despite the growing demand.

In this week’s Hub book review, Patrick Luciani examines two books, Technofeudalism: What Killed Capitalism by Yanis Varoufakis (Melville House, 2024), and Slow Down: The Degrowth Manifesto by Kohei Saito (Astra House, 2024), to examine the ideas of Karl Marx and how they’ve managed to persist to this day—and why they ultimately always fall short in practice.  

Capitalism has never had a good reputation, even though it pretty much rules the world. It’s an ugly word invented by its enemies in the nineteenth century, even though the history of private property and free exchange goes back centuries, including Italian city-states in the Middle Ages. Adam Smith preferred “commercial society,” but the Left won that PR battle.

Throughout the twentieth century, when Europe and North America were in economic distress, capitalism was an easy scapegoat, even though capitalism led to manufacturing jobs, bringing millions out of poverty. Karl Marx was right about one thing: the bourgeoisie saved millions “from the idiocy of rural life.”

Following the massive success and influence of Thomas Piketty’s 2014 book Capital in the Twenty-First Century, inspired by Marx, the French economist turned Marx’s prediction on its head. Marx predicted wild business competition would drive out profits, ending capitalism; Piketty worries that capitalism is too successful, with returns to capital continually outpacing economic growth, leading to a concentration of wealth in fewer hands. Hence his famous r > g expression.

Now we have two more books that continue the assault on free markets by self-professed Marxists.

Yanis Varoufakis, a former Greek finance minister in 2015 and now YouTube star, claims in his book Technofeudalism that capitalism is already dead, killed by a new class of feudal overlords: the owners of cloud capital. He argues that we have allowed a few creators and owners of computer platforms, such as Google and Amazon, to set the direction of technology to their benefit against everyone else.

These titans of technology have turned us into serfs who voluntarily turn over personal information for free. This new ruling class “draw[s] power from owning cloud capital whose tentacles entangle everyone.” Varoufakis takes the reader on a journey of how technofeudalism works, peppered with insights from the Mad Men TV series and comparing it to the rise of the Greek mythological Minotaur monster that rose “From the Ashes of the Bretton Woods system.”

Varoufakis is a great storyteller with fascinating insights, including his mother’s observation that capitalism might pay workers for their productivity but not their enthusiasm. Although a trained economist, the book lacks any data or evidence. Why let facts get in the way of a good story? Varoufakis has little regard for traditional economics, claiming it is closer to a religion than a science.

As finance minister, he fought hard against any austerity program to get Greece’s economy back on track. As it turned out, austerity put the economy on its current path to prosperity.

Although Varoufakis hates big media platforms, how ironic that he has made himself a star on YouTube, pontificating on all manner of economic and political topics. The allure of fame was just too tempting to resist.

Another book influenced by Karl Marx that has gained a following, especially among the young, is Slow Down: The Degrowth Manifesto by Kohei Saito, translated by Brian Bergstrom. To save the world from environmental destruction and the oppression of the poor, capitalism must be replaced with a form of degrowth communism. Saito blames capitalism for the climate crises, forgetting that “to live is to pollute,” and as a species, we’ve been living long before capitalism made its appearance.

He claims neoliberal capitalism is all about overproduction and overconsumption, whereas green capitalism is a myth. He calls sustainable development goals (SDGs) the opiate of the people and useless in the fight to protect the environment, one thing he has in common with environmental skeptics.

Saito, who teaches philosophy at the University of Tokyo, wants to marry degrowth, reducing production year over year, with Marx’s theory to “update our vision of a post-capitalist world.” He argues that market economies produce scarcity, while communism provides abundance. For example, if land speculation were banned, prices would fall, and voilà, more land for everyone. Forget the old Marx, he of failed predictions about the inevitable collapse of capitalism and the rise of the proletariat. Saito sees Marx as a cutting-edge thinker opposing colonialism and a protector of the environment.

On this last point, Saito completely ignores that communism left the environment in ruins everywhere it ruled. I doubt he has ever visited Cuba, Venezuela, or most of the Soviet Union—all scarred by devastating environmental disasters. If he has, he suspiciously makes no mention of it. China is cleaning up its act only because of the wealth created by capitalism. For someone born in 1987 and who completely missed the fall of the Soviet Union, he still has time to visit these places and see for himself. And when he does, he might take along something to read by Alexandr Solzhenitsyn.

In 1930, John Maynard Keynes said, “I prophesy that in 1950 every Treasury in the world will be talking about my ideas; but by that time, the problems will be quite different, and my ideas will be not only obsolete but dangerous.” That’s one lesson Marxists have never learned.

However, the conflict or struggle today isn’t between capitalism and communism but between different kinds of capitalism. Economist Branko Milanovic, who knows a thing or two about the history of capitalism, reminds us that the real battle is between two capitalisms. Liberal capitalism, as practiced in the West, with democracy tempered by the rule of law, and China’s political capitalism run by technical bureaucrats to maintain growth with the power to punish political opponents. The winner of that battle is just getting started.