The new vacant homes tax taking effect in Vancouver next year will require people to self-declare whether their property is sitting vacant.

Mayor Gregor Robertson announced Wednesday that a plan to tax empty homes would go ahead in 2017, and that the project could conservatively raise $2-million.

The proceeds will be used to create much-needed rental housing in the city's superheated real estate market, where buying a home has become out of reach for many people.

The city is currently dealing with record-low vacancy rate, which is hovering around 0.6 per cent.

The mayor said that principal residences will be exempt from the new tax, and only secondary properties will be targeted.

Penalties for not declaring are still being worked out by the city, and the city says it will conduct random audits once the tax is in place.

"The penalties for not declaring need to be significant enough that it might be preferable to pay the tax," said Kathleen Llewellyn-Thomas, general manager of community services for the City of Vancouver.

She added that the audit and complaint process will "keep people honest."

It's hoped penalizing property owners for having their homes sit vacant will motivate them to rent it out instead.

"Some people who can afford it will not want rent their property so they'll make a generous contribution to affordable housing in Vancouver," Robertson said.

The new levy, which will be introduced to city council next week, will be between 0.5 per cent and 2 per cent of the property's assessed value.

A study commissioned by the City of Vancouver found that about 10,800 homes were left empty for a year of more, most of them condominiums.

"We want to make sure we have people living in these homes," Robertson told reporters.