Homeowners with vacant properties in Toronto take heed: the city’s new Vacant Home Tax takes effect this week.
Homeowners were initially required to declare their property’s occupancy status by February 2 or risk fines of up to $10,000, but Toronto Mayor John Tory announced an extension to that deadline today.
Homeowners now have until the end of February to declare if their property is occupied or vacant.
The City of Toronto introduced the new tax in an effort to increase housing availability by encouraging the conversion of vacant properties into occupied homes and rentals.
The new annual tax will be levied on vacant properties this year, with taxes payable starting in 2023. A property is considered vacant if it hasn’t been used as the owner’s principal residence or was not occupied by tenants for a total of six months of the previous calendar year.
“Properties may also be deemed (or considered to be) vacant if an owner fails to make a declaration of occupancy status,” the city noted on its website. A declaration can be done through the online portal or by printing the paper form and submitting it to the City before the deadline.
A tax rate of 1% will be applied to such properties based on the home’s Current Value Assessment (CVA). If the property is assessed at $1 million, for example, the tax payable next year would be $10,000.
The City said all tax revenues collected under the Vacant Home Tax will be allocated towards affordable housing initiatives.
Toronto isn’t alone in introducing such a tax. Ottawa has its own Vacant Unit Tax.
Homeowners there have until March 16 to declare whether their residential properties are occupied or face having an additional 1% of the property’s assessed value added to their tax bill.
Last month Hamilton city council voted to adopt a similar tax, while the Region of Peel is currently considering adopting its own vacant property tax.
The Vancouver experience
Vancouver was the first major Canadian city to introduce a tax aimed at cracking down on vacant properties with its Empty Homes Tax (EHT), which came into effect in 2017.
The move was meant to “encourage residential property owners to return empty and under-used properties to the market as long-term rental homes,” according to the city.
Any properties deemed or declared vacant in 2022 are subject to a tax of 3% of the 2022 assessed value. In 2023, that tax rate will increase to 5%.
According to the City of Vancouver, there were 1,398 vacant properties as of 2021, a decline of 36% since the tax was introduced.
It also pointed to an increase in rental stock over that same period. “The Canada Mortgage Housing Corporation (CMHC) observed a significant shift toward long-term rental in Vancouver following the introduction of EHT, with an increase of 5,920 condominium units in the long-term rental stock between their surveys in 2018 and 2019,” the city noted in a report.
It has also collected more than $115.3 million in net tax revenues from the tax, which it says has been allocated to support affordable housing initiatives.