In response to Toronto’s ongoing housing crisis, the Toronto City Council made a significant decision on Wednesday by voting to increase the vacant home tax rate from one percent to three percent. The move is aimed at urging property owners to put their vacant units to use in a housing market where affordability is a growing concern. Mayor Olivia Chow emphasized the importance of taking action, stating that the city aims to generate additional revenue by levying higher taxes on speculators who leave apartments vacant during a housing crisis.
Funds for Affordable Housing Preservation: To utilize the revenue generated from the increased vacant home tax, Mayor Chow introduced a motion to allocate the funds to the Multi-Unit Residential Acquisition (MURA) program, which focuses on preserving affordable rental housing in the city. The MURA program operates by having the city acquire market rental buildings that are at risk of being converted into condominiums, thus safeguarding affordable housing options.
Tax Requirements and Collection: The vacant home tax mandates that residential property owners in Toronto declare the occupancy status of their properties each year. If a property remains vacant for six months or more, homeowners are required to pay a tax amounting to one percent of the property’s assessed value. This tax was initially adopted in 2021 and went into effect last year. The council has requested staff to report their findings from the first full year of tax collection and recommend any necessary changes.
Impact and Expected Revenue: In the inaugural year of implementation, Toronto collected $54 million through the vacant home tax. Staff recommendations for 2024 propose increasing the tax rate to three percent, which is expected to generate an additional $50 million for the city, assuming the number of vacant homes remains constant. However, staff predicts that this extra revenue will gradually decrease as the program deters property owners from keeping homes vacant.
Additional Fee and Future Compliance: In addition to the tax increase, staff recommends implementing a new fee of $21.24, adjusted annually for inflation, for failing to provide an occupancy declaration by the annual deadline. This fee is expected to bring in approximately $800,000, with revenue declining as owners become more compliant with reporting. The compliance rate for the first year of the program was 95 percent, and staff anticipates a one percent improvement each year.
Exemption and Future Considerations: Other proposed changes include a two-year exemption for newly constructed, never-occupied residential units that remain unsold. The definition of “tenant” is also set to be expanded to include business tenants. Council discussions included debates on the tax’s ultimate goal, with some expressing concerns about it becoming primarily a revenue tool. Some councilors pushed for exemptions based on health circumstances, and motions were passed to explore these options and affirm that the goal is ultimately to collect no revenue from the Vacant Homes Tax.
Tackling the Housing Crisis: These measures to reduce vacant homes come at a time when Toronto is grappling with a housing crisis marked by soaring rent prices and the increasing unaffordability of home ownership, exacerbated by rising interest rates. The increased vacant home tax aims to stimulate action within the housing market and ensure that vacant properties contribute to addressing Toronto’s housing issues.