Understanding Toronto’s Proposed Vacancy Tax
If Toronto implements its proposed vacant home tax in 2022 as planned, the city will join other popular metropolitan areas around the world attempting to address the complex issues of real estate speculation and rental housing scarcity. The 1% tax would be imposed on a home’s assessed value if not occupied for more than six months in a year. However, more details are expected when the program’s complete framework is delivered in Q2 of 2021.
Vancouver began a similar initiative five years ago to curtail the use of its properties with sales funnel platforms such as Airbnb. But Toronto not only trails Vancouver’s timeline; it falls well short of its tax penalty, which will climb to 3% when Toronto’s program is finally in place. Still, using Vancouver’s experience with their vacant home tax as a blueprint, Toronto expects the annual revenue generated from its homegrown program could be as high as $66 million.
Real estate speculation aside, the rationale behind Toronto’s vacant home tax as a mechanism to deliver the city more rental properties seems clear – to motivate homeowners into making their empty units available as rental options — but how effective the measure will ultimately be is widely debated. The Toronto Real Estate Board insists the city doesn’t have a major issue with vacant properties but isn’t opposed to the tax. However, TREB has made several recommendations to protect homeowners, advocating for exceptions to the tax in the following cases:
- Principal residences
- Owners who are unable to rent the property due to market conditions
- Snowbirds
- U.S. citizens
- Legal matters pertaining to court orders prohibiting occupancy
- Commuters
- Properties undergoing renovations or ownership changes during the calendar year
- Owner or other occupier undergoing medical or supportive care
- If the owner is deceased and grant of probate or administration pending
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