City puts plan to tax vacant homes on hold, but the idea isn’t dead quite yet

A proposed tax on vacant homes in Toronto will likely be delayed for at least another year after the concept was found to be in need of more investigation during the city’s 2020 budget discussions.

On Tuesday, Coun. Brad Bradford asked the city’s chief financial officer to complete a report on the proposal by the second quarter of 2020, after the city’s upcoming budget has been set.

“We do need a made in Toronto solution. [The] context, challenges and the pressures facing our city are unique,” said Bradford, who represents Ward 19, Beaches-East York.

“They’re going to need to take some time to make sure that we get it right.”

A vacant-home tax is designed to increase a city’s supply of rental homes by penalizing the owners of properties that are not being fully used, thus encouraging them to make the properties available for rent.

Toronto’s budget committee approved Bradford’s motion on Tuesday to more closely examine the implications and challenges of a vacancy tax.

Ana Bailao, Toronto’s chair of planning and housing, has also voiced her support for the tax.

Other cities have grappled with how to administer the tax, how to reliably identify vacant homes and how onerous the tax rate should be.

There are also questions about the efficacy of the tax itself, and whether or not the concept actually increases a city’s rental supply.

In Vancouver, where a similar tax was introduced in 2018, property owners are taxed 1.25 per cent of the assessed value of their property if it isn’t their principal residence or if it is not rented for at least six months per year.

“There is data to show the supply of rental properties has improved,” said Toronto’s chief financial officer Heather Taylor during Tuesday’s budget meeting. “However they’re in a price category that might not be deemed affordable.”

Vancouver’s tax generated close to $40 million last year, though Bradford said the tax should not be viewed as a source of revenue, but instead as a policy to increase supply on the rental market.

Lessons from Vancouver

Critics of the tax say it has mostly resulted in high-end properties being made available for rent, since the people who can afford to keep a property vacant often own expensive homes.

“They’re definitely not affordable by any means, but people have been forced to rent them out,” said Cameron Fazli, a residential rental property manager in Vancouver.

“It has created a lot of inconvenience for a lot of people who own property.”

Even proponents of the tax concede that it disproportionately frees up high-end properties. Still, they argue that enough affordable units enter the rental market to make the system worthwhile.

“I think it’s definitely a good idea; it’s a step in the right direction,” said Raza Mirza, a member of the advocacy group Housing Action for Local Taxpayers Vancouver.

He added that a vacancy tax should be part of a larger housing plan.

Mirza also said Toronto could improve on Vancouver’s introduction of the tax by more firmly establishing how many vacant units currently exist and measuring how many enter the rental market after a tax is introduced.

Unlocking homes that are ‘built and ready to go’

Von Palmer, chief communications and government affairs officer at the Toronto Regional Real Estate Board, said the city should instead give developers incentives to build new rental properties.

He also noted that determining if a home is vacant can be difficult, and in some cases, potentially infringe on privacy laws.

“There are better ways to bring on more rental supply,” he told CBC Toronto.

Bradford’s motion calls on the city to examine the vacancy tax in relation to other initiatives that could boost the rental supply.

He said he would wait on the full staff report before committing to the idea, though he expects the tax to be an effective aspect of the city’s overall mission to create more affordable rental housing.

“When we look at the Vancouver experience that they’ve just been through in implementing it there’s certainly lessons that we can take from that,” Bradford said.

“The nice thing about this is that these are rental units that are, for the most part, built and ready to go.”

CBC