What You Should Know About Toronto’s Coming Vacant Home Tax

Dated: October 21 2021

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Many houses have been sold faster than they're built in Toronto, and investors have left many empty properties as the market has bubbled. This is about to change in the new year, with a new tax being imposed on properties that are still unoccupied.

The city's vacant home tax was approved in July. It's expected to bring in another source of revenue for the cash-strapped city. The new tax will apply to all residential properties. It will also encourage owners to keep their properties occupied. The tax becomes effective in 2022 and then payable starting in 2023 and will apply to all residential properties that sit empty.

The first step in this process is to declare the status of a home(s) each year. It's also the end of the process for those who regularly live in their homes, even if they spend long periods throughout the year away from their Toronto home.

As an example, homeowners who spend the winters in sunnier locations will still be exempt. Owners declaring vacant non-principal properties will only be subject to a tax of 1% of the home's current value. This will not apply to owners who may have a vacant property under renovation or are currently seeking new tenants. The approved tax will only apply to homeowners with homes occupied for more than six months of the last calendar year.

Like any tax, there are specific exemptions to the six-month cutoff. Examples of these exemptions include whether or not this is the owner's principal residence even though the owners may reside elsewhere for an extended time, vacancy due to death of the registered owner, significant renovations, and other issues that prevent a unit's occupancy.

While the tax is definitely coming, more specifics continue to be finalized. A public survey on the new tax remains open until October 25 at 9 am. The survey addresses some significant issues around the new tax, such as how much tax should be paid and if late declarations should be accepted.

The City of Toronto estimates that a one percent tax on vacant homes would generate $55 to $66 million annually.

At the time of the tax approval, Ana Bailao, Deputy Mayor and Chair of the Planning and Housing Committee, stated, "Toronto needs housing options – plain and simple. This tax program has the ability to open up the housing supply by making vacant homes available – and if homeowners want to leave them vacant they can pay the tax which will fund housing projects in the city. Creating housing options for Toronto residents is the priority."

Although most city council members supported the tax, it remains a controversial topic within the real estate industry. Toronto council has been working towards a vacant home tax since 2019. Other Greater Toronto Area governments are also looking at implementing similar measures.

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