What you need to know about Toronto's vacant home tax ahead of Feb. 2 declaration deadline

Toronto residents whose properties sit vacant for more than half the year will soon have to pay a hefty tax but it remains to be seen whether the penalty will actually help boost housing supply in a city facing an affordability crisis.

Homeowners have been given until Feb. 2 to declare whether or not their property is vacant.

If the owner deems the property vacant or fails to complete the declaration, a tax of one per cent of the home’s assessed value would then be applied to property tax bills starting in the spring.

Supporters say that the new tax could convince some owners to list underutilized properties for sale or place them on the rental market, helping to boost housing supply in the process.

But opponents say that the tax is confusing and won’t ultimately have a big impact when it comes to boosting housing stock.

Here is what you need to know about Toronto’s vacant home tax:

What is it?

The tax was first approved by city council in 2021 but has taken the better part of two years to implement. Once in effect it will apply to residential properties that sat vacant for more than six months of the previous tax year however there are a number of exemptions available, including if the principal resident died or had to be placed in a hospital or long-term care facility for more than half the year. Repairs and renovations are also exempt so long as city officials are of the opinion that the work is “being actively carried out without unnecessary delay.”

What do homeowners need to do?

All homeowners should have already received a notice in the mail and will be required to submit their declaration by Feb. 2, either through an online portal or by mailing it in. The city will then issue formal tax notices in March and April. Owners who fail to complete the form by the Feb. 2 deadline will still have the ability to make a late declaration but could face a fine of at least $250.

Speaking with CP24.com this week Etobicoke Centre Coun. Stephen Holyday said that he has already heard from a number of constituents who have been confused by the process.

Others, he speculated, likely aren’t even aware of it yet and may not get their declarations in by the deadline.

“I have heard from a lot of people who don’t necessarily have access to a computer and for whom this poses a challenge or a complexity,” he said. “My prediction is that there will be quite a few people that will get a very large bill in the mail (in the spring) and say ‘What is this? My home wasn’t vacant.’ They will have the chance to make a late declaration but they could face a $250 fee as a result of that.”

How effective will the tax actually be?

City staff have estimated that the tax could bring in between $55 and $66 million annually, with that money then being directed towards affordable housing initiatives. But Jason Mercer, who is the chief market analyst for the Toronto Regional Real Estate Board (TRREB), said that the success of the tax will ultimately hinge on its ability to convince some owners to rent or list their properties for sale.

“I think the jury is still out. If a year from now we do an audit on the revenue generated from the tax my hope would be that it doesn’t actually generate that much revenue and in fact did see people that had vacant units either list them for rent or for sale,” he said. “If we find there is a tonne of additional revenue going to the city’s coffers the purported point of the tax won’t have been fulfilled.”

How many vacant homes are out there?

Nobody really knows for sure. A 2017 staff report did estimate that there could be 15,000 to 28,000 vacant residential units in Toronto, based on water and hydro data. But staff warned at the time that the number was likely not a “reliable estimate” and couldn’t be used to actually identify vacant properties.

Holyday said that while there are some vacant properties “here and there,” his suspicion is that many of them come with a “long story” that might exempt their owners from paying the tax.

“Given the cost of maintaining a property and of course paying property taxes, which every property is subject, it would be very surprising to me if many of these properties are left haphazardly vacant,” he said. “I think for the most part this is a tax that will cross the desk or kitchen table of every resident and really, truly will only have an impact on very, very few. But yet everyone will still have to go through this process.”

Has this sort of tax been effective elsewhere?

Vancouver is the only other major Canadian city with a vacant home tax, though a number of other municipalities including Mississauga are studying the possibility of introducing one. Since the tax came into effect in Vancouver back in 2017 the number of vacant properties declared by homeowners has been reduced by 36 per cent. The tax itself has also been hiked several times and is now set at five per cent of a home’s assed value. For his part, Mercer said that the number of vacant homes identified through the declaration process in Toronto in 2023 will really just serve as a “baseline” and it will likely take “a number of years” to determine whether the tax is having its intended effect here.

“Right now they've sent out the forms for people to declare whether, you know, their dwelling is vacant or not and that will provide us with a baseline. And then, you know, the following year, they'll obviously collect the information again, and, you know, we'd have to see how that changes,” Mercer said. “There's a lot of considerations and it needs to be measured properly.”

How will the city ensure compliance with the tax?

Director of Revenue Services Casey Brendon told CP24.com that staff will “conduct reviews and audits of the declarations of occupancy status and any claimed exemptions,” though she did not provide any information about how frequently audits would be carried out. City officials previously said in a 2021 staff report that they anticipated hiring 25 new staff members to help administer the tax and carry out audits.

Could the tax be inherited by the buyer of a home?

Potentially. Brendon says that if no declaration is received by Feb. 2 and the home is sold prior to the tax being assessed, the new owner may wish to “lodge a complaint/appeal to review the circumstances.” She said that purchases are also being advised to “discuss the vacant home tax implications on purchases of property, and to discuss who (vendor or purchaser) will be responsible to make a declaration for the unit.”