Efficacy of Toronto’s vacant home tax questioned in record slow real estate market

The vacant home tax is meant to improve availability and affordability, but there are questions over whether it’s working as intended. Beth Macdonell reports.

The City of Toronto’s vacant home tax was created to make housing more available and affordable, but several years into the policy it’s not known how many properties have been converted into additional homes.

Real estate broker Carol Foderick has questions about how well the tax is working given the changing market conditions. The city is dealing with record low sales and Foderick said the number of homes intentionally left vacant is also very low.

She said her real estate group has as many as 40 properties currently up for sale that could be turned into rentals if there was an appetite do so.

In 2022, when the tax was brought in, Foderick said some of her clients who had moved to a second home during the pandemic did decide to sell or rent their primary residence.

“The reality is in the last handful of years the market conditions have changed so dramatically that in fact the tax may have run its course in terms of its efficacy,” Foderick told CTV News Toronto on Monday.

Number of rentals created from tax and revenue collected not clear

The City of Toronto shared numbers with CTV News Toronto showing that in 2022, 6,944 homes were deemed vacant.

In 2023, the city registered 5,077 homes that were deemed vacant, although the city said numbers could be skewed due to problems with the policy rollout that year.

• READ MORE: City of Toronto staff knew vacant home tax bills could backfire, emails show

In 2024, 5,989 homes were marked vacant. The vacancies from each of the three years represent less than one per cent of all properties in Toronto.

However, the city “cannot confirm whether residential properties that were identified as vacant have been rented,” John Longarini, director of revenue services, said in an email.

CTV News Toronto asked the city for the total amount of revenue brought in since the tax was created and if any money was collected.

Despite the projected billed revenue from the tax for 2024 estimated to be $103 million and a budgeted target of $50 million, the city said staff continue to process complaints, appeals and exemptions, and an overview of the vacant home tax’s revenue is planned for the second quarter of 2026.

“The vacant home tax is a policy tool designed to increase the supply of housing in Toronto and is not intended to be revenue generating,” said Longarini.

He said early indications suggest the vacant home tax continues to encourage property owners to occupy, rent or sell their homes rather than leaving them vacant.

The Toronto Regional Real Estate Board (TRREB) said when it comes to condos right now, more supply has come online and buyers and renters have a lot of choice, but it doesn’t necessarily mean units are being filled.

“You could have a condo owner that has every intention of renting that unit out, but they are having difficulty doing so because there is so much competition between different units and the city will also have to take in account for that and think about how our policy, our vacant tax policy sort of shift over time,” TRREB’S chief information officer Jason Mercer told CTV News Toronto on Monday.

Owners growing concerned as properties sit

Meanwhile, as properties continue to sit and owners manage debt, there are concerns the tax could eventually kick in.

“That’s obviously adding another layer of urgency to what is already a very stressful situation to move properties in a very challenging market,” said Foderick.

There are several exemptions from the Toronto’s vacant home tax, including the death of a registered owner, repairs or renovations, or a court order, among others.

The city also said the tax does not apply to an owner’s principal residence, regardless of how long its takes to sell, and a secondary property is exempt for a year, regardless if it was vacant beforehand.