Are you ready for Toronto's new vacant home tax? Deadline to declare is Feb. 2

Toronto residents who own an empty home will soon be taxed for it, as the city pushes forward with a fee it says will help increase housing supply and raise as much as $66 million a year.

City hall's new vacant home tax will start in the new year and the deadline for all property owners in the city to declare whether their home is vacant or not is Feb. 2. The lone councillor who voted against the tax says he's already receiving complaints about the "heavy-handed" notices issued by the city to alert homeowners to the need to make a declaration.

Stephen Holyday, who represents Ward 2, Etobicoke Centre, said he's received numerous calls about the message, its tone and the complexity of the new system. 

He says it's struck a nerve.

"I would say over-arching is the principle about government overreach into their private affairs," he said of the complaints. "And what they saw as a very heavy-handed approach to taxing people."

City council voted in December 2021 to create the tax on vacant properties. The goal was to put pressure on the owners to sell those empty homes or put them on the rental market. 

With a growing housing crisis in the city, council hoped it would open up more spaces for new buyers and renters.

Anyone subject to the tax pays one per cent a year of a home's current assessed market value. That fee applies if a home has been unoccupied for six months in a year or is not used as the owner's principal residence or by "permitted occupants."

Homeowners who don't make a declaration by Feb. 2 could be fined $250. Fines for attempting to evade the tax can range from $250 to $10,000. 

People subject to the tax will be issued notices in March or April. Payment will be due on May 1.

Some exemptions to the tax apply including; if the homeowner is in long-term care, if the property is undergoing repairs or renovations, or if vacancy has been caused by the death of the owner.

Process to declare is complex, councillor says

Holyday said the city letter sounds "rather strict" and has caught a number of people, who hadn't heard of the tax, off guard. Others are frustrated with the complexity of the city letter or online portal to make the declaration, he said.

"The idea of negative billing, or forcing you as a customer to take action in order to not receive a charge, is upsetting to people," Holyday said. "And I understand why. And it was among the reasons why I voted against it."

Mayor John Tory's office defended the tax, saying it's needed to help create more rental stock in the city. The "vast majority" of Toronto property owners will not pay it, said Tory's spokesperson Taylor Deasley.

"If you live in your own home, if you live in your own home but go to a vacation home during parts of the year or work abroad, or even if you rent out your property, this tax will not apply to your situation," she said in a statement.

Deasley said council approved the tax after consulting the public over several years. The experience of other cities who have implemented a similar tax is that the most practical way to determine if a home is vacant is "self-declaration," she added.

She points to Vancouver's vacant home tax, which is estimated to have returned approximately 6,000 homes to the rental market in its first year.

"Residences are meant for people to live in, not to sit empty during a housing crisis," she said.

City estimates tax could generate $66M a year

The city estimated in 2021 that it would need to hire 25 people to administer the new tax and audit compliance. The program would cost $11 million over two years to start and cost the city $3 million a year to administer in the years ahead.

But the city said the tax is expected to generate as much as $66 million in revenue per year, funding that will be used to create more affordable housing.

The president of the Toronto Regional Real Estate Board said realtors across the city have been preparing for the implementation of the new tax for months. Kevin Crigger said the group is still working with city officials to learn how homeowners can provide proof of a declaration during a home sale. 

Right now, Crigger is suggesting all homeowners take a few simple steps as they're completing the form to save any hassle down the road.

"I would encourage anyone while completing it, even if a sale of your property is not contemplated today, it certainly makes sense to print it and have it easily accessible," he said. "I'm not sure yet what form the city will have available for the verification process, outside of potentially a tax certificate." 

Crigger said the tax will likely have the desired impact, incentivizing some people to put homes on the market to avoid paying the fee.

"I think from a policy perspective, in a market that has the low level of supply that we do, we certainly understand the government's perspective and bringing it forward," he said. "We worked collaboratively with the [city,] not in opposing the tax, just really ensuring that the tax applied fairly and reasonably throughout the market." 

Holyday also believes the tax will push people to sell vacant homes, but worries the tax revenues will flatline in the years to come as people find ways around it. That has been the experience in Vancouver, which introduced its vacant homes tax in 2017, he said.

"Their numbers showed that they did reduce the number of vacant homes," he said. "But it was really only in the first year. And then after that it started to dwindle."

Holyday said the tax might have the unintended effect of pushing small landlords who own one or two properties out of the market. 

"I am concerned that this is yet another barrier to people who would like to do something like rent a property or become a small landlord," he said. "It's those people that are critical to dealing with the housing shortage."