Council votes to hike Toronto's vacant home tax to 3% as housing crisis grows

Toronto city council will hike the city's vacant home tax amid a growing housing crisis, a year after the new fee was introduced.

Council voted 21-2 in favour of increasing the tax for having an empty house or condo from one to three per cent of its assessed value next year.

Backed by Mayor Olivia Chow, the move aims to help battle the growing housing crisis in Toronto while helping to trim the city's budget deficit.

"We're seeing speculators sitting on much needed housing, strangling the market, driving the price of rental housing higherand making it even less affordable for people," Chow said Wednesday in council.

"No one should be keeping a home empty during this housing crisis."

Council also approved a motion presented by Chowtodirect at least $10 million of any additional revenue from the tax hike to a city housing program, which would providegrants to non-profit housing operators to buy private market rental housing.

The hike will go into effectfor the 2024 tax year.

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 the move would open up more spaces for new buyers and renters.

Anyone subject to the tax currently 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."

Fines for attempting to evade the tax can range from $250 to $10,000.

Tax brought in $54M during 1st year

The city says that by the end of February, it had received approximately 95 per cent compliance as home owners either declared their home occupied or vacant. As of August 1, just over 2,160 homes were declared vacant. The city ultimately deemed a total of17,400 vacant, meaning their ownershad to pay the tax.

There are exemptions to the tax,includingif the homeowner is in long-term care, if the property is undergoing repairs or renovationsor if vacancy has been caused by the death of the owner.

City staff say that revenues from the first full year of the tax were $54 million, in range of projections made before it launched. Chow,who promised to address the city's growing housing crisisand budget deficit during the spring byelection, said she'dlike to see that funding put into a dedicated stream.

"We want to take that money to buy older buildings that we can protect, make them affordable for tenants forever and create affordable housing," she said.

The new increase is estimated to bring in roughly $105 million in 2025, nearly double the expected 2024 revenue at one per cent.

The tax is also one of a number of measures recommended by city staff to help address a $1.5-billion budget deficit this year.Chow stressed the the levyis meant to crack down on real estate speculation that keeps homes off the market long-term.

Fee welcomed by most, but not all

Ausma Malik, who representsWard10, Spadina-Fort York, welcomed the program expansion.

"Through the vacant home tax, we're aware of 19,000 units paying this fee with an estimated 10,000 units that were left empty in the city," Malik said during thecouncil meeting on Wednesday.

"Empty units that can be homes for people who need them in this city and who should be able to imagine a future here."

Malik said too often empty units are left for investment speculation or for illegal short-term rentals, leaving a hole in the number of units in Toronto available for housing.

"I believe that the success we're seeing this year can be built on and elevated by increasing this fee to three per cent and putting more housing supply back into our system," she said.

Coun. Stephen Holyday, who represents Ward 2Etobicoke Centre, opposed the tax hike Wednesday, saying he feared it wasnot about creating more housing supply.

"I do not support the increase from oneper cent to threeper cent because I fear that it is about the money," Holydaysaidahead of the vote.

"I urge members of council not to vote to increase the tax and see this as a policy tool as opposed to a tax tool."

Holyday, who also voted against the creation of the vacant home tax, said residents of his ward have expressed frustration with the fee, as well asthe complexity of the system to opt-out in order to avoid being charged. Hesaid the tax hike was an attempt to bring in another variable tax through "the side door" rather than directly through the property tax.

The city is still working its way through a backlog of thousands of homeowners appealing being assessed for the tax. He said the cost to administer the vacant home tax which isapproximately $11 million a year cuts into the effectiveness of the levy.

"It's not always the story of a rich landlordthat's just allowed a vacant unit to sit there," he said of who is paying the tax. "The truth is, it's expensive to carry property in Toronto, and I think most people will rent it if they could. But there's always a backstory."

"I think there are people that got caught up in a very expensive tax, and it's about to get much more expensive."