The City of Toronto is on track to begin taxing vacant properties to try to stop real estate speculators from buying up homes and letting them sit empty while residents struggle to find affordable housing.
Mayor John Tory’s executive committee unanimously supported a city staff recommendation Tuesday to implement a one per cent vacant home tax starting Jan. 1, 2022. The proposal will go to council for approval next week and then undergo public consultations.
The vacant home tax mirrors the one Vancouver put in place in 2018 to address a housing crisis and low vacancy rates. Councillors there pushed the rate to three per cent last fall after determining the tax pushed 5,000 condo units on to the rental market in 2019 and reduced the number of empty homes by 25 per cent.
Based on Vancouver’s experience, Toronto city staff estimate a vacant home tax will generate between $55 million and $66 million per year that the city would use to fund affordable housing projects, according to a staff report to the executive committee.
Staff hope the tax would also compel property buyers planning to leave homes empty to live there themselves or rent units out.
1% tax ‘a joke’
But at least one housing advocate thinks the proposed tax is set too low. Emily Johnson told councillors that the home vacancy tax has the potential to be both an effective revenue tool to fund housing projects and stop speculative real estate investing. But she said it needs to start at three per cent.
“People with the capital to buy and sit on properties like this and leave them vacant for their own purposes can afford a three-per-cent tax,” Johnson said. “One per cent is not a disincentive. One per cent is, frankly, a joke.”
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Heather Taylor, the city’s chief financial officer and treasurer, said Toronto wants to follow Vancouver’s lead by “easing its way into the tax to give residents the opportunity to correct vacancies they’re experiencing.”
But Johnson said Toronto doesn’t have time to wait, pointing to her own living situation as an example.
She has a stable, full-time job in a rent controlled apartment and still pays more than she can afford. When she leaves the city to pursue a master’s degree, she said she won’t be able to afford moving back in the future.
“I say this as a person with a great deal of privilege,” Johnson said. “This is to say nothing of people with low wage or precarious employment, with families to support, on social assistance, or trying to find their way back into stable housing after experiencing homelessness.”
City considering luxury home tax
The pandemic has driven up rental apartment vacancy rates to a 50-year high, a survey from January found. Urbanation reported that 5.7 per cent of rental apartment units were vacant in the fourth quarter of last year, compared to 1.1 per cent in the same quarter of 2019.
However, the consulting firm predicted the city will revert back to low vacancy rates as the pandemic continues to wane, with people getting vaccinated and returning to offices and schools.
And while rents have gotten cheaper, they’re still too expensive for low-income tenants, advocates say. The median rental price for a one-bedroom sits as $1,800 as of June, according to PadMapper.
The executive committee also considered a study by city staff for a luxury home tax, which it punted to the 2022 budget process for further consideration. Owners of homes valued over $2 million would face an increased municipal land transfer tax up to three to four per cent from the current 2.5 per cent.
Mayor John Tory said “it’s not the time” to be changing tax policies until the economic impacts of the pandemic lockdowns are better understood, even if the housing market has remained “relatively healthy.”
“I think you have to take great care when it comes to imposing additional burdens on people,” the mayor told the committee.
Staff estimate that depending on how the vacant home tax is structured, it could generate up to $30 million more a year in revenue for affordable housing projects. The risk is homeowners would hold off on upgrading to luxury homes, tightening the supply of “mid-value” homes, the report said.
Given that the average detached house price in Toronto was $1.5 million in 2020, the tax will predominately target homeowners who aren’t “uber rich,” the Toronto Real Estate Board’s Kevin Crigger told the committee.
The tax increase would have “a direct dampening effect” on housing supply, he said.
Original Article: https://www.cbc.ca/news/canada/toronto/vacant-home-tax-toronto-1.6092010