Toronto’s vacant home tax must go
The rollout of the City of Toronto’s vacant home tax has been nothing short of disastrous. There’s no point trying to fix it, as it’s a flawed tax that was always going to be a mess. It needs to be axed.
The vacant home tax, now in its second year, requires an annual declaration from homeowners that they are either living in their property or renting it out for at least six months of the year. This declaration needs to be made yearly for each property a person owns.
The supposed purpose of it is to tackle the housing crisis by giving homeowners an added reason to put any vacant units they own on the market to increase the housing supply and, if they won’t, to redirect the tax revenue they’re forced to shell out towards housing initiatives.
If someone declares that their property is vacant, they have to pay one per cent of the assessed value of their home to city coffers. That’s a lot of money, and it’s set to go even higher: council recently voted to increase it to three per cent starting next year.
What’s caused the bulk of the public outcry now, though, is that homeowners also get dinged if they simply fail to submit a declaration. And more than 60,000 Toronto homeowners are currently in that very situation, getting shocking notices that they owe the city many thousands of dollars on top of the massive property tax increase they just received.
The notice to file the declaration came, in physical form, as a slip of paper in the property tax bills that were mailed out. It was no doubt mistaken by many residents as one of the various wasteful add-ons that are included in such mail-outs and get tossed in the bin without reading.
Those residents who have been improperly fined have spent their time emailing and calling the city, and lining up at municipal offices to get the charges removed. They’re angry — and they have a right to be.
The communication and implementation of this tax was an epic fail. Mayor Olivia Chow, in response, is pledging to waive late fees and fix things for those who were wrongly dinged. This is all going to take considerable resources.
It’s rather ironic that a program meant in part to be a revenue generator is now eating up a growing amount of money. But if we look back at the origins of this tax, it was clear all along that it would be trouble.
There are two dead giveaways in the original 2017 report made by city staff that should have set off alarm bells and made council less eager to vote this in.
The first was how heavily the city leaned on the Vancouver model as an inspiration: “Vancouver’s learning in implementing the empty home tax is of benefit for other jurisdictions contemplating such a tax,” the report states.
But Toronto is not Vancouver. It is not, as one magazine feature described the West Coast city, “a giant safety deposit box for China’s elite.” The same feature detailed how Vancouver real estate firms send recruiters to Chinese cities to bring wealthy buyers over on bus tours of high-end neighbourhoods. In other cases, homes are bought from abroad sight unseen.
While Toronto invariably has some of that, there was no evidence presented in the city’s report that Toronto is experiencing this phenomenon to the same degree as Vancouver. So why introduce an initiative that was tailormade to Vancouver’s situation?
Then there’s this doozy of a line from the report: “There is no reliable estimate for the number of residential units that may be vacant in Toronto.” Ouch. So they basically proceeded with a tax without any clue as to how much money would be collected, or what effect it would have. This is the exact opposite of evidence-based policy making.
In actuality, in 2022, there were 2,336 owners who declared their units vacant. Another 44,902 were deemed to be empty because no declaration was made. That number was later whittled down to 17,437, after residents complained about being wrongly dinged.
This means that the bulk of the administration of the vacant home tax for two years running has actually been spent on wrongly penalizing people and then cleaning up the mess afterwards.
How did the first year’s mistakes not better inform the implementation of the second year? It appears to be flawed by design. This mess should not be allowed to continue for a third year.
This fiasco also serves as a warning about how such niche taxes are invariably more trouble than they’re worth.
If you think this one was bad, just wait until they try to bring in a rain tax or commercial parking levy.