Act now to tax vacant homes

No one will ever accuse the city of Toronto of rushing into things. Standard operating procedure at city hall is to wait, study, wait some more, study some more — and then (maybe) do something once pretty much everyone has concluded that it’s long overdue.

So it is with the proposed tax on vacant homes that the city’s executive committee is to consider on Thursday. By now, the idea is such a no-brainer that it would be astonishing if the city doesn’t go ahead with it, as it should.

The idea behind a tax on vacant homes is straightforward. First, to discourage property owners from leaving condos, apartments and houses empty in a city where decent rentals are expensive and (at least in normal times) hard to find.

And second, to raise money for a city that is chronically underfunded relative to its ambitions and the needs of its growing population.

As Toronto pondered the idea of a vacant-homes tax, it was tried elsewhere and the evidence is in: It works on both counts.

Vancouver, where the property market is historically even tighter than Toronto’s, brought in a tax on vacant homes back in 2017, amounting to one per cent of assessed value per year. There were warnings at the time that it would scare off investors and collapse the housing market, but none of that happened.

Instead, the new levy discouraged owners from leaving homes (mainly condos) empty at a time of great housing need. It did just that: The number of empty properties dropped by 25 per cent in the first two years.

And the tax brought in extra revenue for the city — about $61 million overall. Not a great deal, but something to put toward building more affordable housing in a region that badly needs it.

Vancouver has since upped its tax to 1.25 per cent of assessed value and plans to increase it to three per cent next year.

And the province of British Columbia now applies a similar tax in Victoria and other urban areas.

The city of Ottawa is considering such a tax, and the federal Liberals floated the idea of a national levy on vacant homes in last year’s election campaign. Others (including the Star) have been pushing the idea.

Toronto would just be following the trend. A city report estimates that a modest one per cent tax, to be introduced in 2022, would bring in somewhere between $55 million and $66 million a year.

That’s not a huge amount in the context of a city operating budget of close to $13.5 billion.

But the COVID-19 pandemic has blown a giant hole in the city’s finances, and if those who can afford to leave properties empty can be separated from a bit of their surplus cash, then all the better for the rest of us.

Naturally there would be exceptions. If a property is empty because of renovations, or because owners are spending a few months in the sun, it won’t apply.

And the best scenario would be for owners to sell or rent out their properties rather than keeping them vacant and paying the tax.

At the moment, some are arguing that a vacant-homes tax isn’t needed because rents have fallen and rental vacancy rates are up sharply because of the pandemic. But COVID-19 won’t last forever, and the city should position itself for the recovery that will follow.

All long-term projections for the city and the whole GTA are for an influx of newcomers and continued pressure for more housing.

That’s a big problem that calls for big solutions if the city is to avoid becoming unaffordable for all but the very rich. We’ve been moving in that direction for a long time, and a tax on vacant homes would be just one small step in pushing back against that trend.

The executive committee and the full city council should join Mayor John Tory in moving ahead with the idea. It’s the right thing to do, and now’s the time to do it.

By now, the idea of a vacant-homes tax is such a no-brainer that it would be astonishing if Toronto doesn’t go ahead with it