Toronto Real Estate Board urges caution over vacant-home tax
The Toronto Real Estate Board is urging caution on the issue of a possible vacant home tax in the City of Toronto. A measured approach to the issue can help to avoid any unintended consequences on the housing market and property owners.
The City says a vacancy tax can encourage property owners to free up empty units, thereby increasing rental supply. However, TREB is concerned there is not enough empirical data or evidence to support this approach.
“At this time, it is not clear that the issues targeted by a vacancy tax are fully understood, nor is it clear how effective such a policy would be, or if it would have unintended outcomes that run counter to the stated City benefit of increasing rental supply,” says TREB President Tim Syrianos.
TREB is also flagging the issue of private property rights. “The application of a vacancy tax on a property owner who is abiding by property standard by-laws, zoning rules, and all other municipal requirements must be carefully considered,” adds Mr. Syrianos.
The administrative challenges of running this program, including the approach for identifying vacant homes (e.g. a mandatory system, a self-declaration by owners, and/or a complaints-based model) could pose challenges. In addition, a vacancy tax could possibly result in a net loss to the City’s budget. The start-up costs of a similar program in Vancouver totalled $5 million and is yielding only $700,000 in net annual revenue.
More evidence to support the suitability of a vacancy tax approach to increasing housing supply is needed. As well, better and more sensible policy measures should also be considered. One of the most effective ways to encourage homeowners to move in a bid to free up entry level and “middle” housing stock is to lower the high taxation burden on housing, not add another tax penalty. TREB has participated in discussions with policymakers and has taken the initiative to conduct research that is contributing valuable data, and we will continue to do so.
In light of recent policy measures aimed at the housing sector at both the provincial and national levels, it may be time for a pause to assess the impacts of these already announced policy decisions.
The Mayor of Toronto has adopted a wait and see approach, CLICK HERE to read more.
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