Toronto may finally start taxing vacant homes. City of Toronto staff recommended a vacant home tax to council this week. The tax would place a penalty on those that use residential property in the City for less than half the year. By doing so, the City hopes to join other major cities like Paris in curbing housing speculation. This comes after Toronto has been bleeding millennials for years, as housing affordability reaches crisis levels.
Toronto’s Vacant Home Problem Is Forcing Millennials Out
Toronto is becoming a place to park money in real estate, as young adults abandon the City. We pointed out in 2017, much to denial of the City, that tens of thousands of homes were vacant or scarcely used. Shortly after, the City’s own report found over 10,000 units were almost never used. This has made a sharp contribution to the City’s affordability crisis.
The affordability crisis has actually resulted in a negative flow of young adults. These key consumers to urban areas, tend to drive many of the creative and hospitality industries that make cities livable. As Toronto bleeds them to smaller regions and the suburbs, it sets itself up for long-term damage. This trend is likely to have accelerated during the pandemic, as Toronto’s suburbs became buying hot spots.
Toronto Net Intraprovincial Migration
More people are leaving Toronto for other (cheaper) parts of Ontario.Source: Statistics Canada, Better Dwelling.
Toronto’s Vacant Home Tax Proposed At 1%
City staff officially recommended Toronto adopt a vacant home tax. The tax would start at 1% of the assessed value of homes used less than six months per year. The proposed starting rate would be almost double the rate of the city’s 0.599704% property tax rate. It’s likely to sting speculators sitting on vacant property, but not eliminate them. Vancouver recently raised its vacant home tax to 3%, to try and encourage a further reduction. The idea is to provide a penalty large enough to make vacant speculation unprofitable.
Toronto Targets Vacant Home Taxes For 2022
The City is giving speculators plenty of time to liquidate, which will reduce the number of vacant homes by implementation. By the end of Q2 2021, the City should have the framework designed and ready to go. They’re proposing a target roll out for the 2022 tax year. The report estimates one percent of housing stock subject to the tax, would generate between $55 and $66 million in gross tax revenue annually. Yes, one percent of housing stock – more than rental vacancy in some years.
Toronto’s vacant homeowners will have more than enough time to liquidate, and avoid being hit with the tax. Just by existing, this is likely to promote a more efficient use of housing supply. This should help ease demand over the next couple of years. Although whether it’s too late to reverse the outflow remains to be seen. Millennials still have to pick between the vacant tiny boxes the City built for AirBnB, or spacious suburbs to work their now remote jobs.
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