Changes to the Vacant Home Tax One Year After Implementation

By Mirjana (Mira) Markovic

Last year I wrote an article on the Vacant Home Tax (“VHT”), which took effect on January 1, 2023. Both the City of Toronto and the City of Ottawa passed bylaws that require residential homeowners to declare the occupancy status of their properties annually. The goal behind introducing such a tax was to open up more spaces for new buyers and renters in the current growing housing crisis, by discouraging owners/investors from leaving their residential properties unoccupied

Anyone currently subject to the said tax pays 1% of the property’s current assessed market value on an annual basis. Properties that are unoccupied for at least six (6) months in a year; are not the owner’s primary residents; are not occupied by a permitted occupant; and not contingent to exemptions as defined by the Vacant Home/Unit Tax Bylaw for the City of Toronto are subject to the tax.

Deadlines to file for the year 2023 are as follows:

• For Toronto: The property status declaration must be filed by February 29, 2024.
• For Ottawa: The property status declaration must be filed by March 16, 2024.

Deadlines to file if there is a transfer of legal ownership:

• For properties transferred prior to December 31 of the year being declared, the purchaser must submit the status declaration in the following year. In such cases, the purchaser will qualify for the “transfer of legal ownership” exemption.
• For properties transferred between January 1 to the deadline to file the status declaration (i.e., February 29, 2024), the seller must complete the status declaration prior to closing. This is because only the seller will know the property occupancy status for the prior year.

If the property status declaration is not submitted by the deadlines as specified herein, the City will deem the property vacant and require a property owner to pay the vacant home tax along with certain fines and penalties.

Current applicable fines and Penalties:

• A fine of $250 for failing to submit the status declaration by the deadline.
• A fine of up to $10,000.00 in addition to payment of the tax, for submitting false status declarations or failure to provide information when requested.

Any unpaid amount will be added to the property tax roll for the residential property and will be collected in the same manner as property taxes.

Amendments to the VHT in 2024

The VHT is only one year old, yet amendments have been proposed and are currently being implemented as follows:

• The vacant home tax will increase from 1% to 3%.
• A fee of $21.24 be added for failing to submit the status declaration in addition to the fines for attempting to evade the tax, which can range from $250.00 to $10,000.00.
• Deadlines to file the status declaration?
  • The first year the vacant home tax was implemented, the deadline to file the status declaration was February 2, 2023, for Toronto, and April 30, 2023, for Ottawa.
  • The Current deadlines are February 29, 2024, for Toronto and March 16, 2024 for Ottawa.
  • At this time, it is uncertain whether the deadlines will continuously change year after year or if a concrete date will be set at some point.

Why the Amendments?

The idea behind the VHT increase is to continue to deter property owners from leaving properties empty in the middle of a housing crisis and raise more money to improve housing supply and reduce the number of deemed vacant properties.

Mayor Olivia Chow has spoken on this matter and intends to allocate a portion of the additional revenue generated for the 2023 filing towards MURA (Multi-Unit Residential Acquisition Program). The said program is designed to preserve the existing supply of affordable rental housing in Toronto by having the City purchase rental buildings that could potentially be converted into condos to provide modest accommodations for its residents.

The City collected $54 million in the first year that the VHT was implemented. It is estimated that the VHT increase will generate an additional $50 million for the 2023 filing however, it is projected that the revenue will begin to decline in the subsequent years. The decline seems to suggest that the VHT will succeed in prompting vacant homeowners to sell or rent their properties instead of leaving them empty. This is consistent with the occurrence in Vancouver since the Empty Home Tax was implemented in 2017 at 3%. In light of this fact, the number of vacant homes in Vancouver has dropped from 1.2 % to 0.6% since 2017. The Ontario Government hopes to achieve similar results.

As I mentioned in my previous article, the bylaws continue to be a work in progress and professionals have noted several areas which have yet to be addressed however, the Government appears to be working towards more concrete guidelines and a positive outcome.

I hope that this article has provided you with some helpful information. If you have any questions, please do not hesitate to contact me at mira@sorbaralaw.com.

Helpful websites on this topic:

https://www.toronto.ca/services-payments/property-taxes-utilities/vacant-home-tax/