How Much is Vacant Home Tax in Toronto?

Toronto, known as the cultural hub of Canada, boasts a vibrant economy, diverse culture, and booming real estate market. One unique feature of the city's property sector is the Vacant Home Tax. Before diving into how much it is, it's important to understand the rationale behind this levy.

The Rationale Behind The Vacant Home Tax

The Vacant Home Tax was instituted to alleviate pressure on Toronto's strained housing market. With a vacancy rate hovering around 1% in the past few years, there is a clear scarcity impacting the 440,000 renters in the city. The tax is designed to incentivize homeowners to put unused properties on the rental market, thus increasing supply and easing rent inflation to some extent.

Quantifying the Vacant Home Tax

The amount a homeowner has to pay for the Vacant Home Tax is dependent on the value of the property. As of 2022, the City of Toronto sets the tax at 1% of the property's assessed value for the calendar year. So, for example, if a home is valued at CAD 1,000,000, the homeowner would be liable to pay CAD 10,000 in Vacant Home Tax for that year if they do not rent it out or otherwise occupy it.

What Constitutes A 'Vacant Home'?

A home is considered 'vacant' if it is not occupied by the owner, is not being rented, and is not the primary residence of a close family member for more than six months within a year. It should be noted that homes under construction or renovation, or those that are unlivable, are typically exempt from this tax.

Implications of the Vacant Home Tax

On one hand, this tax has brought about positive outcomes in the form of increased rental supply within the city, but on the other hand, it burdens homeowners who are unable to rent out or sell their properties within the specified duration. Some critics argue that it disproportionately impacts those with relatively lower incomes who may own inherited and unoccupied property.

The future of Vacant Home Tax in Toronto

The City of Toronto is actively monitoring the impact of the Vacant Home Tax on the housing market. There are ongoing debates about potentially increasing this tax in future years, in particular, for luxury properties that sit empty. The aim would be to prevent these homes from being essentially 'storage lockers' for wealth and instead be put to proper utility as livable spaces. In conclusion, the Vacant Home Tax is a significant feature of Toronto's housing policy. At a rate of 1% of the property's value, it incurs considerable costs for homeowners. Nonetheless, its influence on Toronto's housing ecosystem remains a topic of unwavering relevance. As the city continues to grapple with housing affordability issues, the Vacant Home Tax is a unique tool to modify homeowner behaviour and boost available rental supply. Remember, whether you are a homeowner, prospective buyer, or investor, it’s crucial to familiarize yourself with such taxes and cater to them in your financial planning to avoid penalties and make the most from your property investments in Toronto.