With deadline looming, Toronto’s vacant-home tax may catch some owners by surprise

Homes on Vaudeville Dr. in Etobicoke, on Jan 10. In December, the City of Toronto mailed out letters notifying homeowners that they are required to declare the occupancy status of their property in order to avoid being hit with the vacant home tax.Fred Lum/The Globe and Mail

Toronto homeowners who are lackadaisical about checking their mail need to take notice of a looming deadline.

In December, the City of Toronto mailed out personalized missives notifying each homeowner that they are required to declare the occupancy status of their property in order to avoid being dinged with the vacant home tax.

The deadline to file is Feb. 2 and every residential property owner must submit a declaration whether their home is vacant or not.

“We need to hear from everybody,” says Casey Brendon, director of revenue services at City of Toronto. “We’ve tried to make that very clear.”

Under the new policy, an annual tax of 1 per cent of the home’s current value assessment will be levied on vacant Toronto residences.

The city’s goal, Mr. Brendon explains, is to increase the supply of housing by discouraging owners from leaving their property empty.

To sum up, not every residential property owner has to pay the tax, but every owners has to submit the declaration.

The city is backing up the directive with social media posts, radio and television advertisements, and posters in transit shelters.

Still, real estate agents report that some homeowners appear to be oblivious to the alert. Many people figure they don’t need to declare their occupancy status because they live in their homes full time.

Broker Cheri McCann of Toronto-based McCann Realty Group says her firm amplified the message on social media and sent out an e-mail blast to everyone in their database when they realized that the policy had flown under the radar for many of the clients they were talking to.

“People don’t seem to understand it,” Ms. McCann says.

Residents living in $5-million houses are just now learning they need to declare occupancy status or risk being on the hook for a $50,000 tax bill, she says.

The news startled one of Ms. McCann’s clients who lives in Collingwood, Ont., but also owns a Toronto condo that he rents out. In this case, the city’s letter likely landed in the mailbox but the tenant may have just put it aside, she says.

Other people are snowbirds who would have already flown south when the letter arrived, she says.

In another wrinkle, Ms. McCann says her firm has had legal language added to offers to purchase. The clause states that the seller must have submitted the declaration and also must pay the tax if it applies.

She recommends that agents flag this hazard to buyers: According to the city’s website, the tax will form a lien on the property and any unpaid taxes will become the responsibility of the purchasers.

Pritesh Parekh, real estate agent with Century 21 Legacy Ltd., agrees with the implementation of the tax, but he believes the communication from the city could have been stronger.

“Overall I think this is a good idea – it’s one step closer to solving the supply issue in our city.”

But he adds that a letter is easy to misplace amidst the deluge of flyers that many homeowners receive.

He has also spoken with homeowners who were under the misapprehension they only need to declare any vacant property. They don’t twig to the need to declare the status of a principal residence.

“You need to declare that it is not vacant,” he says. “That applies to almost everyone in the city.”

It’s also difficult for some owners of unused properties to fill the vacancy on relatively short notice by finding a solid tenant – particularly if the owner is out of the country, he adds.

“This is something that came fast and furious for such a large undertaking,” he says. “You certainly need more runway to do something like that.”

Mr. Parekh knows of one investor who is contemplating renting out the unit or selling to avoid the tax.

“Whichever he decides to do, it will open up a unit for someone,” he says. “It will achieve the necessary goal.”

He expects quite a few more units will land on the rental market as a result.

For homeowners who need to get up to speed, the ins and outs are provided in detail on the City of Toronto website.

Most people will find the online portal the simplest method for making a declaration, Mr. Brendon says, but paper forms are available for download as well.

Under the policy, the property must be occupied for six months or more during the previous year. If a home was vacant for more than six months in 2022, the tax would be payable in 2023.

The city will continue to accept declarations after the deadline, Mr. Brendon stresses. Interim tax bills will contain an insert reminder as well.

“We really are trying to get the highest possible response from the get-go. People shouldn’t be afraid to submit this form.”

Tardy homeowners could face a late fee of $250, he adds, but he expects the city to be fairly lenient in the first year.

“Our interest is really just to get a declaration back,” he advises. “Our interest is not to be punitive.”

Still, he urges people to submit that form in the coming weeks or risk having the city declare the property vacant after a time.

At that stage the city will send a tax bill with a due date stated.

Mr. Brendon estimates that notice may be sent out in early to mid-March in order to give the property owner time to pay the bill by May 1.

Owners may be eligible for various exemptions, including the death of the owner in the previous year, a lengthy renovation, or the need to have a property available for employment part of the year.

Officials will comb through the responses and may order audits that require owners to provide documents that support their claim that a property is occupied or exempt.

Mr. Brendon adds that there is a two-stage complaint process in place if the city has deemed a property vacant by error.

He’s not too worried about a lapse on the part of owners who are travelling or spending the winter down south.

“The fact that you can submit a declaration online means you can submit a declaration online from anywhere in the world.”

A good portion of homeowners did get the message: About two weeks before the deadline, the city had recorded a response rate of about 66 per cent through its online portal, according to Mr. Brendon.

“We’re actually pleased with that result,” he says.

That tally is generally in line with the response rates in Vancouver and Ottawa, he adds.

Vancouver introduced a 1-per cent empty-home tax in 2017, raised the rate to 3 per cent in 2021, and hiked it to 5 per cent for 2023.

Ottawa will impose a 1-per-cent vacancy unit tax starting this year, and Hamilton has a similar policy in the works.

According to Canada Mortgage and Housing Corp. data, the tax is having the desired effect in Vancouver, with more owners making properties available for rent.

In Toronto, the tax revenue collected will be put toward social housing initiatives, according to the city.

As for how many homes and condo units are sitting vacant in Toronto, Mr. Brendon says the city doesn’t know the number.

In Vancouver the portion was approximately 1 per cent, and the City of Toronto is basing its estimates on that result, Mr. Brendon says. Based on the responses received so far, the number of vacant homes is running a little below that figure, he adds.

The question the city wants answered is, “is the unit capable of being rented or sold?”

Either outcome adds to housing supply, Mr. Brendon says.

“That is really our goal – to identify property that could otherwise be made available.”

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