Toronto vacant homes tax could be hard to enforce, city officials say

Theglobeandmail.com
June 20, 2017
By Jeff Gray

Mayor John Tory says he recognizes that imposing a tax on vacant homes in Toronto - as Vancouver has done - could turn out to be more trouble than it’s worth. But he still wants city bureaucrats to study the idea and come up with a proposal for a tax that could encourage speculators to free up empty units.

On Monday, Mr. Tory’s executive committee approved a plan to see city finance officials launch public consultations and draft Toronto’s own version of the tax. Starting next year, Vancouver property owners will have to cough up a surcharge worth 1 per cent of their home’s assessed value - $10,000 on a $1-million dwelling - if they leave it empty for more than six months.

Toronto’s plan must still be approved by city council, and any proposed tax will be back at city hall for another vote in September. The idea is moving ahead even as the recent announcement of the province’s foreign-buyers tax appears to have the city’s red-hot real estate market cooling.

Mr. Tory acknowledges he is not wedded to the idea.

“If it makes no sense or it’s not going to have any positive impact on calming the housing marketplace and making sure units are on the market for rent as opposed to sitting empty, then my interest will be diminished,” Mr. Tory told reporters on Monday. “But I am not going to prejudge it.”

According to new estimates from city officials based on aggregated water and hydro data, there may be 15,000 to 28,000 residential units in Toronto left vacant for 12 months or more, or between 2 per cent and 4 per cent. (That’s lower than Vancouver, which estimated a 4.8-per-cent vacant-unit rate before bringing its tax, which fully takes effect next year.)

However, Toronto bureaucrats caution that their own numbers cannot be considered a “reliable estimate,” and that hydro and water data cannot be used to actually label individual properties vacant, or enforce any future tax, because of privacy legislation.

The lack of data is just one of a host of problems that city bureaucrats now face.

For starters, Mr. Tory has rejected any approach that closely mimics Vancouver’s model, which requires homeowners to make a “mandatory declaration” whether their unit was vacant for more 180 days the preceding year. Anyone who fails to send in their declaration would also face the tax, whether their unit was vacant or not.

Toronto’s mayor has ruled out strictly copying Vancouver’s approach, calling it presumptuous and unfair.

City finance officials now set to draft Toronto’s version of the tax say they are left with three other options: a system based on self-reporting by property owners willing to flag their own properties as vacant and pay the tax; a system based on complaints from neighbours about vacant units; or a combination of the two.

But catching cheats would be difficult, they warn: “Identifying tax avoidance would however be challenging, given the limited means by which a municipality can identify vacant units.”

Ontario, as part of its housing plan announced in April, only gave Toronto (and some other cities) the power to tax vacant houses and condos, but not units in large rental apartment buildings. A vacancy tax will also need a myriad of other exemptions to be considered fair. Vancouverites can get out of paying if they are renovating, if the property was sold in the past year or if they are receiving medical care, among other exemptions, for example.

Toronto officials say Vancouver’s tax is expected to cost $4.7-million to set up over the first three years, with annual operating costs of $1.5-million after that. Vancouver’s initial revenue estimate was just $2.2-million a year, city staff say.