Too soon? York Region walks back its plans for tax on vacant homes

Regional council voted to move forward with vacant homes tax last year, but things have changed since then

Yorkregion.com
May 8, 2023
Kim Zarzour

The Region of York is pausing its plans to move forward with a vacant homes tax.

The decision, at a committee of the whole meeting May 4, is based on a staff report indicating still too many unknowns and new developments to determine if it’s the right move and recommending it be deferred for a year.

Plans for a tax on vacant homes were put forward as a tool to help ease the housing crisis by returning vacant or underused housing back to the market.

A public survey with over 2,750 responses found more than 80 per cent of respondents supported the potential tax.

It was proposed that revenue from the program would first be directed to administer the program, with further funds helping increase the supply of affordable housing.

KPMG, consultants, hired by the region, estimated net proceeds could amount to up to $7 million per year and regional council voted September 2023 to move forward with next steps.

But things have changed since then.

The province has launched a provincial-municipal working group to develop a policy framework for the Vacant Homes Tax -- something the region’s design would have to comply with.

At the same time, recent federal legislation on foreign buyers and underused housing, as well as higher interest rates, could also have an impact on the number of vacant homes in York Region, the staff report said.

KPMG initially suggested that an estimated 1,605 homes in York Region could potentially be subject to a Vacant Home Tax, based on 2021 Census data and the number of taxable homes in Vancouver in 2017.

That may no longer be the case.

In September 2022, the federal government implemented a one per cent Vacant and Underused Housing Tax. This tax applies to residential properties owned by nonresident, non-Canadians, which are vacant for six months within a calendar year.

In addition, in January 2023, the federal government enacted a two-year ban on home purchases by nonresident non-Canadians.

These moves may reduce the number of vacant homes and could mean York Region’s revenue from the tax is overstated, the report said.

Higher interest rates could also have an impact, the report said.

Newmarket Mayor John Taylor expressed disappointment that the region may lose an opportunity to address the housing crisis.

“We’ve done so much work on this,” he said. “Now all of a sudden it seems like the brakes are being hit.”

KPMG was forecasting significant revenue from the move and these latest changes might cause revenue to drop a bit, but the reduction would have to be dramatic to make it not worthwhile, Taylor said.

“We declared a housing crisis. We’re being asked to sign on to housing targets, meanwhile we’ve got thousand if not tens of thousands of vacant homes in the GTA built already,” he said.

“The province is looking at so many things ... I can’t keep track. If we start stopping or going backwards because the province Is reviewing them, we might grind to a halt ourselves.”

Regional treasurer Laura Mirabella said the region is watching what’s happening in Toronto, which was first out of the gate in Ontario with a Vacant Homes Tax.

It’s not going as smoothly as anticipated with deadline extensions and additional costs, she said.

As well, the estimate of Toronto vacant homes from KPMG “is either overly optimistic or there will be a higher rate of disputes.”

Initially Toronto estimated 8,000 vacant units, but only 2,000 have declared themselves, she said.

“They will be collecting less than a quarter of what they’d expected to in terms of revenue.”

A similar drop would pose a significant financial risk to York, she said.

Markham Mayor Frank Scarpitti and Vaughan Regional Councillor Mario Racco voiced their opinion against the tax.

“It might be a tool but it's pretty insignificant and, ultimately, doesn’t create that much more housing," Scarpitti said, adding, there are plenty of respected economists who take the same view and see it as a waste of time.

Regional staff promised to report back in the fall.