Toronto homeowners to declare status of property to avoid fines until this Thursday
A new tax on vacant homes is set to take effect in Toronto and homeowners have until this Thursday to declare the status of their properties.
If you’re a homeowner in the City of Toronto, you have to declare whether it is occupied or not. Otherwise, you will face an additional 1 per cent tax based on the assessed value of your property.
The city says a declaration is not required if the property does not contain a residential unit (vacant land, parking space or condominium locker). Homeowners could also face a $250 fine for filing a late declaration, though the city says there will be a grace period.
Toronto’s City Council introduced the Vacant Home Tax (VHT) in a bid to increase housing supply by discouraging homeowners from leaving their properties unoccupied. It went into force last year, making 2022 the first payable year the tax will be levied on vacant homes for one per cent of a property’s Current Value Assessment (CVA). Notices of the declaration requirement were sent to homeowners in December.
Penelope Graham, director of content at Ratehub.ca, said homeowners should strive to meet the Feb. 2 deadline in order to avoid steep fines, which range between $250 for failing to submit a declaration to $10,000 for making a false declaration.
WHO IS AFFECTED
Toronto defines a property as vacant if it was not used as a principal residence for the owner or other occupants, or was unoccupied for six months or more during the previous calendar year.
Graham said real estate investors with units sitting empty will likely be among those affected by the tax.
She also advised that home buyers and sellers pay close attention to their closing dates when it comes to the tax.
The seller must complete the tax declaration if the sale closes between Jan. 1 and Feb. 2, and the purchaser must submit a declaration the following year for any closing dates from Feb. 3 until Dec. 31.
However, Toronto said “any unpaid taxes will become the purchaser’s responsibility” and the Vacant Home Tax will form a lien on a property.
EXEMPTIONS
Some vacant homes are exempt from the tax. Those situations include:
- Death of a homeowner
- Principal resident is in a care facility like a hospital or long-term care home
- Court order preventing occupancy
- Owner lives outside the Greater Toronto Area but requires the vacant home for occupation-related residency for at least six months of the year
- Repairs and renovations
- Transfer of legal ownership
Paperwork is required to qualify for an exemption to the tax, and Graham said people with exemptions or those who might fall through the cracks should stay on top of communication with municipal officials.
“It’s really important to be communicating with the city and ensuring you’re getting ahead of it,” she said.
HOW TO DECLARE
Homeowners can submit their declaration for the tax online. There is also a paper option, but Graham noted that the city must receive copies by the Feb. 2 deadline.
Toronto said it will issue notices to owners in March and April and payments for the tax will be due on May 1.
WHAT IS THE GOAL
Toronto is the latest Canadian jurisdiction to introduce a tax on vacant homes as the country struggles with a widespread housing shortage.
Vancouver was the first to introduce a tax on vacant homes and said in November it had generated $115.3 million for affordable housing initiatives and renter supports since 2017.
The federal government has also introduced an “Underused Housing Tax” that mostly applies to non-resident homeowners, while other Canadian cities are also considering the measure.
Toronto said revenue from its tax will go towards affordable housing, with a goal to discourage vacant rental units at a time when Canadian renters face the tightest market since 2001, according to a report from the Canada Mortgage and Housing Corporation (CMHC).
Some data from Vancouver suggests the tax nudged some vacant homes back onto the market, with the city reporting that the number of unoccupied properties decreased by 36 per cent between 2017 and 2021.
It remains to be seen how the tax will play out in Toronto, but Graham said it presents an opportunity to understand true number of vacant properties and potentially expand housing supply amid a “crucial shortage” that’s also contributing to the steep cost of real estate.
“Any opportunity to get more data on the true status of the housing market is going to be beneficial,” she said. “Hopefully we’ll see some positive benefits … and actually see some of these units returning to either the rental or the ownership market.”
The city says revenues from the VHT will be allocated towards affordable housing initiatives across Toronto.
Homeowners have to know how to pay VHT. For example, if the property’s current value assessment is $1,000,000, the tax amount billed would be $10,000 (1 per cent x $1,000,000).
If a homeowner disagrees with the decision, they will have 90 days to submit an appeal request. The city will vary or reconsider the assessment within 30 days following the determination. The appeal decision is final.
Declarations can be made through the city’s secure online portal or by calling 3-1-1 to request a paper form. The city says that those who do not have access to a computer can authorize someone to act on their behalf to make the online submission.
This article was reported by CityNews and CTV News.
