Housing affordability has become a significant issue in Canada, particularly in major cities like Vancouver and Toronto. A contributing factor to the lack of affordable housing is the prevalence of vacant properties, which often sit empty for extended periods while the housing market remains highly competitive.

To address this issue, several municipalities in Canada have implemented a vacant housing tax. The tax is designed to encourage owners of vacant properties to either rent them out or sell them, rather than letting them sit empty.

What is a Vacant Housing Tax?

A vacant housing tax is a tax imposed on residential properties that are left vacant for an extended period. The tax is intended to discourage property owners from holding onto vacant properties for speculative purposes or investment purposes, rather than making them available for occupancy by renters or buyers.

The amount of the tax varies by municipality but is typically a percentage of the property’s assessed value. The tax is often only imposed on properties that are deemed vacant for a certain period, such as six months or a year.

Municipalities in Canada with Vacant Housing Tax

The vacant housing tax is not a federal tax, but rather a municipal one, which means it is imposed and administered by individual cities. As of 2021, several municipalities in Canada have implemented a vacant housing tax, including Vancouver, Toronto, and Oakville.

Vancouver was the first city in Canada to implement a vacant housing tax in 2017. The tax rate is 1% of the property’s assessed value, and it applies to residential properties that are deemed vacant for six months or more in a calendar year.

In Toronto, the vacant housing tax was implemented in 2021. The tax rate is also 1% of the property’s assessed value, and it applies to residential properties that are deemed vacant for more than six months in a calendar year.

Oakville, a suburban town in the Greater Toronto Area, also implemented a vacant housing tax in 2021. The tax rate is 1% of the property’s assessed value, and it applies to residential properties that are deemed vacant for more than 90 consecutive days.

Effectiveness of Vacant Housing Tax

The effectiveness of the vacant housing tax in addressing the issue of housing affordability is still being evaluated. However, early reports suggest that the tax has been effective in encouraging property owners to rent out or sell their vacant properties.

In Vancouver, the vacant housing tax is estimated to have resulted in approximately 8,500 properties being occupied, which has helped to increase the supply of available housing and lower rental prices. Similarly, in Toronto, the vacant housing tax is expected to increase the supply of available rental units and help to address the issue of housing affordability.

Conclusion

The vacant housing tax is an innovative policy solution to address the issue of vacant properties in Canada. The tax is designed to encourage property owners to rent out or sell their vacant properties, rather than letting them sit empty for speculative purposes.

While it is still early days, the implementation of the vacant housing tax in several municipalities in Canada appears to be having a positive impact on housing affordability. As such, it is likely that more cities will follow suit and implement their version of the vacant housing tax in the coming years.

 

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