Is it time for Ontario to slap a tax on vacant properties, real estate speculation? The NDP says so
Plan would hurt property owners, landlords already reeling from pandemic, critics say
Ontario's official opposition is pushing the Ford government to implement a tax on empty homes and real estate speculators to increase the stock of affordable housing in the Greater Toronto Area and beyond — as real estate prices soar even in the face of the COVID-19 pandemic.
NDP MPP Jessica Bell, who represents the University–Rosedale riding in Toronto, introduced a motion in the provincial legislature Thursday to create a speculation and vacant home tax to increase the number of rental properties available.
"Over the past year of the pandemic we have seen housing prices rise very quickly," said Bell.
Rising real estate prices in the Toronto area, along with more more moderately priced markets like Hamilton, have put home ownership out of reach for many as the affordability crisis becomes worse in more of Ontario's communities. The City of Ottawa is set to begin taxing vacant residential units next year
"We have too many people sleeping on our streets and in our parks; we have too many people who cannot afford their rent and we have too many people, generations of young people and immigrants, who have given up on the dream of home ownership because it is too expensive," Bell said.
Bell says the proposed speculation tax would target property owners who pay the majority of their taxes outside Ontario, while the vacant home tax would be charged to absentee owners who leave their units empty for more than six months of the year. In both cases, the tax rates would initially be pegged at two per cent.
Downtown condo resident Jaco Joubert says his research supports Bell's proposal. He used light detecting camera technology to estimate the vacancy rate in some buildings.
His technique suggested a vacancy rate as high as 13 per cent in some cases, and on average 5.6 percent of units sat empty.
"I'm tired of having my friends leave the city and province because they can no longer afford to live in a place they were born," said Joubert, who says part of the problem is a scheme called "land banking," in which investors hoard parcels of real estate for future sale or development.
"[The NDP proposal] will help curb land banking and treating homes as investment vehicles, making them available for families to live in. Without a vacancy tax, I fear land banking will become normalized and the problem will get worse," he said.
But realtor Linda Pinizzotto, founder of a non-profit group called Condo Owners Association, says vacancies are up and many of her members are desperate to find tenants or planning on selling their units.
"COVID has already created problems in the rental scene in downtown Toronto," she said. "This is not the time to put more things out there of this nature. People are already struggling to hopefully get their lives back."
Jason Mercer, the Toronto Regional Real Estate Board's chief market analyst, says he doesn't see a justification for speculation and vacancy taxes.
"I think the supply argument goes well beyond a vacancy tax. If I were a policy maker, I'd be looking to work with other levels of government to get more shovels in the ground for a greater diversity of home types," Mercer said.
And other levels of government are looking at some type of tax to incentivize more units available for rent or sale.
On Dec. 16, 2020 Toronto city council voted 24 to one to introduce a vacancy tax in 2022, but the details are still being worked out. The city's revenue services staff are preparing a report on detailed tax design features that will go back to council this summer.
Number of vacant homes 'unknown,' city says
In the meantime, the city says in a statement that "the number of vacant homes in Toronto is unknown at this time and will not be known until Council has approved the tax and the definitions and criteria that will determine whether a home is subject to the tax."
But the statement does make some broad projections based on metrics from a similar empty homes tax implemented by Vancouver in 2016.
"If 1 per cent of Toronto's housing stock is vacant and subject to the tax, then based on the number of 800,000 taxable residential properties within Toronto, it can be expected that the number of vacant homes that may be subject to the tax could range between approximately 6,400 and 9,600 homes — but nothing can be accurately determined at this time."
However, Bell says a tax must also apply to speculation and extend well beyond the borders of Toronto, as the housing crunch expands farther into southwestern Ontario.
The province says since 2017, the Ministry of Finance has had a 15 per cent non-resident speculation tax in place on residential purchases in the Greater Golden Horseshoe region by non-citizens or permanent residents of Canada or by foreign corporations.
The most recent figures available show this tax provided the province with $44.9 million from April 1, 2020 to June 30, 2020.
But Bell points out this is a one-time tax paid on the purchase price, while she is also proposing an annual fee on property that sits empty for more than six months.
"If [the Ford government] is truly committed to affordable housing they will pass my motion. This issue means as much to their voters as it does to mine," she said
Bell says a federal speculation tax on foreign buyers of residential real estate outlined in its most recent budget also doesn't go far enough, since it doesn't take into account domestic investors with vacant properties.
Starting in Jan. 2022, the federal government is applying a one per cent annual tax on the value of non-resident and non-Canadian-owned properties that are "vacant or underused."