With home prices across Canada skyrocketing (some say on account of a combination on and off-shore buyer speculation as well as a pandemic-induced exodus from major cities), various federal, provincial and municipal governments have been kicking the tires on new vacancy tax policies patterned off of Vancouver’s 2017 politically popular (and revenue generating) measures.

Canadian homeowners and first-time investors will need to brace themselves for the roll-out of these taxes across the country, as it seems that — like the “carbon tax” — these measures are almost sure to come on a broad-based level.

Below, we outline some background on these measures, and provide an update on the expected changes in Ottawa, Toronto, and Hamilton.

Ottawa

On June 9, 2021, Ottawa City Council approved a direction to City staff to prepare a 1% vacancy tax for implementation for the 2022 tax year.

The proposed tax would require residential property owners to self-declare whether their properties were vacant (i.e., unoccupied > 184 days in a calendar year, where the unit was not the principal residence of the owner). Vacant properties would then be levied a 1% tax based on its “Current Value Assessment” (“CVA”) by Ontario’s Municipal Property Assessment Corporation (“MPAC”). The new rules would also grant the City audit powers to inspect homes and field tips and complaints with respect to vacant housing.   If implemented, these rules come into effect sometime in 2022-2023.

Toronto

In July 2021, Toronto City Council approved the development and implementation of a vacant home tax, with a final report and actual by-law to be prepared for review by Council by the end of 2021.

While consultations with respect to the final rules are still ongoing, and specific legal structure is still uncertain, it appears from the City’s website that the proposed tax measures would be substantially similar to those proposed for Ottawa (e.g., the self-declaration of “vacancy”, the 1% tax rate, etc.).

Hamilton & Other Ontario Cities

Hamilton also appears to be considering similar measures, and in July 2021 also instructed City staff to create a draft by-law for public consultation and consideration.

London, Mississauga, and York Region also appear ready to climb on board, and have each taken some initial steps towards similar vacancy taxes.

Federal

On the federal front, the Liberal government’s 2021 federal budgetproposed a 1% tax on the “specified value” of vacant property, although defining that property to be ‘residential properties that do not meet the “qualifying occupancy” requirements’ (again, residential properties are those unoccupied for less than six months of the year — although subject to certain other conditions and exceptions).

Unlike the municipal versions, the federal vacancy tax will not require Canadian citizens and permanent residents to make annual declarations of “vacancy”. (One wonders how that is going to work!)

The federal measures are not yet finalized, although the government consultations period has concluded as of September 17, 2021. Draft legislation is the next likely expected step.

Takeaways

The increasing appetite of municipalities to tax vacant homes should serve as a wake-up call to investors and homeowners alike that these sorts of tax measures will likely spread throughout the country — especially since they have been proven to be a revenue-generating, political popular policy winner. Owners of residential properties should pay serious attention to local developments in their area for further, final details.

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