by Markus O’Brien Fehr, Chief of Staff
Though many haven’t been so lucky, if you’ve been able to afford to rent a property through the COVID-19 pandemic, 2020 may have offered you some relief in rental rates or availability. But experts warn that this relief will be short-lived. Before we return to a period where housing availability is a big problem, it’s time to discourage people from leaving entire homes empty, often for years at a time.
Earlier this year, I advocated that the time was right for Council to move forward on a Vacant Homes Tax (VHT). After the proposal moved through Council’s Executive Committee yesterday, Councillors will be asked to authorize staff to begin the implementation of a VHT beginning in 2022.
The purpose of this tax would be to provide additional incentive to use houses (or condos) as homes, rather than as buy and hold speculative commodities lacking government regulation. Having fewer vacant homes would increase rental availability in the long run, and hopefully improve affordability by lowering the supply/demand imbalance.
The median residential rent in the City increased by an average of 7.7% per year over the past decade, while median household incomes rose by only 2.2% per year over the same period. With our population expected to increase by 36% by 2041, it’s time to act.
As a secondary benefit, net revenue would become available to the City to invest in affordable housing initiatives. Council continues to build on its HousingTO 2020-2030 Action Plan, but with funding in short supply, new dedicated revenue streams will be required to achieve the city’s funding targets.
City staff are recommending a program very similar to the one that has proven effective in Vancouver over the last several years. The Vancouver model requires homeowners to fill out an annual declaration about the use of their property. If vacant for more than six months in the year prior, or if there is no declaration filed, the owner would be taxed at 1% on the value of the home.
John has often advocated that beyond a VHT, the City should be considering a “land speculation tax” on owners holding multiple properties for financial gain, a practice that drives up home prices and bidding wars. Collecting usage data would allow new policy directions on this front down the road, and another reason to start this process today.