Beaches-East York Councillor Bradford questions effectiveness of Vacant Home Tax as city examines redesign of the program

City staff have presented a redesign of Toronto’s Vacant Home Tax (VHT) following a slew of complaints from property owners about the program over the past two years.

Although staff said the new version of the program is not yet complete, they have taken steps to rectify inefficiencies that they hope will now free up many of Toronto’s vacant homes for tenancy.

“Ten thousand units that are vacant. If we can get (20 per cent) of them housed with people, that’s 2,000 people,” said Mayor Olivia Chow at the city’s Oct. 1 Executive Committee meeting.

The Vacant Home Tax was created with the goal of improving Toronto’s affordability by forcing property owners to rent out or sell unused units.

However, the implementation process was significantly botched. Many property owners were charged for homes they lived in, there was inadequate communication about declaration requirements, and seniors who struggle with technology as well as those who have English as a second language found difficulty navigating through the declaration process.

Furthermore, the faulty declaration portal left property owners unsure of the status of their declarations.

“We were also lacking in overall program awareness, specifically what constitutes a vacant home,” said Toronto’s Chief Financial Officer and Treasurer Stephen Conforti.

To rectify the situation, the city waived last year’s late fees and extended the declaration timeline by two months (from Nov. 1 to Apr. 30) with no late fees.

There has also been a revised payment due which now occurs from September to November. This, the city said, gives people more time to file a notice of complaint in the case their home is wrongfully deemed vacant.

Due to the struggles many had with filing their declarations, the city has also increased the number of ways the process can be approached. Along with various improvements to technology and customer interface, the city has now made it possible to file a declaration in person rather than just online and paper mailouts. This strategy eradicates the technological issues while also giving people a way to get in person advice about how to file their declarations.

“Some of these changes that staff brought forward are badly needed, like providing confirmation numbers and having a more flexible declaration period,” said Beaches-East York Councillor Brad Bradford.

“However, none of this fixes the main problem, which is requiring 800,000 homeowners to have to tell the city, every year, that they live in their home otherwise they have to pay thousands of dollars more in tax.”

Bradford told Beach Metro Community News that the process might not be worth it “for just 8,000 homes a year declared vacant” with no evidence that the strategy actually brings vacant homes back on to the rental market.

However, Conforti said it would cost the city $5.5 billion to create the amount of housing space that the VHT hopes to deliver.

Although the program has been described as a policy tool to free up unused units, critics see it as more of a revenue generator for the city due to uncertainty about how many homes have re-entered the market as a result.

With operating costs of $3.2 million – which will increase to $5.2 million with the changes due to enhanced administration fees – the city reports that the 820,000 declarations have garnered $107 million over two years of the program.

This figure could be slightly lower following the results of some pending disputes regarding the vacancy status of some of the homes.

Conforti emphasized that the VHT program is in fact a policy tool which solely aims to encourage property owners to rent their unoccupied homes to people who will put the spaces to use. He highlighted that revenue generated as a result of the VHT is not used to balance the budget or help budget pressures, rather these funds go towards housing initiatives that help Toronto’s housing supply, such as the Multi-Unit Rental Acquisition (MURA) Program.

The goal of the Vacant Home Tax has sparked debate amongst Torontonians. During the Oct. 1 Executive Committee meeting, Toronto-Danforth Councillor Paula Fletcher inquired about if it’s “legally required” to call it a “tax”.

“Is there no other way to describe it other than a tax?” she asked.

“It is correctly described as a tax,” said one member of city staff. “We could perhaps use a different name, but it is in fact a tax.”

Fletcher said at the meeting that the program’s branding needs to revolve around a “penalty” rather than a tax.

Today, 60 per cent of the 10,000 vacant homes in Toronto are condominium units.

With the city sitting on many unused condos owned by investors, the vacant home tax has been framed as a way to force many speculators into renting out their units rather than sitting on useful property, awaiting a date that they can resell for profit.

“I supported the original idea of a Vacant Home Tax,” said Bradford. “But I think what we’ve seen is that so few homes are impacted, the costs to residents are not worth the benefits. That’s why I think this tax should be shelved unless these much more fundamental problems can be ironed out.”