Decoding the Vacant Home Tax in Ontario: What Homeowners Need to Know about VHT
The soaring housing costs in Ontario have prompted cities like Toronto, Ottawa, and Hamilton to take action. In 2022, both Toronto and Ottawa implemented the Vacant Home Tax (VHT), while Hamilton's city council approved a similar tax in July 2023. This tax specifically targets properties left vacant for extended periods, aiming to optimize housing resources. In this article, we'll explain how the VHT works, what it means for homeowners, and how it impacts the community.
VACANT HOME TAX IN TORONTO
Toronto, one of the most vibrant cities in Canada, has been grappling with the issue of housing supply, a concern shared by many metropolitan areas worldwide. To address this challenge, the city of Toronto has introduced a Vacant Home Tax as a measure to encourage property owners to either rent out their vacant properties or sell them, thereby increasing the housing supply in a city where demand often outstrips availability.
How the Vacant Home Tax Works
A property is considered vacant if it has not been used as the principal residence by the owner(s), permitted occupant(s), or tenants for a total of 6 months or more in the previous calendar year. Under the Vacant Home Tax, property owners are required to declare the occupancy status of their property each year, with penalties imposed for non-compliance. If a property is left vacant for more than 6 months in the previous year, it is subject to the tax.
However, exemptions are granted for specific situations:
1) Death of the Registered Homeowner: Exemption applies when a property is vacant due to the death of the owner.
2) Property Undergoing Repairs/Renovations: Exemption covers properties actively undergoing renovation, subject to certain conditions;
3) Principal Resident in Care: Exemption for properties when the principal resident is in a hospital, long long-term care facility.
The exemption may be claimed for up to two consecutive years;
4) Transfer of Legal Ownership: Exemption is applicable during property ownership transfers, excluding name changes, adding a second owner, and removing a second owner;
5) Occupancy for Full-Time Employment: Exemption is applicable when the vacant property is required for occupation for employment by its owner has a principal residence outside of GTA; and
6) Cout Order: Exemptions are granted under specific legal court orders related to the property.
Note that all of these exemptions require particular documentation to prove that the owner qualifies for the exemption.
How to Declare
It is mandatory to submit a vacant home tax declaration of occupancy status if you own a residential property in Toronto. To declare your property's occupancy status, you'll need two essential pieces of information: your 21-digit assessment roll number and your customer number. These can be found on your property tax bill or property tax account statement. Homeowners can easily declare their property's occupancy status by visiting the City of Toronto's secure online portal. The portal is user-friendly and designed to streamline the declaration process.
For those who prefer a paper declaration form, homeowners can obtain one by reaching out to 311, Toronto’s municipal helpline. When filling out the paper declaration form, homeowners must ensure it is completed in full. Incomplete forms will not be accepted, emphasizing the importance of providing all necessary information accurately. Failure to make the annual declaration by the deadline can lead to significant consequences. Residential properties will be deemed vacant if the declaration is not submitted on time and VHT may be levied against the property. Failing to declare your property's occupancy status by the deadline could also result in a $250 fine.
Vacant Home Tax Calculation and Payment Schedule
The Vacant Home Tax in Toronto is currently set at 1% of the property's Current Value Assessment (CVA). Recently, there has been a significant update to this tax in Toronto, raising it to 3% starting from the 2024 tax year. The CVA represents the assessed value of a property as determined by the Municipal Property Assessment Corporation (MPAC). For example, If your property’s CVA stands at $500,000, the Vacant Home Tax billed would amount to $5,000 (1% x $500,000). The tax is based on the property’s occupancy status for the previous year. Consequently, if the home is vacant in 2022 the tax will become payable in 2023.
For homeowners subject to the Vacant Home Tax, the amount owing is typically paid in three installments, spread across May, June, and July of the taxation year.
In the event of a disagreement regarding the Vacant Home Tax assessment, homeowners have the option to file a complaint through an online portal, which opens in early April 2023. This process allows homeowners to address any discrepancies or concerns they may have about their tax assessment.
Recent Update: Increase to 3%
On October 11, 2023, the city council has voted overwhelmingly in favor of a substantial increase in the Vacant Home Tax. With a decisive 21-2 majority, council members have agreed to elevate the tax rate for unoccupied houses and condos from 1% to 3% percent of their assessed value starting from the 2024 tax year. This bold initiative is a strategic step aimed at not only easing the housing shortage but also addressing the city's budget deficit.
Implications of VHT
By the end of February, an impressive 95% of homeowners had declared their properties as either occupied or vacant. Subsequently, over 2,160 homes were officially declared vacant, and the city deemed a total of 17,400 homes vacant, resulting in the imposition of the tax. City staff reported revenues of $54 million from the first full year of the tax.
For more information about the Vacant Home Tax in Toronto, please visit: https://www.toronto.ca/services-payments/property-taxes-utilities/vacant-home-tax/
VACANT UNIT TAX IN HAMILTON (click for info sheet)
Starting in 2024, the City of Hamilton will launch a Vacant Unit Tax (VUT) targeting vacant residential properties. Residents have begun receiving informational materials about the program, highlighting the city's commitment to transparency and awareness. Residential property owners are required to submit an annual occupancy declaration starting in January 2024. The city has set a mandatory declaration deadline of March 31, 2024. This declaration can be conveniently done online or through a downloadable paper form. Properties left vacant for more than 183 days in a year will be subject to an additional 1% tax. Hamilton's VUT program also acknowledges various exemptions. It's important to note that principal residences are exempt from the tax but are still required to submit an annual occupancy declaration.
For more information about the Vacant Unit Tax in Hamilton, please visit: www.hamilton.ca/VacantUnitTax