For a few years now homeowners in Vancouver have had to declare that they have lived in their residence for at least 6 months (half) of the previous year in order to avoid having to pay a vacancy tax. One that the city introduced to make more housing stock available to rent in the city – something that is VERY much needed there and in Canada’s other major metro city, Toronto. Data indicates the vacancy tax has raised revenue for the city, and as you would expect the city earmarks that money for investment in new affordable housing.
It’s a slow change process, but it’s in the greater civic interest to prevent owners from buying homes and then leaving them vacant while they wait for the home’s value to appreciate before selling it. Any realtor working in Vancouver or Toronto will tell you this practice has been very common for a long time, but in Vancouver at least now it’s going to cost those investor buyers more to protect their investment that way.
Understanding and being receptive to buyer prerogatives in the best way possible is what a realtor should strive for. But when you’re new to the business you won’t have learned the ropes in the same way as someone who’s a more experienced realtor. You gain that experience one way, and one way only – working with clients. That’s why our online real estate lead generation system here at Real Estate Leads is such a good choice for realtors new to the business. You’ll be directed to prospective clients, and given that opportunity to convince them you’re a good choice as their realtor.
But back to our topic here this week. It appears as if Toronto is starting to see the same merit in a vacancy tax that Vancouver has for a while now, and may be following suit with a vacancy tax of their own.
Stumping Speculation
The City of Toronto’s aim of course is to try to stop real estate speculators from buying up homes and having those homes sit empty while residents find finding affordable housing to be a major struggle. The mayor’s executive committee unanimously supported a city staff recommendation that would implement a 1% vacant home tax beginning the first day of 2022. It’s very likely that council is going to approve the proposal, so we can go ahead and assume this is probably going to go through.
The rate for the tax that Vancouver put into place when introduced in 2018 was raised 3% in the fall of last year, and it’s estimated the vacancy tax put around 5,000 condo units on to the rental market in and brought down the number of empty homes by 25%.
Spokespersons for the city in Toronto have said they estimate their vacant home tax will generate between $55 and $66 million per year. Again in the same way as Vancouver, the city would use the money to fund affordable housing projects. The hope with these taxes is that they will compel property buyers to either live in the home themselves, or add it into the rental stock that is in extremely short supply in both cities and likely will be for the long foreseeable future.
Questions about Rate
Apparently Toronto intends to introduce the vacant homes tax at 1% of the home’s assessed value, but some are suggesting it’s too low and they should follow Vancouver’s lead exactly and start at the same 3% of assessed value.
Some people think 1% is not enough of a disincentive. Rental vacancy rates are as low as they’ve ever been right across Canada, and the pandemic has driven up rental apartment vacancy rates to a 50-year high. Numbers have shown that just under 6% of rental apartment units were vacant in Q4 last year.
As the pandemic becomes more under control, students will return to schools in big cities and this will put even more pressure on the rental market.
Luxury Tax Too?
Toronto city’s executive committee is also considering a study proposing a luxury home tax, where owners of homes valued over $2 million would havean increased municipal land transfer tax up going up to 3 / 4% from the current 2.5%. The estimate there is that this tax could generate up to $30 million more a year in revenue that will be invested into affordable housing projects.
However, some experts say not to loo past the effect of some homeowners choosing not to upgrade to luxury homes and this meaning fewer upper scale detached single-family homes being available for sale on the real estate market.
$1.5 million was the average detached home value in Toronto for 2020, so the concern is that this tax will target homeowners who aren’t extremely rich way too predominantly, as well as have a dampening effect on the housing market.
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