Toronto’s New Vacant Home Tax – What you need to know
- Kamal Gawri
- Feb 21, 2023
- 4 min read
A vacant home tax is a relatively new thing. Let’s break down the basics of the Vacant Home Tax (known as the VHT).
What is the Vacant Home Tax?
The Vacant Home Tax is 1% of the Current Value Assessment (CVA) and applies to Toronto homes declared, deemed, or found vacant for over six months in the previous year. The tax is based on the property’s occupancy status in the previous year.
How much is the Vacant Home Tax?
For example, if the CVA of your property is $800,000, the tax amount billed would be $8,000 (1% x $800,000).
The tax is based on the property’s occupancy status for the previous year. For example, if the home is vacant in 2022, the tax will become payable in 2023.
When is the tax due?
Per the City of Toronto website, residential property owners must declare their vacant properties by February 28. The vacancy is based on the building’s vacancy or usage in 2022.
This declaration leads to a bill for VHT tax which will arrive in the mail in late March or early April 2023.
The vacancy tax will be due in three instalments in May, June, and July.
What do homeowners need to do?
Property owners in Toronto must annually now declare the occupancy status of the properties they own, even if they are currently living in the property.
To declare, you need your 21-digit assessment roll number and customer number from your property tax bill or statement. Declarations can be made through the City’s online portal or via a paper form. Incomplete paper forms will not be accepted. Owners of unoccupied properties may be subject to an audit.
Corrections to declarations can be made before the deadline (Feb 28th) or by filing a Notice of Complaint after the deadline.
How can I avoid the VHT?
You can only avoid the VHT if your property is:
1. Someone’s Principal Residence – you can only have ONE Principal Residence. The home can be occupied by the owner or any other person, without the need for a lease, as long as it is that person’s Principal Residence;
2. OR: Occupied by a Tenant (or Tenants) – not necessarily as their Principal Residence, but for residential purposes. A Tenant is defined as someone living there pursuant to a written lease or sublease for a consecutive term of at least 30 days. One or more tenants must occupy the property for at least six months in the year.
Does occupancy for six months have to be consecutive?
No. It is cumulative.
Are there any exemptions from the VHT?
A property may be left vacant and be exempt from the Vacant Home Tax if one of the following criteria is met:
● If the building were empty for more than six months in 2022 due to the homeowner's death, the building would not be subject to VHT. This will need to be proved by a death certificate.
● If the building were undergoing City-licensed renovations in 2022 that prevented it from being occupied for more than six months, it would not be subject to VHT. This is proved by the city-issued building permit and a description of the work being performed.
● If the resident of the building (owner or tenant) were in a long-term care facility, causing the building to be vacant for more than six months, the building would not be subject to VHT. This will need proof in the form of an official letter from the long-term care facility.
● If the building were sold to an unrelated third party in 2022, it would not be subject to the VHT. The proof of this exemption is the title transfer paperwork from the sale.
● Suppose the building was used as a secondary residence by someone who primarily lives outside Toronto but needs to live in Toronto temporarily to work. In that case, the building will not be subject to VHT. This will need to be proved by a copy of the employment contract and a statement on letterhead from the employer stating that this is the arrangement.
● Finally, if a court order in place requires the building to be vacant, the building will not be subject to VHT.
If any of these apply to your situation and you have the appropriate proof, you can be exempt from VHT.
Why is Toronto imposing a VHT?
The VHT is an attempt to regulate housing prices and supply in one of the most expensive cities in Canada. According to the Canadian Mortgage and Housing Corporation, the average rental price of a 2-bedroom apartment in Toronto in January 2023 stood at $1,765, and the average cost of buying a house is $750,000.
These prices are driven by extremely low supply; houses and apartments that should be available often sit vacant as second or third-owned properties. Landlords may be trying to hold out for a renter who can pay a higher price rather than rent to a lower-income person, leaving the unit empty for a longer time. Many houses and apartments are also being used as short-term rentals, such as Airbnb, instead of being available for long-term living.
The City of Toronto hopes that the Vacant Home Tax will drive landlords to quickly rent their houses and apartments to long-term tenants.
The City of Toronto will use the money raised by the VHT to fund affordable housing initiatives.
For more information, go to the City’s website at:
This article is intended to provide general information only and not legal advice. This information should not be acted upon without prior consultation with legal advisors.
By: Kamal Gawri, CPA, CA
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