Tax implementations for vacant homes, with a focus on the City of Toronto (“Toronto”) program
Know how the housing crises can be resolved in and around Toronto
Introduction
Vacant-home taxes are increasingly used by municipalities to address housing supply and affordability issues. In Toronto, the Vacant Home Tax (VHT) seeks to encourage homeowners to either occupy or rent out properties rather than leave them uninhabited. By taxing homes that sit vacant for long periods, the city aims to bring more housing units into active use. This article outlines how the tax is implemented in Toronto: the scope, key provisions, exemptions, calculation, declaration processes, implications for owners and buyers, and what to watch for.
Motive
Toronto faced a persistent issue of residential properties remaining unoccupied. According to the city’s fact sheet, the vacancy rate in Toronto was estimated at 1 % to 1.2 % of residential properties. Toronto In February 2022, the City Council approved the Vacant Home Tax program, effective for the 2022 taxation year. The policy aim: discourage owners from leaving homes idle, thereby improving rental availability or prompting sale of under-used dwellings.
For example, in 2022 the tax generated approximately $56.5 million, and in 2023 around $50.6 million. For 2024, with the tax rate increased to 3 % of Current Value Assessment (CVA), the estimated revenue rises to about $105 million.
Thus, the VHT is both a revenue tool and a housing-market incentive mechanism.
Scope & Key Definitions
What properties are subject?
The tax applies to residential properties within the City of Toronto that meet the following general criteria:
The property is unoccupied (vacant) for six months or more during the calendar (taxation) year.
The owner is required to submit an annual declaration of occupancy status—even if they live in the home.
If a property fails to declare, it may be “deemed vacant” and the tax applied.
The tax rate is applied to the Current Value Assessment (CVA) of the property, essentially its assessed value relevant for property tax purposes.
What counts as “vacant”?
A property is considered vacant if the residence was not occupied for a total of six months or more during the calendar year (unless it qualifies for an exemption) and the home is not otherwise being used in a qualifying manner (tenant, principal residence, etc.).
Who is exempt or considered occupied?
There are categories of occupancy or exemption:
The property is the principal residence of the registered owner, or the principal residence of a permitted occupant (for example a family member) and occupied for at least six months of the taxation year.
The property is rented to a tenant for residential purposes with occupancy at least six months in the taxation year.
The property qualifies for an exemption: death of the registered owner, major renovations or repairs preventing occupancy, property in care or hospital, etc.
Declaration requirement
All residential property owners in Toronto must submit an annual declaration of their occupancy status for each property they own—even if they occupy the home themselves. The declaration involves identifying the property (via roll number) and indicating whether it was occupied, tenanted, vacant, etc. Failure to submit or incomplete forms can lead to a deemed-vacant status and tax liability.
Tax Rate & Calculation
Historical rates
For taxation years 2022 and 2023, the rate in Toronto was 1 % of the CVA for a home deemed vacant.
Beginning with the 2024 taxation year, Toronto increased the rate to 3 % of CVA.
Sample calculation
For illustration: if a property’s assessed value (CVA) is $1,000,000 and it is deemed vacant (no exemption, unoccupied 6 + months), then
At 1 % rate: tax = $10,000.
At 3 % rate: tax = $30,000.
Liability & collection
Once the tax is calculated, it is added to the property tax account and collected through the same mechanism as regular property taxes. Unpaid amounts may accrue interest or penalties per the city’s standard tax enforcement procedures.
Deadlines, Declaration Process and Compliance
Declaration deadline
For the 2024 program (i.e., for the 2024 taxation year) a redesigned declaration period opened November 1 2024 and runs until April 30 2025. Toronto For earlier years deadlines were earlier (for example February or end of February).
How to declare
Online: Via the City of Toronto’s VHT portal, using property roll number and customer number.
By phone or in person: For those unable to declare online, telephone support (311) or in-person at civic centres is available.
Documentation: If claiming an exemption, supporting evidence may be required (e.g., death certificate, building permit, hospital letter).
Consequences of non-compliance
If no declaration is received by the deadline, the city may deem the property vacant and levy the tax.
Late declarations may trigger a late fee (in some years waived).
False or misleading declarations may result in fines up to $10,000.
Interest may accrue on unpaid tax.
Billing & payment
For those subject to the tax, once the status is confirmed or deemed, the city issues a VHT notice. Payments in earlier years were split (e.g., May/June/July). For the redesigned 2024 program, billing and payment instalments were adjusted (e.g., September/October/November).
Exemptions & Special Cases
Understanding exemptions is key to determining liability. Some of the major exemptions for Toronto’s VHT:
Death of the registered owner: If the owner died during the year or within the previous two tax years, the property may be exempt for up to three consecutive years.
Major renovations or repairs: If the property is undergoing permits-issued major renovation that prevents normal occupation and is actively being carried out without unnecessary delay.
Owner (or dependent) is in hospital or care facility for at least six months of the taxation year.
Employment outside the GTA: If the property’s owner or spouse works full time outside the Greater Toronto Area and the home was required for residential purposes.
Transfer of ownership: If the property changed hands in the taxation/reference year.
Court or municipal order prohibiting occupancy.
Additionally, properties classified as seasonal or uninhabitable (under certain MPAC codes) may be exempt under the provincial guidance.
Given the high tax rate (3 % of CVA), properly assessing whether an exemption applies is critical for owners.
Implications for Owners, Buyers & the Market
For owners
Compliance risk: Owners must know to declare occupancy status each year, even if they live there. Failing to do so may lead to the property being deemed vacant.
Financial cost: With the tax at 3 % of CVA, the cost for a high-value property can be substantial (e.g., $1 M assessment → $30,000 tax).
Transaction risk: If a property was vacant and the seller did not declare or pay the tax, the new owner may be liable for past years’ VHT.
Planning considerations: Owners who hold properties for future personal use, perhaps returning after travel or absence, should ensure they meet “occupied” criteria (six months residence) to avoid the tax.
For buyers and real-estate professionals
Due diligence: Purchasers need to confirm that the seller has filed the occupancy declaration and paid any applicable VHT to avoid inheriting liability.
Closing conditions: Lawyers should include representations, warranties and indemnities related to the VHT in purchase agreements.
Market pricing: The VHT may influence pricing in the resale market for properties that were vacant or have ambiguous occupancy status.
Market and housing-supply impact
Intended effect: The policy is designed to discourage long-term vacancy, thereby putting more homes into the rental market or prompting sale. The estimated revenue increase suggests the city expects significant behavioural change.
Availability: By reducing the number of idle homes, more units may become available, possibly easing rental pressures.
Potential unintended consequences: Some critics argue the tax may push owners to minimal use just to avoid the tax (e.g., short stay by owner), or increase rental supply only marginally. The broader effect on affordability remains subject to evaluation.
Challenges & Implementation Issues
Administrative rollout
Toronto’s 2023 rollout faced significant issues. A “botched” implementation resulted in confusion and complaints: many owners were incorrectly billed or did not understand the process. As a result, the city committed to a “complete redesign” of the process starting 2024.
Key issues included: tight deadlines, portal capacity, communication breakdowns, and owners missing the declaration. For example, the city extended the declaration period to April 30 2025 for 2024 onward to give more time.
Data, enforcement & verification
Although the declaration is self-reporting, the city may use MPAC data, utility usage, tax payment records and other sources to identify potentially vacant units. This raises issues of accuracy, fairness and transparency.
Owner burden & fairness
Some owners argue that occasional or seasonal vacancy should not trigger the tax. For example, a second home used part-time or a snowbird going abroad may be captured. The six-month rule tries to balance this, but disputes occur.
Market behaviour & penalization
There is debate about whether the tax may disproportionately impact small investors or owners of luxury homes who choose to keep properties as discretionary assets rather than speculative holdings. The revenue-raising element may also raise concerns about fairness and unintended side-effects.
Strategic Considerations & Practical Steps
Here are practical considerations for owners (and advisors) to manage liability under the Toronto VHT:
Ensure timely declaration: Each year review your property holdings, ensure the occupancy status is declared by the deadline (for 2024 year: by April 30 2025) so the property is not deemed vacant.
Maintain occupancy records: If your property is occupied (owner or tenant) for at least six months of the year, keep proof (lease agreements, utility bills, mail forwarding, etc.) in case the city requests documentation.
Evaluate exemptions: If your property qualifies for an exemption (major renovations, owner in care, etc.), gather supporting documentation at the time of declaration.
Assess potential tax cost: For homes that may be vacant, calculate the potential tax (3 % of CVA) and weigh options — perhaps renting out the unit for six months+ or listing for sale.
Transaction diligence: Sellers should provide proof of declaration and VHT payment; buyers should conduct a review of past years’ declarations and tax account to avoid inheriting liability.
Monitor any policy changes: Municipalities may adjust rules, deadlines, tax rate or exemptions. For example, the 2024 changes extended deadlines and improved portal access.
Communicate with tenants or permitted occupants: If you rely on a permitted occupant (family member, etc.) to meet the six-month occupancy rule, ensure documentation and that the status qualifies under the city’s definition.
Use professional advice: Given the complexity and financial impact, consult legal or tax advisers or real-estate professionals to review status, exemption eligibility, and implications for property transactions.
Broader Context & Comparisons
While Toronto’s VHT is one of the more visible examples in Ontario, the concept of vacant-home taxes is emerging in other Canadian municipalities. For instance, the provincial government’s guidance on municipal vacant home tax includes recommended practices for occupancy verification, appeals process and exemptions.
Other cities have adopted similar measures (e.g., Ottawa, Windsor) or are considering them. In many jurisdictions the rate ranges between 1 %–4 % of assessed value.
In British Columbia, similar taxes (e.g., for foreign-owned properties or speculation) are in place, illustrating a broader trend of regulatory tools to address housing under-utilization.
From a policy lens, vacant-home taxes can be viewed as a use-it-or-pay mechanism: if a property remains idle instead of contributing to supply, the owner pays a cost. Whether this translates to significant increases in rental supply or lower rents remains to be fully proven.
Impact & Outcomes to Date
Toronto’s VHT has already had measurable outcomes. The city collected tens of millions of dollars in revenue and expects that increase with the 3 % rate.
Early reports indicate thousands of property owners submitted declarations early to avoid tax, and some previously idle units are being marketed. However, full evaluation of long-term housing-supply effects is still forthcoming.
The redesign of the program for 2024 (grading process, extended deadlines, improved portal) reflects the city’s acknowledgement of early implementation issues and its commitment to smoother administration.
Risks & Considerations
For owners
There is the risk of large tax liability if your property becomes subject to the tax (especially at 3 %).
The risk of inherited liability for buyers when previous owner fails to declare or pay.
The administrative burden of annual declarations and record-keeping.
Potential dispute if the city deems your property vacant but your occupancy circumstances differ (e.g., seasonal use, secondary home).
For the policy
Effectiveness: Will the tax truly increase rental supply and affordability, or push vacancy into other categories?
Fairness: Some owners may see this as penalizing legitimate uses (second homes, snowbirds, temporarily vacant units) depending on exemptions.
Enforcement: Requires city resources to verify and audit declarations, which increases administrative cost.
Market distortion: If the tax causes owners to list for sale prematurely or convert units in unintended ways, it could shift market dynamics.
Practical Advice for Stakeholders
Homeowners & Investors
Review your property’s occupancy status and ensure that it either qualifies under “occupied” for six months or an exemption.
If you plan to keep the property vacant for personal reasons, run the numbers: at 3 % of CVA, the tax may exceed the cost of renting it out for six months.
If selling, ensure you complete the necessary declaration and settle any VHT issues before closing.
Keep clear records of tenancy, mail delivery, utility use, visitor stays, etc., to substantiate occupancy if required.
Stay informed on changes in deadlines, portal updates, and city communications.
Real-Estate Professionals & Advisers
Alert clients (owners, buyers) about the VHT liability and declaration requirement.
Factor VHT compliance into due diligence for property transactions: ask for the seller’s declaration history and clearance of any VHT bill.
Highlight the tax’s financial implications in investment-property analyses.
Monitor policy updates, especially as the city refines its processes and maybe expands enforcement.
Provide clients with the timeline for declaration, the forms and supporting documentation needed.
Municipal Policy Makers & Analysts
Monitor whether the tax achieves its goal of increasing active rental supply and reducing vacancy.
Evaluate whether exemptions are appropriately calibrated so as not to penalize legitimate uses.
Track administrative costs, compliance rates, disputes and revenue outcomes to assess program efficiency.
Communicate clearly with property owners, especially given the large financial implications of the tax and the potential reputational risk from errors in billing.
Finally
The City of Toronto’s Vacant Home Tax represents a bold municipal policy to tackle housing under-utilization by imposing a significant financial cost on homes left vacant for half the year or more. With the tax rate now set at 3 % of assessed value, property owners must take the annual declaration seriously and evaluate their occupancy or rental strategies accordingly. For buyers, the obligation extends to past years and previous declarations — making due diligence essential. While the long-term impact on rental supply and housing affordability remains to be fully measured, the VHT signals a shift in how municipalities use taxation and regulation to manage idle housing stock.
For any homeowner, investor or adviser operating in Toronto, awareness, timely compliance and strategic planning around the VHT are now integral parts of property-holding and transaction considerations.
Outcomes
Likely Positive Outcomes
More Homes Rented or Sold
The tax creates a strong incentive for owners of vacant homes to either rent them out or sell them, rather than paying the tax. Research from other jurisdictions found a meaningful reduction in vacancy rates after such taxes.
By 2026, the number of vacant units in Toronto may therefore decline further, helping boost supply of active rental or owner-occupied homes.Increased Housing Supply for Renters
As more previously idle homes are brought to market, rental availability may improve. The city’s own fact sheet notes that the VHT supports housing supply goals by encouraging occupancy.
By 2026 this extra supply could ease some pressure in specific segments of the market (though not necessarily across all price ranges).Revenue for Affordable Housing Initiatives
The tax revenue collected is earmarked in part for housing programs (e.g., the city’s “MURA” Program) that preserve or create affordable housing.
By 2026, cumulative revenues may substantially contribute to housing-stock initiatives, helping with broader affordability and supply-side goals.
Potential Challenging or Mixed Outcomes
Affordability May Not Improve Much
Research (e.g., by the C.D. Howe Institute) indicates that while vacant-home taxes reduce the number of empty units, they do *not necessarily reduce rents or housing prices.
So, by 2026, even with more units available, renters may not see substantial rent decreases; affordability gains might be modest.Behavioral & Compliance Issues
As the program progresses, some owners may attempt to circumvent the tax (e.g., minimal occupancy, short stays) or dispute the classification of “vacant”. Implementation challenges remain.
By 2026, enforcement, audit, and compliance costs may remain significant, and some properties might remain underutilized despite the tax.Revenue Decline if Vacancy Falls
As more homes become occupied, the tax base shrinks. The city acknowledged that over time collections may decline as the goal of reducing vacancies is achieved.
By 2026, the VHT revenue line may level off or reduce, meaning the city’s housing-program funding from VHT may need adjustment.Potential Market Distortions
Behavioural responses might include owners selling rather than renting, reducing overall owner-occupied housing turnover, or shifting properties into categories exempt from the tax. The research suggests such side-effects exist.
By 2026, this could mean unintended outcomes such as fewer owner-occupied listings in some neighbourhoods.
Strategic Considerations for 2026
For property owners: Ensure annual declarations are filed, occupancy status is valid, and plan for tax liability if property remains vacant longer than six months. The tax rate now (3 % of CVA) makes that significant.
For renters and home-seekers: Monitor whether additional units come to market, particularly in neighbourhoods with previously high vacancy or investor ownership.
For policymakers and housing advocates: Assess not just the reduction in vacant units, but the quality of new supply, impact on affordability, and whether the tax revenue is being effectively used.
For investors/market watchers: Anticipate shifts in investment strategy – properties held idle may become less attractive; rental or sale may become more viable.