My Concerns With The Toronto Vacant Home Tax
And I have a lot of them.
I'm just going to get right into it. I've never seen such a haphazardly implemented policy by any level of government, ever. And that's saying a lot. Let me tell you why this new Toronto Vacant Home Tax is such a mess.
First off, in case you missed it and you own property in the City of Toronto, every single property owner is required to fill out a declaration with the city confirming that their property was not vacant for more than six months in 2022. And if you own multiple properties, a declaration needs to be made for each one separately. If you didn't get that yellow letter in the mail (and yes, it only came via physical mail - one of the many issues with this process), here's the link where you can submit the declaration. It must be done by Feb 2, 2023 or else... (that's basically how I read the consequences laid out by the city). But in all seriousness, if you miss this deadline you'll get hit with a $250 penalty and a 1% tax will be added to your next property tax bill based on the latest assessed value. It's not a joke, so don't miss that deadline. And for clarity, even if you own just one property in Toronto and it's your primary residence, this declaration must still be filed by the deadline.
Now on to why I think the implementation of this is going to cause such a headache for not only property owners, but for the city.
1 - Not everyone received this notice. Wifey and I own a number of rental properties in Toronto and I can tell you that we did not receive a notice for each one. So then what? Is it right to penalize us because the city didn't send us a notice or make any attempt to confirm that the notice was received by every property owner for every property they own? Property tax bills are sent to whatever mailing address the city has on file for you - and that address could very well be the address of your rental property, or where you actually live, or whatever other address they may have. If your bank pays your property taxes for you, guess where the city sent your Vacant Home Tax notice? To your bank! For the past several years, we've also been set up with ePost to receive our property tax bills online. So worrying about which mailing address the city had on file was a non-issue. Until now. Now that ePost was decommissioned at the end of 2022, there are likely thousands of property tax statements that are going to be mailed to tenants rather than owners, and I am 1000% sure that countless of these Vacant Home Tax notices were sent to the the address of the actual property, rather than the mailing address of the owner. Whose problem is this? Apparently, it's the owners' problem. Didn't get the notice. Too bad. We're gonna tax ya.
2 - It looked like junk mail. My parents received their notice and immediately tossed it in the garbage because it said "Vacant Home Tax" in bold and they thought "our home isn't vacant, so this doesn't apply to us. Oh, and it's yellow. Only junk mail is yellow". Had I not told them the declaration was mandatory and exactly where to go to online to fill it in, they likely would have tossed the letter and not thought twice about it. I mean, if it was important, they'd get a reminder anyway, right? Nope. I promise you, there will be many more folks like this that just ignore that yellow flyer they got in the mail and assume that a reminder notice would be sent with their upcoming property tax bill, if it really was that important and was something they needed to do something about.
3 - Very little time to respond. These notices started hitting people's mailboxes in mid-December, with a Feb 2nd hard deadline to respond. So the city decided to send millions of notices to millions of home owners a week before Christmas, with no background information or campaign to educate residents about what this was for, and gave them six weeks to reply... or else. How many of you have family that spend the winter in Florida? Imagine their shock when they return to Toronto in March only to find out that they've been hit with a 1% Vacant Home Tax and a $250 fine for not filling in the declaration that arrived physically to their home in Toronto, via mail, while they were on vacation.
4 - Why was the notice only sent via physical mail? There is no way for the city to know if these notices actually reached every single property owner. How many letters get lost in the mail every day? Does the city know if everyone got their notice? If this notice didn't get to you, or got sent to the wrong address, why is the onus on the owner to make sure they don't miss the deadline? We live in a digital age and it's pretty ridiculous to me that an electronic means of reaching property owners wasn't proposed.
5 - Why are we being asked for personal information about our tenants? This is the one that I have the biggest issue with. In submitting this declaration, you have the option of stating that the property was tenanted for at least six months in 2022. Fine, no problem. But then things take a turn - you are forced to submit the name and phone number of your tenants. This is not optional. Not an email address either, but a phone number. I don't remember anywhere during the time that I've been a landlord where any of my tenants have given me consent to provide their personal information to anyone, and now the city is demanding it otherwise I can't submit my declaration. Also - leases in Ontario are under the jurisdiction of the province, not the city, so I don't even know if it's legal for the city to demand information about a tenancy. Maybe some legal geniuses out there can help me out but I'm sure some tenant advocacy groups or privacy rights groups out there can chime in?
6 - Is the city actually going to call my tenant to verify information? Another huge issue on my end. If the city is going to ask for the phone number of my tenants, one can only assume that there is a non-zero chance that they will call them. So am I to assume that if my tenant is having a bad day when the city calls to verify that they actually live in one of my properties, and they jokingly say "nah, I don't live there anymore. Haven't for years", that the city will then come after me? The fact that there is even a chance that my tenants have a say in whether or not my declaration is true is extremely concerning. As far as I know, the city doesn't have legal authority to ask for a copy of my leases but are they saying they have a right to call my tenants to validate my declaration? Huge, huge red flags for me on this.
7 - The exemptions to the Vacant Home Tax are not encompassing enough. You can tell this implementation was extremely rushed because the list of exemptions to the tax has me scratching my head. Death, renovations, sale of property, etc are all valid exemptions, but there are many, many more real-world scenarios that should not be subject to this tax. Imagine you bought a new house in 2022, moved, and are now trying to sell your old house in a slower market. According to the city, if this sale took you more than six months, you'll be hit with a vacant home tax. Talk about rubbing salt in your wounds. I didn't know there was a law that said you only have a certain period of time in which to sell your home before you could get taxed by the city. Apparently now there is. That's just one of many examples and I can already hear the grumblings from people who will be challenging this declaration because their valid reasons are not included as an exemption, which will actually prevent them from submitting the declaration accurately.
8 - It's making real estate transactions messy. This Vacant Home Tax got thrown on us at the last minute, with literally no time to digest or understand how this impacts so many other aspects of people's real estate transactions. For me, the question of how it affects my clients was top of mind. I have a deal closing next week that was signed back in early December. According to the city, it's the seller's responsibility to sign the declaration because only they can attest to the occupancy status of the property in 2022. Fine. But what if they don't fill in the declaration on time? Or worse, what if the property was actually vacant for more than six months in 2022 and that's what they declare to the city? Guess who's going to get hit with the tax? My clients! How does this even make sense? You might be saying "but the lawyers will take care of this" but this is my point - everything got thrown on us so quickly that there isn't an agreed upon clause that exists yet that we can include in our agreements to address this situation (and it would be pointless anyway for deals that have already been signed), and even if we did, lawyers aren't even sure how to handle the situation where a property is assessed with the Vacant Home Tax several months later pertaining to the vacancy status of a property that the current owners didn't even own yet! It's a can of worms and I can already see the scrambling that will go on when folks who closed on their new homes in 2023 end up with a 1% Vacant Home Tax levy on their next tax bill. And will OREA come to save the day with a clause we can insert into our purchase agreements? Well, this is a Toronto-specific problem and I have yet to hear a peep out of anyone because there are still so many unknowns and nuances that need to be thought out first. But there is no time. Deals are happening every day while this is still being sorted out.
9 - You are presumed guilty. The fact that every single home owner has to submit a declaration stating that their home is in fact NOT vacant is so ass-backwards, I'm speechless. The assumption from the city is that every property is vacant unless you tell them otherwise, and if you don't tell them otherwise - boom, you get a 1% Vacant Home Tax levied on your head. In what world is it right to assume someone is guilty of something unless they prove or say otherwise? Imagine not filing your tax return this year and getting a $50,000 tax bill from the CRA under the rationale that "well, since you didn't file your taxes to tell us otherwise, we're just going to assume you made $200,000 last year. So here's what you owe us". What. The. Heck. This Vacant Home Tax declaration process should have been implemented in the exact opposite manner - you tell us if your property is vacant so we can assess the tax accordingly. Because of the sheer logistical nightmare of having every single property have a declaration on file, that's how any logical person would have implemented it (assuming this tax is even needed at all. More on that below).
10 - The city doesn't even know how many vacant homes actually exist. This is a huge point of contention for me. The City is spending literally tens of millions of dollars on this project without any concrete data on how many vacant homes even exist in Toronto. How many people are they targeting for this tax? They have no idea. Wouldn't it have made sense to first do an analysis on how many vacant homes likely exist before assuming every home is vacant unless the owner says otherwise? Nothing infuriates me more than governments implementing laws and taxes to "solve" a problem that may not even exist. Remember the Foreign Buyer Tax back in 2017? That was based on zero data. The Foreign Buyer Ban that was just implemented across Canada? Based on zero data. And here were are with the City of Toronto, acting blindly as governments continue to do, trying to make it look like they're actually trying to fix the housing crisis Toronto is facing. Make no mistake, this is a tax grab, plain and simple.
11 - Will the City come to the rescue of landlords? The supposed purpose of this Vacant Home Tax is to encourage property owners to rent out their units to promote the creation of more rental supply, rather than keeping them empty. I have no issue with that premise. But here's where I have an issue - if the government is going to penalize someone for choosing to keep their property vacant, will that same government come to the owner's rescue if the tenant they are now forced to provide housing to stops paying rent? Or damages the unit? We all know how dysfunctional the Landlord Tenant Board is so if someone is going to force me to rent out my property against my will, isn't it only fair to assume that there will be some sort of assistance provided to me in the event that things go awry? Yeah, that's not gonna happen. Governments can't keep offloading their responsibilities with regards to housing citizens onto private landlords.
12 - Can the government then tell me how many people should be living in my house? This is probably what scares me the most. The city is basically saying "you can't have zero people living in your property". So what's to stop them from saying "you can't have only one person living in a 2-bed/2-bath 1000 sq ft condo". Or "you can't have just two people living in a 3000 sq ft house". Is the next step from the City to start taxing property owners based on how many people are actually living in a property vs how many the city thinks should be living there? You may think this is far-fetched but is it really? If the city (or any level of government) can exert control over whether or not a property is left empty, what's to stop them from mandating minimum occupancy restrictions for any given house or condo based on size, bedroom count, etc, or else you'll get taxed? It's a slippery slope and I'm not happy about it.
Yes, I'm upset about this tax. The premise, the presumed need, the implementation, the cost to the city (ie, taxpayers), the lack of analysis to see if this is even going to help the housing situation in Toronto. All of it. I'm actually shocked there hasn't been a bigger uproar. I can only hope something is brewing in the background to force it to be fixed.
Have you checked out my previous blog posts?
Your Toronto condo lover,
iPro Realty Ltd, Brokerage
Direct: 647-223-1679 (call/text)