Houses and condo towers near central Mississauga. The Peel Region is asking the provincial government for the ability to levy taxes on vacant homes to free up more available housing in the region.J.P. MOCZULSKI
Peel Region is asking the Ontario government to allow it to tax vacant homes in order to free up more of them for residents while bringing in revenue to fund affordable housing.
The regional government, which includes Mississauga, Brampton and Caledon, is the latest Canadian jurisdiction to target vacant homes as a possible solution to a housing crisis driven in part by a lack of supply. Vacant-home taxes already exist in Vancouver, Toronto and Ottawa, and a similar tax took effect at the federal level last year.
The proposal in Peel would apply to homes that are vacant for more than 184 days in a calendar year and don’t qualify for a list of exemptions. The tax rate would start at 1 per cent of the property’s current value annually, according to a staff report recently presented to Peel council. So for a $1-million home, the tax would amount to $10,000 a year.
Mississauga Mayor Bonnie Crombie said she supports the proposed tax as one of many strategies to help boost housing supply and generate revenue to be reinvested in affordable-housing initiatives.
“It’s no secret that we are in the midst of a housing affordability crisis, one that disproportionately impacts equity-deserving groups,” she said in a statement. “Mississauga is a city in demand. People want to live here, but the demand far outstrips the supply.”
Ms. Crombie noted that there are 91,000 households in Peel who need affordable housing and 4,000 who used emergency shelters last year. “We can’t afford to wait.”
Council passed the proposal in the weeks before an expected announcement Thursday that the provincial government plans to dissolve the Region of Peel, instead making Mississauga and Brampton independent municipalities. It’s not clear how that change would affect the vacant home tax proposal.
Peel Region contracted Ernst &Young to examine the prospect of a vacant-home tax. The firm’s report recommends that property owners be required to submit annual declarations for each property indicating whether they are vacant.
The region could declare properties vacant if owners fail to declare or submit a false declaration or if they fail to submit evidence or submit false evidence, the report says. Exemptions could include the property being for sale or undergoing major renovations, or if the owner is in care or has died.
The average home price in the Peel Region is just over $1-million, which is down from last year but still more than 15 per cent above prepandemic levels. Rental rates have also been surging in the region, similar to the rest of the Greater Toronto Area, with vacancy rates below 2 per cent.
Vancouver was the first jurisdiction in Canada to impose a tax on vacant homes when it introduced a 1 per cent tax in 2017. The tax rate is now 3 per cent.
Toronto and Ottawa each have a 1 per cent tax, and Hamilton will use the same rate when its vacant-home tax takes effect next year.
The federal government implemented its underused housing tax on Jan. 1, 2022, at a rate of 1 per cent.
In Peel, the Ernst & Young report recommended that the majority of responsibilities, such as levying the tax, running the declaration process, as well as auditing and compliance, would fall to the region, while municipalities would be in charge of tax billing and collection.
The vacant-home tax proposal now goes to the provincial government, which will need to approve it before the policy can be implemented.
Ministry of Finance spokesperson Scott Blodgett said in a statement that the government is aware of Peel’s desire to bring in a vacant-home tax, though the regional government has yet to request the authority to impose such a tax.
Peel’s regional chair, Nando Iannicca, said he would like to see the tax be used primarily to free up housing, rather than as a source of revenue.
“In an ideal world, there would be no revenue raised by a vacant-home tax. The aim is for this to be a tool that leads to vacant units being sold or made available for rent,” he said in a statement.
“There is a very real affordable housing crisis happening right now, and we need to consider innovative ideas that will increase the number of available units in Peel.”
Mississauga Councillor Joe Horneck agreed that the tax could help with the housing crisis, though he raised concerns about having the process split between Peel Region and municipalities.
“Mississauga is very much on the books saying for this issue and many, many others, a single-tier municipality makes a lot more sense for the efficiency of running things for our citizens,” he said.
Mr. Horneck said under the Ernst & Young proposal, the two governments will need to get together to design and make the process work.
Daniel Tsai, a business lecturer at the University of Toronto Mississauga, said vacant-home taxes have already proven to be ineffective in Toronto and Vancouver, and he predicted the same will happen in Peel Region.
He argues that vacant-home taxes fail to produce new housing where it is needed. For example, he has pointed to city data in Vancouver, where there were more than 10,000 empty homes, but the first report on the tax’s implementation in 2018 found it was only applied to 2,538 units. By 2019, Vancouver taxed 1,893 units, in a market that needs 72,000 new homes to meet its demand over the next decade.
“Peel Region must, like all cities, address the problem of lack of housing supply by encouraging densification for development and lasting sustainability, and providing incentives for rentals and renters to get developers onside,” he said in an e-mail.
“We should recognize the empty homes tax for what it is – a political tool and needless tax, and not a comprehensive housing solution.”
University of Ottawa professor Carolyn Whitzman, whose research focuses on housing and planning, argues that vacant-home taxes are most effective when they are part of a range of policies aimed at the housing crisis.
“The idea is, as long as we’re not building enough supply, we might as well take advantage of homes that are bought merely as investments and not rented out,” she said.
Prof. Whitzman said vacant homes that might become available in response to the tax would likely enter the market at high prices, so she would like to see revenue go toward accelerating new affordable housing.