The city of Windsor is asking residents to report vacant homes in their neighbourhoods, becoming the latest Canadian municipality to implement a tax on unoccupied properties to help ease the housing crisis.
Owners of homes in the Southern Ontario city that sit empty for more than six months a year must pay an annual tax of 3 per cent of the property’s assessed value. Exceptions will be made for residences under renovation or for sale.
“We’re looking at all strategies to try and deal with the housing supply and demand mismatch. And this is one that we thought was relatively low-hanging fruit in that there are already homes built that have been left vacant,” Mayor Drew Dilkens said in an interview.
Windsor is relying on public complaints rather than requiring all homeowners to file occupancy declarations, which is the system used by other Canadian cities with such taxes. Mr. Dilkens said officials hope to avoid “some of the chaos” Toronto recently experienced when numbers of residents missed the reporting deadline.
“Every neighbourhood knows where the vacant homes are,” he said.
Taxes on unoccupied homes are intended to increase the housing supply by encouraging owners to sell or rent out vacant residences. A chronic shortage of properties has driven up real estate prices and rental rates and contributed to the affordability crisis.
Vancouver became the first Canadian jurisdiction to impose a tax on homes left empty for more than six months a year with a 1 per cent levy in 2017. The rate has since increased to 3 per cent, meaning the owner of a $1-million home would receive a $30,000 bill each year.
The city says there is “strong evidence” the tax is working, citing data showing the number of vacant homes dropped by 54 per cent between 2017 and 2022, according to a report last year. In 2022, 1,156 properties in Vancouver were considered vacant.
Thomas Davidoff, a professor at the Sauder School of Business at the University of British Columbia, said the tax has been effective in boosting supply, though it is difficult to determine whether it has increased affordability.
“You’re getting more housing units available and you’re raising revenue for the government, which are desirable,” said Prof. Davidoff, who advised the city on the development of the tax.
However, Murtaza Haider, a professor at the Ted Rogers School of Management at Toronto Metropolitan University, said vacant home taxes have little impact on supply over time and instead are used to create an impression that city leaders are taking action.
“It’s more about optics. It’s basically being seen as doing something about housing,” he said.
Earlier this year, the Ontario government gave all municipalities the authority to tax vacant homes. “An unoccupied home is unacceptable in a housing crisis,” the government said in its March budget.
Toronto introduced a 1 per cent vacant home tax in 2022 and hiked the rate to 3 per cent starting this year. But some 176,000 property owners did not submit occupancy declaration forms by the extended March deadline and received a tax bill, the city said in a statement. Since then, more than 95 per cent of the bills have been reversed.
Ottawa and Hamilton have 1 per cent vacant home taxes.
In Windsor, which launched its levy on June 11, owners of homes suspected to be unoccupied will be contacted by the city and required to complete an occupancy declaration form within 30 days.
Individuals who own properties that officials determine were vacant for more than 183 days in a calendar year will be required to pay a tax of 3 per cent of the home’s assessed value.
Mr. Dilkens said Windsor has an estimated 200 to 250 unoccupied homes out of a total of 88,000 units. The vacant home tax will likely bring in about $500,000 to $600,000 and cost between $100,000 to $150,000 a year to enforce, said Janice Guthrie, the city’s chief financial officer. The city will use the proceeds for housing programs.
“This is just a tool,” Mr. Dilkens said. “At the end of the day, we will evaluate year over year and if it’s not having an impact and we can’t tweak it accordingly, then we’ll probably discontinue it. But it’s worth trying in today’s market.”