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Toronto Mayor John Tory speaks during a press conference in Toronto on Feb. 29, 2020.Cole Burston/The Canadian Press

Toronto Mayor John Tory is throwing his support behind a proposed tax on vacant homes, which he says should help increase the availability of housing in the city.

The proposal, contained in a city staff report made public Thursday, calls for Toronto to work out the legal and practical implications of such a tax, with an eye to implementing it in 2022.

The financial impact of the proposed tax is unclear. The report does not recommend a specific level of taxation and the city does not know how many homes currently are vacant. But, as an example, the report notes that if 1 per cent of homes were vacant, a tax rate of 1 per cent on average assessed value could gross $55-million to $66-million annually.

“I’d be happy if this tax didn’t raise any money, because it meant there were no homes sitting vacant,” Mr. Tory told reporters. “We simply can’t afford, from the housing perspective, to have housing accommodation for thousands of people sitting empty.”

Such a tax could discourage absentee owners who use property as a way to park money or in hopes of capital appreciation. Mr. Tory pointed to Vancouver, which has such a tax, as evidence that it could make more housing stock available.

However, several real estate professionals suggested that the impact in Toronto would be minimal. Barry Lebow, a veteran broker for RE/MAX Ultimate Realty Inc., said that a tax set at 1 per cent would be “but a hiccup” in the market.

“It will just add to the cost of parking money out of China, Iran, Russia or wherever,” he wrote in an e-mail. “The desire to have a safe investment here outweighs a 1-per-cent tax.”

Andre Kutyan, a sales representative with Harvey Kalles Real Estate Ltd., pointed to the example of a house he knows to be vacant in the upscale Forest Hill area of the city.

“They’ve been in California since the pandemic, they have no intention of coming back,” he said. “That house is worth $5- or $6-million. Is this tax going to force that into the long-term rental market, or force a sale? Is that going to ease up the pressure on housing issues? I highly doubt it.”

Although such a tax may not motivate all owners to occupy, rent or sell their homes, the experience of Vancouver suggests it might sway some.

In 2017 Vancouver passed its Empty Homes Tax, an annual levy that was pegged at 1 per cent of a home’s assessed value for any home that was not a principal residence or rented for six months of a year. In November, the city council voted to raise the levy to 3 per cent.

A recent study of the housing market by the Canada Mortgage and Housing Corporation (CMHC) found a record 11,118 condo apartments were added to the city’s rental supply in 2019, up 18 per cent from 2018.

Seventy-nine per cent of those additions were existing units returned to the long-term rental market, a number the study concluded was driven by the city’s Empty Homes Tax and the provincial government’s Speculation and Vacancy Tax.

Significantly, the study found that in downtown Vancouver there were more homes converted from other uses to the rental market than condo sales, suggesting owners were changing behaviour.

Downtown Toronto councillor Joe Cressy said the need for such a tax resonates particularly in high-rise neighbourhoods, where condos may be bought by absentee investors and, in some cases, used for short-term rentals.

“It’s logical, sensible and overdue,” he said.

The tax being proposed in Toronto would not apply to people out of their homes for medical reasons, renovations or winter vacations shorter than six months. The city would rely on a declaration by homeowners that their property is not vacant, with an undetermined penalty for those who lie.

The city staff report acknowledges that the pandemic has been associated with “increased rental availability and downward trending rent prices,” but adds that this may not continue.

“Long term housing affordability and availability challenges will most likely persist into the future,” the report states. “A [vacant home tax] can be a helpful tool to address these challenges.”

The staff recommendations will go next week to Mr. Tory’s hand-picked executive committee, where they are almost certain to pass. They would then need to be approved by the full council the following week.

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