Toronto Mayor John Tory says he is open to following Vancouver's lead by imposing a tax on vacant homes to crack down on speculators, as pressure mounts on governments of all levels to rein in the runaway real estate market.
"Vancouver recently implemented a vacant-home tax. And I am open to exploring whether this would be the right measure for Toronto," Mr. Tory told reporters on Thursday after a closed-door meeting with housing experts that he convened to discuss the city's accelerating affordability crisis.
"I look at housing as a place to live for people in this city," Mr. Tory said. "That is what I view as my responsibility, not to look after the investment needs of people who chose real estate as their investment target. They'll look after themselves."
The idea comes amid continued warnings that Toronto's real estate market, where the average price of a detached single-family home is $1.6-million, is a bubble waiting to burst.
An RBC Economics report released Thursday warns that house prices haven't been so unaffordable in Toronto since 1990, just before housing markets went into a "deep and prolonged slump." Ontario Finance Minister Charles Sousa has signalled that some sort of action on the housing market is coming in his government's budget, expected next month.
But whether a vacancy tax would do much to contain spiralling house prices in Canada's largest city remains unclear. While anecdotes about "dark condos" and oddly empty luxury homes are common, little reliable data exist on just how many empty units speculators are sitting on in Toronto. The mayor says the only estimate he has seen puts the number of vacant units at 65,000.
That number comes from census data, meaning that owners at those addresses did not answer their doors on census day or on two follow-up visits over the next six months. Mr. Tory said city officials will now start using Toronto Hydro and Toronto Water data to try to refine the number of truly vacant units and produce a report on the feasibility of a vacancy tax.
Mr. Tory would not say what rate could be charged, or how the tax could be implemented. No details were discussed, he said, and the idea is at a "preliminary stage." His staff said Toronto would likely need provincial permission to impose a vacancy tax.
Vancouver demanded that B.C. amend that city's charter to allow it to impose a first-in-North-America vacancy tax that will go fully into effect in 2018. Homeowners are getting mailed notices warning them that they will have to make a declaration about the occupation of their property in 2017 by February of next year. If their property was not occupied by the owners or family and if it was not rented for at least six months in 2017, they will have to pay an additional 1 per cent of their home's assessed value in property tax.
Phil Soper, chief executive officer of realty firm Royal LePage, said he doesn't oppose a vacant-property tax in theory, but he doesn't think it will have an impact on house prices.
Few homes are vacant because the owners are speculating in the market and waiting to cash in on a price increase, he said, as the costs of carrying a vacant home are high enough relative to other investment options to dissuade most from doing so. More typically, many seemingly vacant homes were bought to be used from time to time by the owners when they travel to Toronto, he said.
And those who own these luxury properties are wealthy enough to absorb a vacancy tax without feeling pressure to rent or sell their houses, he added: "That subset of the properties won't be appropriate to solve Toronto's housing crisis. They'll be luxury homes that are not the class of homes where we're having the issue with the availability of properties."
It is still too early to conclude what effect Vancouver's vacancy tax is having on the rental market, according to Thomas Davidoff, an associate professor at the University of British Columbia's Sauder School of Business. But he said the rapidly increasing rents in the city last year appear to have flattened out since then.
Prof. Davidoff said a vacancy tax in Toronto could dissuade speculators and help cool the market. But even if it didn't, and some absentee wealthy property owners just chose to pay it, the tax would still benefit the city's own bottom line, he said: "The beautiful thing about taxing an activity you don't like, like leaving a perfectly good home empty, is you win either way."
Among those at the table for the mayor's morning housing meeting was Tim Hudak, who succeeded Mr. Tory as Ontario Progressive Conservative leader in 2009 but who is now head of the Ontario Real Estate Association. In an e-mailed statement, he supported the idea of a vacancy tax: "Ultimately, the best solution is going to be increasing the supply of listings in hot markets across Ontario like the GTA. In the short term, a vacancy tax could address the issue of houses sitting empty, growing weeds and taking housing out of a tight market."
After his housing meeting, also attended by academics, bank economists and developers, Mr. Tory said there is no one "silver bullet" solution to Toronto's skyrocketing house prices. He stressed that demand for Toronto real estate is driven by the fact that the city is such a desirable place to live and invest.
With reports from Janet McFarland in Toronto and Frances Bula in Vancouver