Taxing vacant homes in Kitchener would prove costly and unnecessary, councilors say
KITCHENER — The number of vacant homes in Kitchener is so small that the city would spend more to administer a tax on those properties than it would collect, Kitchener councilors heard Monday.
Staff were asked to explore the feasibility of a vacancy tax, similar to programs that have been implemented in Toronto, Ottawa and Vancouver.
In the midst of a housing affordability crisis, it is believed that the prospect of an additional property tax on a vacant home could encourage the landlord to sell or rent the property and help increase housing supply.
“It’s not meant to be a revenue tool for the municipality,” Kitchener revenue manager Saleh Saleh said at Monday’s finance and corporate services committee meeting.
But there are not believed to be as many vacant properties in the city that could be taxed, councilors heard.
“We’re confident that’s not a problem here,” Saleh said, adding that Waterloo, Cambridge and the Region of Waterloo have come to the same conclusion.
The province allows Ontario municipalities to charge a vacancy tax on residential properties of six units or less – large apartment buildings, for example, are not included.
Policies in place in Toronto, Ottawa and Vancouver exempt properties under renovation, awaiting redevelopment, Airbnb units and those on probate, whose owner has died.
Staff used water usage data to estimate that there are only between 100 and 125 vacant properties, or 0.15% of the total, in Kitchener.
Additionally, a 2021 report by Canada Mortgage and Housing Corporation concluded that the rental vacancy rate in the Kitchener-Cambridge-Waterloo Census Metropolitan Area was quite low, at 2%.
Using an estimate of 125 vacant homes in Kitchener with an average assessed value of $325,000, a 1% vacancy tax would generate approximately $406,000 per year. But the costs of the program are expected to be higher, resulting in a net loss to the city.
Toronto, Ottawa and Vancouver all started with a 1% vacancy tax (Toronto and Ottawa implemented theirs this year, while Vancouver’s has been around since 2017). Vancouver subsequently increased its tax to 3% and is considering moving to 5%.
With many more vacant properties (Toronto is estimated to have approximately 7,900 eligible residences), the estimated annual revenues in each of these three cities far exceed annual start-up and operating costs.
Kitchener advisers said exploring the option was a worthwhile exercise, but agreed it didn’t make sense at this time. Their decision still needs to be ratified at a future council meeting.
“Even if it’s not a problem now, that doesn’t mean it might not be a problem in the future,” Coun said. Paul Singh.
“I think in our community there’s a sense of urgency among most of us, in terms of trying to tackle this huge affordable housing issue, but there’s also a certain apathy there. -down,” Coun said. Sarah Marsh.
“For landlords choosing not to rent…and clinging to usable residential properties, I think that’s a shame.”