In a perfect world, your Airbnb would be booked from month beginning to end. But rarely does that ever happen; although there might be peak seasons when demand spikes, pretty much every listing in every city sees a lull at some point in the year. Toronto-based operators have a reason to care beyond lost revenue. The Vacant Home Tax (VHT) is a city-specific policy that both complicates, and in some cases, increases the cost of, owning short-term rentals. Today, we’re sharing everything you need to know about it.
What Is the Vacant Home Tax (VHT)?
The Vacant Home Tax (VHT) is a municipal policy designed to address housing availability in Toronto by targeting residential properties that remain unoccupied for more than six months in a calendar year. Implemented on January 1, 2022, through bylaw 97-2022, the tax aims to encourage property owners to either rent or sell their vacant properties, thereby increasing housing supply in the city.
The policy emerged from Toronto City Council's strategic planning in December 2020, with formal approval in July 2021. It was initially set at 1% of a property's Current Value Assessment (CVA) before increasing to 3% in 2024. Approximately $56.5 million and $50.6 million in revenue was generated by the VHT in 2022 and 2023, respectively.
Do Airbnb Operators Need to Pay the Vacant Home Tax?
According to the C.D. Howe Institute, “99 percent” of Toronto property owners won't need to pay the VHT because they either live in the space full time or rent it enough days out of the year to disqualify themselves. Airbnb operators are in a unique position. Where mid-term and long-term leases can easily secure safety from extended vacancies, vacation listings see sporadic occupancy throughout the year.
For example, you might see most of your revenue come in during the summer when tourists flood the city and weekend travelers seek short-term rentals but little to no interest come harsh Canadian wintertime. If and when that works out to below the required occupancy
below the required six-month occupancy threshold, your property could be classified as vacant and subject to the Vacant Home Tax.
Budgeting for the Vacant Home Tax
The Vacant Home Tax is something you'll want to factor into your regular operating costs as an Airbnb owner in Toronto.
Here's how to do just that:
1. Review your booking history from previous years to understand seasonal fluctuations.
2. Create a contingency fund that covers potential VHT costs, especially if your occupancy tends to dip during off-peak seasons.
3. Consider diversifying your rental approach or exploring long-term leasing options that provide more stable occupancy and shield you from the Vacant Home Tax.
Remember to Declare
Even if you get enough bookings to avoid Toronto's Vacant Home Tax, the municipal government still expects you to submit an annual occupancy status declaration by April 30th, regardless of your property's rental performance. All residential property owners must file this mandatory declaration, even if the property is fully occupied and won't owe any tax. Failing to submit this declaration means your property will be automatically deemed vacant and subject to the full Vacant Home Tax.
Non-compliance can result in significant fines ranging from $250 to $10,000. This is a critical administrative requirement separate from your actual tax liability, so mark your calendar and ensure you complete the declaration on time to avoid unnecessary penalties.
How to Pay the Toronto Vacant Home Tax
Calculating potential Vacant Home Tax (VHT) liability is relatively straightforward. The tax is set at 3% of your property's Current Value Assessment (CVA), which means a property valued at $800,000 could face a $24,000 annual tax bill if it is vacant more than six months. Your CVA can be found on your annual property tax bill or through the Municipal Property Assessment Corporation (MPAC) website.
The City of Toronto's VHT portal at toronto.ca/VacantHomeTax is the fastest and most straightforward way of paying the tax. Just log in and navigate through the online declaration process. You'll need your 21-digit assessment roll number and customer number from your property tax bill. The portal will guide you step-by-step to declare your property's occupancy status – whether it was occupied, vacant, or potentially exempt. Carefully enter your property information and select the appropriate status.
After completing the declaration, you'll receive an online confirmation, which you should save or print for your records. Remember, the deadline is April 30th. If you owe Vacant Home Tax, bills will be mailed in June with payment due in September, October, and November. Unpaid amounts can be added to your property tax roll.
Alternatively, you can call 311 (or 416-392-2489 for those outside Toronto) or visit tax and utility counters at City Hall or local Civic Centres.
Call it punishment for failing to be profitable or a measure needed to address Toronto's housing crisis, the Vacant Home Tax (VHT) is now a reality for Airbnb operators. While perspectives may vary – some seeing it as an undue burden and others as a necessary policy intervention – the bottom line for your bottom line remains unchanged: sustainably operating in Canada's largest city comes with this non-negotiable caveat.
