Finance Minister Chrystia Freeland announced the federal government is considering adopting a 3% annual tax on vacant lots, similar to Ireland’s Residential Zoned Land Tax. Blacklock's Reporter says the proposed tax, mentioned in Freeland’s April budget, is aimed at discouraging speculative landholding and encouraging residential development.“We believe good land should not go unused,” Freeland told reporters. “Ireland has an example of a measure like this,” she added, referencing Ireland’s upcoming tax, set to take effect in February, which will impose a three percent levy on vacant serviced lots based on their market value.According to the Department of Finance, such a tax in Canada could help deter property owners from sitting on undeveloped land in hopes of profiting from rising land values. The goal is to incentivize development and provide a potential revenue stream for governments to fund housing projects. "Taxes could provide a source of revenue for various orders of government which could be used to fund the construction of more new homes,” the department wrote in a Consultation Paper.However, no official revenue projections or estimates of the number of homes that could be built were provided. The April budget document, Fairness For Every Generation, expressed concerns that some landowners are holding onto developable land, waiting for prices to increase, instead of putting it to immediate residential use.The proposal follows the Underused Housing Tax Act passed by Parliament in 2022, which imposed a 1% annual tax on the assessed value of vacant or underused residential properties owned by non-resident foreigners. That tax, however, has fallen short of revenue expectations. The government had forecast annual revenues of $175 million but has collected only $49 million since 2022, while spending $59 million on collection costs.Freeland’s vacant land tax proposal also draws on the experiences of Canadian cities like Vancouver, which introduced an Empty Homes Tax in 2017 at three percent, and Toronto and Ottawa, which launched their own vacant unit taxes in 2023. Ottawa’s 1% levy on homes unoccupied for more than 184 days has numerous exemptions, including vacation properties, principal residences of snowbirds, and homes vacant due to renovations or owner illness.Freeland’s office has opened consultations with provinces, territories, and municipalities to gauge interest in implementing vacant land taxes at the local level. "By taxing vacant lands, landowners would be incentivized," said the Department of Finance.
