Consultation on the Taxation of Vacant Lands

Introduction

In Budget 2024 and Canada's Housing Plan, the federal government announced the most ambitious housing plan in Canadian history—a plan to build nearly 4 million new homes by 2031. To help achieve this ambitious target, the federal government is rolling out a suite of policies that will unlock more land for new housing development, including surplus, underused, and vacant public lands.

Solving the housing crisis requires a Team Canada approach. No single order of government, home builder, not-for-profit, or community can do it alone. We need every partner using every possible lever to build the homes Canadians need.

To encourage private sector landowners to develop their vacant land, Budget 2024 announced that the government is considering a tax on residentially zoned vacant land. Canada is a vast country with differing local needs and land availability. The federal government recognizes that such a policy may need to be tailored to address the unique circumstances and requirements of each region.

The federal government is undertaking this consultation to:

• Hear views from all stakeholders on the potential application of vacant land taxes, including feedback on their potential design and impacts; and,
• Gauge interest from provinces, territories, and municipalities on the potential introduction of vacant land taxes at the provincial, territorial, and municipal levels, with federal funding to support their implementation.

This consultation paper provides a general description of a vacant land tax base, such as lands to which such taxes could apply, followed by questions for all stakeholders and provinces, territories, and municipalities.

Policy Framework for the Taxation of Vacant Lands

Applying specialized taxes on vacant land would seek to achieve several important policy objectives. First, such taxes would be intended to encourage the development of land into housing rather than leaving it unused. Second, such taxes would be intended to discourage speculative holding of land by making it more costly to keep land undeveloped. Third, such 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 federal government recognizes that each jurisdiction in Canada is unique and a one-size-fits-all approach to the taxation of vacant lands in Canada would not be appropriate. For this reason, the federal government is exploring a model that would provide support to provinces, territories, and municipalities for the implementation of provincial, territorial, and municipal-level tax measures designed to apply to lands that could be considered suitable for housing development.

To meet shared objectives, federal support is envisioned for provincial, territorial, and municipal tax measures structured around a core tax base of land that is:

• Vacant;
• Residentially (or mixed-use) zoned;
• Serviceable by municipal infrastructure (e.g., roads, water, sewage, and electricity); and,
• Physically developable (e.g., appropriate lot size, no site contamination).

The federal government would engage with each province, territory, and municipality to adapt and define these concepts to meet local needs and policy objectives.

It is anticipated that any provincial, territorial, or municipal vacant land tax would also need to contain special rules to address circumstances in which the taxation of vacant lands could lead to unintended and undesirable results. This could include rules to suspend the application of tax once the development process begins at a previously vacant site.

Questions for All Stakeholders

• What are your thoughts on a vacant land tax potentially applying in your community? Do you believe it would be an effective policy to incentivize housing development? Why or why not? Do you foresee potential drawbacks or unintended consequences that should be considered?
• Are there reasons that may help explain why some vacant land is not being actively developed in your community? If you currently own land that may reasonably be considered to fall within the proposed criteria (i.e., vacant, residentially or mixed-use zoned, serviceable, and physically developable) and you are not actively developing it nor applying for permits to develop it, why is this the case?
• Are the proposed criteria (i.e., vacant, residentially or mixed-use zoned, serviceable, and physically developable) for lands to be included in a potential tax base suitable?
  • Are there particular elements to consider in the policy design of these criteria?
    1. When should land be considered vacant?
    2. Should surface parking lots, lots with derelict structures or underdeveloped lands be considered vacant?
    3. What criteria should apply in determining whether land is serviceable?
• Should other criteria be considered?
• In what circumstances might it be appropriate to pause the application of a vacant land tax in respect of a particular site? For example, some may consider it appropriate to pause the application of tax once development has commenced. Are there other circumstances where the tax should be paused or otherwise relieved?
• Are there considerations or circumstances that you feel should warrant special attention?
• What considerations should inform the tax rate that would apply to a vacant land tax base? To what extent, if any, should the tax rate vary by jurisdiction?

Questions for Provinces, Territories, and Municipalities

• Would you be interested in further engaging with the federal government on a potential vacant land tax? Why or why not?
• What are the impediments to introducing a vacant land tax in your jurisdiction? What potential solutions would overcome these impediments?
• On what basis would your government like to see funding allocated to participating jurisdictions?
• Are there any other considerations you would like to bring to the federal government's attention regarding the taxation of vacant lands?

Next Steps

The federal government intends to engage provinces, territories, and municipalities that express an interest in participating in further rounds of consultation.

Contact Us

Submissions for this consultation will be open from October 8, 2024, until December 31, 2024.

Email us your comments and feedback at VLT-TTV@fin.gc.ca.

Comments and feedback may also be sent by mail to:

Director General
Sales and Excise Tax Division
Tax Policy Branch
Department of Finance Canada
90 Elgin Street
Ottawa, Ontario K1A 0G5

Please ensure your submission includes the following:

• Views on the above questions.
• Name of province, territory, municipality, company, or organization on behalf of whom the submission is being made.
• Name, title, and responsibilities of the person making the submission, as well as their mailing address, e-mail, and telephone number.
• In the case of submissions made on behalf of a province, territory, or municipality, an indication of whether the person making the submission has been authorized to make the submission on behalf of the governing body of the province, territory, or municipality.
• In the case of submissions made on behalf of a company or organization, an indication of whether any information provided is commercially sensitive.
• Any additional relevant information.

Who is the focus of this consultation?

Through this consultation, we want to hear from all Canadians and stakeholders, including provincial, territorial, and municipal governments, homebuilders, non-market housing providers, housing experts, and owners of vacant residentially or mixed-use zoned lands.

Privacy

In order to respect privacy and confidentiality, please advise when providing your comments whether you:

• Consent to the disclosure of your comments in whole or in part;
• Request that your identity and any personal identifiers be removed prior to publication; or,
• Wish that any portions of your comments be kept confidential (if so, clearly identify the confidential portions).

Information received through this comment process is subject to the Access to Information Act and the Privacy Act. Should you indicate that your comments, or any portions thereof, be considered confidential, the Department of Finance will make all reasonable efforts to protect this information.

Get in touch

Questions about this consultation can be emailed to VLT-TTV@fin.gc.ca.