Sales and Excise Tax Division, Tax Policy Branch
Department of Finance Canada
90 Elgin Street
Ottawa, Ontario K1A 0G5
Sent via email: [email protected]
Consultation on the Taxation of Vacant Lands
December 31, 2024
Ontario Home Builders’ Association
The Ontario Home Builders’ Association (OHBA) is the voice of the residential construction industry in Ontario, representing 4,000 member companies organized into 28 local associations across the province, from Niagara to Thunder Bay and Windsor to Ottawa. Members include builders, developers, professional renovators, trade contractors, suppliers, and manufacturers serving the residential construction industry. The residential construction industry employed over 550,000 people, paying $38.8 billion in wages, and contributed over $83.8 billion in investment value across Ontario in 2023.
Please accept the below as our submission to the Government of Canada’s request for feedback on consideration of a tax on residentially zoned vacant land, which is being submitted on behalf of OHBA and its 28 local associations including but not limited to the Building and Land Development Association (BILD), West End Home Builders’ Association (WE HBA), Greater Ottawa Home Builders’ Association (GO HBA), and London Home Builders’ Association (LHBA).
Consultation Paper on the Taxation of Vacant Lands
Federal Budget 2024 announced that the government is considering a tax on residentially zoned vacant land, meant to encourage private sector landowners to develop their vacant land. It recognized that Canada is a vast country with differing local needs and land availability and 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.
The federal government has requested us, as stakeholders, to provide comment on several questions and themes surrounding this topic which we have considered and addressed in our response.
OHBA Response
OHBA and our members acknowledge that in Budget 2024 and Canada’s Housing Plan, the federal government announced their plan to build nearly 4 million new homes by 2031. Generally, we support the overall spirit and intent of any plan that aims to deliver more housing supply and choice to all Canadians.
To reach this ambitious target, the federal government has indicated an intent to roll out a suite of policies aimed at unlocking more land for new housing development, including surplus, underused, and vacant public lands. While many of these policies may stimulate housing supply, OHBA and our local associations are significantly concerned that a potential Vacant Lands Tax will erode affordability and run counter to the goals of the Housing Plan itself.
Our industry is strongly opposed to this tax, and we urge the federal government not to move forward with its introduction. While we recognize the intent to encourage private landowners to develop land rather than hold onto it, the consequence may be higher costs and less housing supply, worsening affordability.
Development Challenges Faced by Homebuilders
Through various touchpoints, we have previously expressed significant concerns with this tax. The development pipeline in Ontario is already suffering from a lack of project feasibility. Adding additional costs to the proformas of a potential project only serves to make housing more expensive to the new homeowners of Canada.
It is common knowledge that the home construction sector has been hit particularly hard by high interest rates. But less known and what does not appear to have been considered in the introduction of this tax, is that prior to high interest rates, many projects could not move forward for a variety of reasons including, but not limited to: municipal approval processes, servicing infrastructure constraints, labour shortages, financing constraints, politicization of the approvals process, and constantly increasing government charges and fees.
Home builders are required to find solutions or be creative to address these challenges and constraints, but in some cases, must put projects on pause. Importantly, not all barriers to development are within the control of homebuilders. Governments should be striving to determine why – in the case of vacant residential land – builders are not building, and work collaboratively to unlock the potential of these lands.
Canada is undergoing an unprecedented housing affordability crisis, largely driven by a lack of affordable housing supply. The federal government recognized the negative impact of government-imposed costs on housing supply in September 2023 when it enhanced the GST/HST Rental Rebate to 100% on new purpose-built rental housing. It is concerning that the government would now consider facilitating the levying of additional taxes onto new homes, which will make resolution of the crisis even more difficult.
Any additional taxes or fees imposed at any stage in the development process, including owning/holding vacant land pre-development, will ultimately be borne by the new home buyer. Increasing government-imposed housing costs is counterproductive.
Ontario Perspective
In February of this year, the Ontario provincial government held consultations on a possible “Use It or Lose It” (UIOLI) policy that, like this consultation, considered land speculation as a main driver of the current housing crisis. A report commissioned at the time by the OHBA and BILD titled “Use It: Optimizing Municipal Development Pipelines” showed that in 2023, the amount of housing units completed and the inventory of units under construction reached 34-year highs, and demonstrated that the industry is not “sitting on supply.”
Provincial planning policy in Ontario requires that municipalities ensure sufficient housing supply at all times. This includes minimum amounts of residential designated land, market contingency factors, and responsiveness to demand. The study ultimately found that measures like a vacant land tax would have detrimental impacts on future housing supply in the province.
We predict that Ontario municipalities themselves might take significant concern to a potential vacant land tax as this would critically impact their required 15-year land supply, overwhelming them faster than they can manage due to servicing and planning constraints already outlined.
The City of Toronto already has a Vacant Homes Tax that caused upheaval during rollout. It is unclear how a federal Vacant Lands Tax would prevent double taxation.
The 2024 pre-sales market in the GTA has been historically low. Sales numbers are well below 10-year averages, and inventory levels have remained flat, with little new supply added due to rising costs. The cost to build has escalated alongside taxes, fees, and government charges, all contributing to fewer housing starts and slower supply growth.
Adding to this, the cost of ownership is at a 33-year high. Development charges account for 25–30% of a new home’s price. The tax burden on new housing has doubled compared to other sectors, now representing 31% of a new home’s purchase price in Ontario. Despite a 2024 housing goal of 125,000 new homes, just over 80,000 were built.
In support of our national counterparts at CHBA, we emphasize: any rate of vacant land tax will simply increase home costs. It is illogical to ask municipalities to freeze development charges while also encouraging a new tax. It sends mixed messages and undercuts affordability efforts.
One Size Does Not Fit All
We agree with the consultation paper: a one-size-fits-all approach will not work. Local implementation risks creating inconsistency and confusion. Builders operating in multiple jurisdictions will face a patchwork of differing regulations, slowing development or halting projects altogether.
The federal Housing Accelerator Fund has not catalyzed sufficient housing starts. Conditional funding tied to actual new home construction, rather than policies that increase costs, is needed. Adding a new tax compounds challenges, rather than solving them.
The administrative cost of implementation must also be considered. A cautionary example is the Underused Housing Tax (UHT), which has had minimal impact despite significant administrative cost ($59 million since 2022) and has placed a compliance burden on homeowners without generating meaningful returns.
There is no benefit to developers sitting on land—they incur holding costs daily. In many cases, projects cannot meet pre-sales thresholds to trigger financing. These economic and financing realities, not speculation, explain delays. It’s a myth that land is being held to “get rich.”
Conclusion
The Ontario Home Builders’ Association and our local associations respectfully submit these comments on the proposed tax on vacant land. We ask the federal government to consider the real-world implications, echoed by CHBA and other regional bodies.
We are strongly opposed to a vacant land tax. It would do nothing to address the root causes of Canada’s housing shortage and would impose further cost and complexity on an already strained system. Ultimately, these costs would be borne by the very people the housing strategy is intended to help—new homebuyers.
We urge the federal government to focus on reducing barriers to housing construction, rather than adding new ones. OHBA would be pleased to continue engaging on this and other policy matters affecting housing delivery in Canada.
Submitted on behalf of the Ontario Home Builders’ Association and our local associations,
Kirstin Jensen
Vice President, Policy, Advocacy & Relationships
Ontario Home Builders’ Association
[email protected]
(416) 606-3454
251 Consumers Road, Suite 301, Toronto, ON, M2J 4R3