The Department of Finance is consulting on the introduction of vacant land taxes, aiming to incentivize landowners to build homes on their “undeveloped” land.
The consultation, which the federal government announced and launched Tuesday, is a part of the government’s broader initiative to encourage more home building, the government said in a release.
Taxes on residentially zoned vacant land would also be intended to discourage the “speculative holding of land by making it more costly to keep land undeveloped” and “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 said it’s seeking the input of the public and all stakeholders. It is specifically interested in gauging interest from provinces, territories and municipalities on the potential introduction of vacant land taxes at the provincial, territorial and local levels, with federal funding to support implementation.
“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,” the government said, adding that it intends to engage in further consultations with provinces, territories and municipalities that express an interest.
The government said it envisioned supporting tax measures structured around vacant land that is zoned for residential or mixed-use, serviceable by municipal infrastructure and physically developable.
The consultation comes after the federal government said in its 2024 budget that it was considering introducing “a new tax on residentially zoned vacant land” to encourage the building of more homes.
“There is a concern that some landowners in Canada may be sitting on developable land, hoping to profit from rising land values when the land could instead be used for immediate residential development,” the government said in the budget document. “Vacant land needs to be used, and it is best used to build homes.”
In 2022, the federal government introduced an annual 1% tax on the foreign ownership of underused housing in Canada as part of its broader efforts to encourage housing affordability.
The vacant land tax consultation closes Dec. 31.
The government also announced Tuesday that it will allow refinancing of insured mortgages for secondary suites. Borrowers will be able to access financing of up to 90% of the home value, including the value added by the secondary suite or suites, and amortize the refinanced mortgage over a period of up to 30 years.
The government will also increase the mortgage insurance home price limit to $2 million for those refinancing to build a secondary suite.