In an effort to improve access to and affordability of the housing market, the government of Ontario has recently announced several updates within the provincial budget for 2024 to increase the housing supply.
This article will discuss three updates to the 2024 provincial budget that will affect residential real estate transactions in Ontario: the vacant home tax, the non-resident speculation tax and investing in modular construction.
Vacant Home Tax
Ontario is expanding the authority of all single and upper-tier municipalities to impose a tax on vacant homes which was previously only available to Toronto, Ottawa and Hamilton.
The goal of the Vacant Home Tax (VHT) is to increase the supply of housing by discouraging homeowners from leaving their residential properties unoccupied. Homeowners who choose to keep their properties vacant will be subject to this tax.
While there is no set requirement related to the tax rate for VHT, Toronto and Ottawa imposed a 1% VHT in the 2023 tax year. This context informs the new provincial policy framework that will guide the implementation of VHT and encourage municipalities to set a higher rate for foreign-owned vacant properties.
Non-Resident Speculation Tax
In an effort to prioritize Ontario homebuyers, the province has updated its Non-Resident Speculation Tax (NRST) to tackle the issue of foreign investors speculating on the Ontario's housing market.
The NRST applies on the purchase or acquisition of an interest in residential property in Ontario by individuals who are not Canadian citizens or permanent residents of Canada or by foreign corporations or taxable trustees. The NRST is applied on top of the standard Land Transfer Tax.
In 2022, the government expanded the NRST provincewide and increased the rate from 15% to 25%. With the 2024 budget, the government is now focusing on additional amendments to enhance the NRST's effectiveness with amendments to support compliance and improve fairness.
Investing in Modular Construction
Ontario is implementing an attainable housing program to facilitate home ownership for more families, with an emphasis on modular construction and other innovative building methods to quicken development and improve affordability.
Modular construction involves building a home using one or more prefabricated components or modules. The home is constructed partially or completely off-site, then transported to a property for assembly.
With these new updates, budget 2024 focuses on addressing the province's housing supply shortage and affordability challenges.
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