Finance Minister Chrystia Freeland has announced that the Canadian federal government is exploring the implementation of a 3% annual tax on vacant lots, drawing inspiration from Ireland’s Residential Zoned Land Tax. The proposed measure, outlined in Freeland’s April budget, aims to discourage speculative landholding and promote residential development.
“We believe good land should not go unused,” Freeland stated, referencing Ireland’s upcoming tax set to take effect in February. The Irish model will impose a 3% levy on vacant serviced lots based on their market value.
The Department of Finance suggests that such a tax could deter property owners from holding undeveloped land in anticipation of rising values. The initiative is intended to incentivize development and generate revenue for housing projects.
While no official revenue projections or estimates of potential new homes have been provided, the government’s April budget document, “Fairness For Every Generation,” expressed concerns about landowners hoarding developable land instead of utilizing it for immediate residential purposes.
This proposal follows the 2022 Underused Housing Tax Act, which imposed a 1% annual tax on vacant or underused residential properties owned by non-resident foreigners. However, that tax has underperformed, collecting only $49 million since 2022 against a forecast of $175 million annually, while incurring $59 million in collection costs.
Freeland’s office has initiated consultations with provinces, territories, and municipalities to gauge interest in implementing vacant land taxes at the local level. The proposal also builds on experiences from Canadian cities like Vancouver, Toronto, and Ottawa, which have introduced similar taxes on vacant properties.
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