Toronto to explore tax targeting vacant storefronts on city’s main streets

March 5, 2020

After spending a year in search of a home for his brew pub, Carl Pratt discovered a troubling real estate dynamic: plenty of available spaces, but few landlords who seemed interested in actually renting them out.

“There are lots of empty buildings, but typically the rents landlords were asking for are above what would be reasonable,” said Pratt, a co-owner of Beaches Brewing Company.

“You need to make a ton of money in order to put that kind of investment into a property.”

Pratt suspects that some of the property owners were simply holding out for a tenant willing to cough up rent well above market value.

Others, he believes, were playing a speculation game; sitting on vacant properties until they can assemble a parcel large enough for condo development.

While Pratt eventually found a suitable and reasonably priced unit and opened for business in 2019, a stroll through The Beach neighbourhood suggests the proliferation of vacant storefronts is widespread and showing no signs of slowing down.

According to the office of Coun. Brad Bradford, who represents Ward 19, Beaches-East York, a busy 2.3-kilometre stretch of Queen Street East in the heart of The Beach is home to 44 vacant storefronts.

Some are dilapidated and unsuitable for occupancy. Others have “for lease” signs in their windows, yet have sat empty for upwards of six years. In 2018, city council repealed a property tax rebate for landlords with empty storefronts. But that move seems to have had little impact on the problem.

Carl Pratt, co-owner of Beaches Brewing Company, says he likely could have negotiated a lower lease if the tax had been in place while he was searching for a property. (Taylor Simmons/CBC)

“You can see storefront after storefront papered over, shuttered up, and that doesn’t contribute to the sort of vibrant main streets that so many of us want to see,” Bradford told CBC Toronto.

The first-term councillor is now spearheading a proposal to introduce a vacant-storefront tax that would charge landlords for sitting on empty units for extended periods of time.

The tax, Bradford argues, will “incentivize landlords to work in partnership with small businesses to try and populate these streets.”

Resistance, lack of data could hamper proposal

Bradford’s motion asking Toronto city staff to investigate a possible vacant storefront tax was adopted by city council last week, despite resistance from five councillors who opposed the motion.

The motion does not recommend any tax rates or other specifics, such as how long a property must be empty before it is taxed.

Still, there are concerns the tax would be too difficult to enforce, or that it might harm landlords who want to rent their properties but can’t find a tenant.

The tax would also require tweaks to legislation, including the City of Toronto Act, provincial legislation that governs aspects of the city’s taxing authorities.

“My view at this point is that it would be difficult to design the tax, to implement it,” said city solicitor Wendy Walberg.

Toronto does not track vacant storefronts, though city statistics show that independent businesses account for 74 per cent of Toronto’s retail stores.

Proponents of a vacant storefront tax say those businesses are particularly vulnerable to speculators who have little incentive to rent out their properties when they could potentially make more money by holding out and selling to developers.

A row of vacant stores on Queen Street East. The properties on the left and right are owned by different numbered companies. Both have been vacant since 2014. (Google Maps)

Property record searches reveal that many of the vacant storefronts on Queen Street East are owned by numbered companies. Bradford’s office found that 13 of the 44 empty units appear suitable for occupation but have no signage and are not listed online.

“It’s numbered companies that are assembling property and letting it sit vacant, a blight on our streets, for years and years and years,” Bradford said.

San Francisco may soon lead the way

The motion to examine the tax also calls for the city to analyze other jurisdictions with similar taxes, though there are few examples to follow.

On Tuesday, residents of San Francisco voted on a vacant storefront tax supported by the city’s mayor, though results of the vote have not yet been confirmed.

The proposed tax would apply to properties that sit vacant for more than 182 days per year, and levy $250 per foot of sidewalk frontage in year one, escalating to $1,000 per foot if the property remained vacant for three years.