Property taxes are likely to be the topic of some debate at this Wednesday’s Council meeting, where final budget votes will take place. This year’s budget includes a proposed municipal tax increase that is considerably higher than previous years — on a residential property tax rate that is amongst the lowest in Canada. If passed, it will raise much-needed revenue to pay for critical programs and services and turn the corner on years of decline in our city. 

For the average home, the municipal tax increase amounts to less than a dollar a day. For seniors and people with disabilities with low and modest incomes who can’t afford the increase, the City has programs to defer or cancel the increase. To protect tenants from rent hikes, the budget includes a small property tax increase for multi-residential properties. 

It’s a reasonable and responsible proposal to fund a better city. On Wednesday, City Council will decide whether to make the sensible choice or continue down the path of under-funding and decline. You can encourage your member of Council to make a good choice for our city by supporting the proposed budget and property tax increase. Sign Progress Toronto’s petition here. Organizations and grassroots groups can sign on to SPT’s letter to City Council here.

In today’s post, we take a closer look at Toronto property taxes — who pays, how much, and how come. 

Property Taxes for a Livable, Equitable and Sustainable City

First things first. I do not like to pay taxes. I do not want a 10% to 16% tax increase. I also do not like going to the dentist or preparing for a colonoscopy. But I want to keep the machinery of my body working for a long time to come. Similarly, Toronto needs to maintain its physical and social structures and environments.
— Mary T. Hynes, January 22, 2024, deputation to Budget Committee

Property taxes are an essential revenue source for municipalities. Funds generated from property taxes help to pay for a broad range of programs and services that directly impact the quality of life, health, and wellbeing of Toronto residents — from public transit, affordable housing, and community services to emergency shelter, eviction prevention, and mental health crisis response. Our property tax dollars support public health programs, public libraries, and public spaces, as well as many other programs and services we rely upon for a better life in Toronto. 

After more than a decade of underfunding, where low property taxes were prioritized above all else, the consequences of failing to raise sufficient revenue are clear for all to see in our crumbling city. Successive mayors and councils have steadfastly ignored the City’s revenue problem, leaving essential programs, services, and infrastructure underfunded. This neglectful path has contributed to multiple crises in our communities and deepened inequality in our city. 

While many of us may not relish paying property taxes (directly as homeowners or through our rent as tenants), we recognize that revenue from these taxes is essential to create a better city. 

Property Tax Increases and Rates by Property Class

If the property tax rates proposed in the Mayor’s budget are accepted by Council, the City will generate $5.3 billion in revenues, including hundreds of millions from the increase. Property tax revenues represent 31% of the City’s $17.096 billion operating budget for 2024. 

Here are the proposed municipal tax increases by property class:

Source: City of Toronto (2024, February 7). Appendix A:  2024 Property Tax Rates and Related Matters. https://www.toronto.ca/legdocs/mmis/2024/cc/bgrd/backgroundfile-243002.pdf 

The table below shows the proposed municipal tax rates by property class. The total municipal tax rate shown does not include the education tax levy set by the province or take into account tax rebates. Property taxes are based on the assessed value of the property multiplied by the property tax rate.

Note: Property values are assessed by the Municipal Property Assessment Corporation (MPAC), a provincial body. Learn more about property taxes and property assessment in this fantastic short video by MPAC, and check out our links at the bottom of the post for more information.

Portion of table replicated from City of Toronto (2024, February 7). Budget Implementation Including Property Tax Rates, User Fees and Related Matters. https://www.toronto.ca/legdocs/mmis/2024/cc/bgrd/backgroundfile-243001.pdf 

The Proposed Residential Property Tax Increase: Less than a Dollar a Day

Following the Budget Committee’s review, Mayor Chow released her budget on February 1, proposing a 9.5% increase for residential properties (including an 8% property tax increase and a 1.5% increase to the City Building Fund levy to support public transit and housing infrastructure) — down from the 10.5% increase proposed in the City staff-prepared budget. Further, the possibility of an additional 6% “Federal Impacts Levy” on residential properties has been taken off the table after an eleventh-hour announcement of new federal funding for shelter and support services for refugees and asylum seekers. 

How much is the increase for homeowners?

For an average residential home in Toronto (with an assessed value of $694,381), the total proposed increase amounts to $338 for 2024, or less than a dollar a day (about 92 cents a day). 

For a residential home with an assessed value of $500,000, the increase would amount to about 66 cents a day, and for a luxury home worth $2 million, the increase would total approximately $2.66 per day — little more than the cost of a cup of coffee.

If Council supports the recommended increase, the total municipal tax bill for an average residential home in Toronto will be $3,904 for 2024. 

Source: City of Toronto (2024, February 7). Budget Implementation Including Property Tax Rates, User Fees and Related Matters. p. 11. https://www.toronto.ca/legdocs/mmis/2024/cc/bgrd/backgroundfile-243001.pdf 

*The educational tax levy set by the province is not included. 

Support for Low and Modest Income Seniors and People with Disabilities Who Can’t Afford the Increase 

In past budget debates, some City Councillors have brought up the impact of property tax increases on seniors with fixed incomes — conveniently omitting that the City of Toronto has programs to protect seniors and people with disabilities with modest and low incomes from property tax increases that they can’t afford. City programs offer a rebate for water and solid waste management rate increases for these groups as well.  

City Council will vote on the following eligibility criteria for the 2024 property tax relief programs at its meeting on Wednesday: 

Toronto Has One of the Lowest Property Tax Rates

In an analysis of 2023 residential property tax rates, the City of Toronto placed second lowest among GTA cities. Toronto’s residential property tax rate is also among the lowest in cities across the country.

Source: Scibetta, M. (2023, May 29). Exploring the GTA Cities with the Highest Property Taxes: An In-Depth Analysis. Zoocasa. https://www.zoocasa.com/blog/gta-cities-property-tax-rates-may-2023/ 

Even with the proposed increase, Toronto’s residential property tax rate will still rank among the lowest.

Renters and Property Taxes 

Renters never receive a property tax bill, but they still contribute to the property tax base through the rent they pay to their landlords. With tenant households comprising 48% of all Toronto households, make no mistake, renters are making a substantial contribution to City revenues from property taxes. 

In her budget, Mayor Chow has recommended a 3.5% increase for multi-residential properties (including a 2.95% property tax increase and a 0.55% increase to the City Building Fund levy) — down from the 5.25% increase proposed in the staff-prepared budget. This low rate increase proposed for multi-residential properties is intended to protect tenants from above-the-guideline (AGI) rent increases related to “extraordinary” property tax increases. 

Under the provincial Residential Tenancies Act, the Ontario government sets an annual guideline that limits the rent increase that landlords can charge on rental units where rent control applies. Under the 2024 guideline, landlords can increase the rent by 2.5% for applicable units. 

However, landlords can apply to the Landlord and Tenant Board for an AGI to allow them to increase rents above the annual guideline. Landlords may apply for an AGI based on “extraordinary” property tax increases or capital expenditures, as well as the cost of new security services. An extraordinary property tax increase is defined as “greater than the guideline plus 50%”; in 2024, an increase above 3.75% qualifies.

AGIs apply only to units covered by the rent control guideline. Rent control applies only to occupied rental units built before November 15, 2018. There is no rent control on vacant units, or units first occupied on November 15, 2018, or later. Ontario’s limited rent control protection for tenants is further weakened by AGIs.

Mayor Chow has stated that her recommendation for a 3.5% increase is intended to protect tenants from AGIs related to property taxes. According to the Federation of Metro Tenants’ Associations, “(t)here is no maximum increase for an application related to an extraordinary increase in the landlord’s property taxes, however most of those applications seek to raise the rent between 0.5% - 1.0%”. Further, large landlords are most likely to apply for an AGI related to a property tax increase.  

Tenant advocates have long described AGIs as a “scam,” out of control, and a way for large corporate landlords to get around annual rent increase guidelines to charge exorbitant rents. Higher rent costs resulting from the growing and persistent use of AGIs are driving many tenants out of their homes and further fueling the city’s affordable housing crisis. As we see in this year’s budget, provincial policy on AGIs is also affecting municipal decisions regarding the property taxes that landlords pay to support City services. 

Graduated Residential Property Taxes

As part of the City’s Long-Term Financial Plan, City Council directed staff to report back on the potential revenue that could be generated through graduated residential property taxes. At present, the City of Toronto has one property tax rate for all residential properties (excluding multi-residential properties). Under a graduated property tax system, the property tax rate would vary based on the assessed value of the home, with higher rates for more expensive homes and lower rates for less expensive ones. 

Staff estimate that an additional $30-$50 million could be generated on homes with an assessed value of over $3 million. Staff note, “(t)his assumes graduated rates of up to 15% to 50% over current residential property tax rates, based on a series of property value ranges.” As noted in the staff report, the City of Toronto does not currently have the power to implement graduated residential property taxes; the Province would need to make changes to the City of Toronto Act and related regulations to make it possible. 

Luxury homeowners have benefited from the City’s low property tax policy for over a decade. Graduated residential property taxes are an idea worth exploring to support the City’s long-term financial sustainability, increase funding for critical services, and address deep inequities within the city.  

City staff also investigated the potential of a higher property tax and Municipal Land Transfer Tax (MLTT) rate on non-primary residences. No exact dollar figures are available. Staff report that the graduated property tax would apply to “a very small number of property owners” and even fewer regarding a graduated MLTT.

New Revenue Tools and Fairer Funding

The City of Toronto needs a reasonable and responsible approach to property taxes, but property taxes alone are not enough to properly fund our city. The City’s Long-Term Financial Plan recognizes the need for new revenue tools and fairer funding arrangements with federal and provincial governments. 

It’s no wonder that the City of Toronto and municipalities in general need new fiscal arrangements. The City’s budget presentation included the slide below, showing that municipal governments receive only 9% of the revenue from all taxes and fees paid. Yet municipalities and, in particular, big cities like Toronto have considerable responsibilities, many downloaded in previous years by federal and provincial governments.

Source: City of Toronto (2024, January 10). Budget TO: 2024 Budget Launch. Presentation by the City Manager, Chief Financial Officer & Treasurer. https://www.toronto.ca/legdocs/mmis/2024/bu/bgrd/backgroundfile-242095.pdf  

City Council has asked the provincial government for powers to implement new revenue tools, specifically including a municipal sales tax and/or to receive a portion of HST revenue. A municipal income tax offers another option. For more on a municipal income tax, check out SPT’s session taking a deeper dive into revenue tools with Senior Economist David Macdonald from the Canadian Centre for Policy Alternatives.

At its February 29 meeting, the Executive Committee will be reviewing staff reports on the development of a commercial parking levy and a review of City surplus and underutilized assets, as part of the City’s work on the Long-Term Financial Plan. Toronto Environmental Alliance and TTCriders are campaigning for the commercial parking levy to support public transit and climate action initiatives. The levy could raise up to $490 million a year to support these vital services.

Learn More about Property Taxes

Check out these helpful resources to find out about how property taxes work:

• Association of Municipalities of Ontario (AMO), property tax basics
• Municipal Property Assessment Corporation (MPAC), how your property tax is calculated [video]
• MPAC, process for assessing properties
• AMO, advocacy on property assessments
• Spacing Magazine, “property taxes are weird”

Photo by Tierra Mallorca on Unsplash