How will GTA homeowners and renters be impacted by Toronto City Council’s approved 9.5% property tax increase this year?
First, let’s look at the bright side. Toronto’s property tax rate is relatively low compared to other municipalities across Canada. However, second to Vancouver, the City of Toronto has the most expensive average home prices in the country.
For some context, let’s take a closer look at Toronto vs Vancouver property taxes. Both cities have high property values. However, Vancouver’s residential property tax rate is less than half of that of Toronto’s homeowners. Therefore, homeowners in Toronto pay more than 2x more property taxes than Vancouver homeowners.
The city of Toronto’s property tax increase of 2024 comes at a time of high inflation and is compounded by the staggering 30% increase in Toronto home prices since February 2020.
Property value assessments lag, so homeowners won’t see the full extent of this increase immediately. However, they should expect to feel a compound effect of higher assessed values with further tax hikes to arrive in the years ahead.
Toronto Property Value Assessment and Tax Calculations Explained
WARNING – This section gets a bit technical (aka boring) so feel free to skip it if you’re not interested in how to calculate your property tax.
Property tax is calculated using the assessed value of the property multiplied by a total tax rate of 0.666274% for residential properties.
A 2 Bedroom condo with a market value of $700,000 might be assessed at $361,000. A $950,000 townhome might be assessed at $600,000, and a $1.4 million dollar detached house might be assessed at $833,000 for example.
Toronto property value assessments are updated every 4 years. You get the idea. The assessed value lags behind market value.
Using the assessment values for the following examples we can easily calculate the total property tax bill using the calculator on the city of Toronto’s website.
2023 City tax $833,000.00 * 0.00506079 = $4,215.64
2023 Education tax $833,000.00 * 0.00153 = $1,274.49
2023 City Building Fund $833,000.00 * 0.00007195 = $59.93
Total Taxes*= $5,550.06
Compared to 2024 9.5% increase looks like this:
2024 City tax $833,000.00 * 0.00554586 = $4,619.70
2024 Education tax $833,000.00 * 0.00153 (TBA) = $1,274.49
2024 City Building Fund $833,000.00 * 0.00007703 = $64.17
Total Taxes*= $5,958.36
The 2024 education tax rate is not available yet, so going with the example above, this homeowner would be paying over $408.30 more per year.
Impact on Vulnerable Populations
Saying life in Toronto is expensive is an understatement. Home prices continue to rise, although more modestly at around 5% year over year, despite high interest rates and high inflation.
Homelessness is on the rise in Toronto and owning a home is an unreachable goal for many young families starting out.
Real property tends to be the best hedge against inflation and this is holding true in 2024.
Homeowners hit with an extra $400 on top of their existing $5000 property tax bill might not seem like the end of the world. But for unemployed and low-income families the property tax increase combined with higher gas prices, groceries, and all other inflated essentials could force them out of their homes.
It’s the elderly and low-income residents who are going to be pushed out of their neighbourhoods. The impact is densification and a demographic shift changing the characteristics of established communities.
Impact on Renters
Renters are not immune to these higher property taxes. Owners and landlords will raise rents to cover the additional operating costs to carry their properties. Many landlords are under pressure from the rapid and unexpected increase in interest rates.
The new vacant home tax is another topic of debate that will likely have unintended consequences on the rental market.
So, during a student housing crisis and unaffordable housing market, this property tax increase only fuels inflation, drives up rents, and ultimately makes housing even less affordable.
The Dark Side of Toronto’s Property Tax Increase
The average Canadian family loses 46 percent of their annual income from income and payroll tax, property tax, and consumption tax, not to mention the new carbon tax, which is a tax on a tax.
Civil unrest is boiling under the surface and should be taken seriously by our policymakers. Alternative solutions to address the city’s financial challenges can be found in lower taxes, less red tape, better zoning, and cutting back on non-essential spending.
Property rights are essential for self-reliant people to thrive and prosper. You can’t put your heart into your work when you don’t have control of your land and property.
People are questioning the legality of the carbon tax because it’s a tax on top of a tax, which should be illegal.
Affordable housing will not be achieved through higher taxes. Some “hard choices” will be needed to cut back spending.
