Most Ontario homeowners are likely unaware of it, but their property
taxes are being heavily subsidized by tenants in multi-unit buildings.
For decades, most Ontario municipalities have taxed multi-residential
tenants at rates higher than those for homeowners, condominium owners and
tenants in smaller buildings.
Federal census data clearly show that homeowners typically have higher
incomes than tenants. As a result, cities like Toronto are overtaxing those
with modest incomes to subsidize those with incomes above, or well above,
The subsidy results from the difference between the residential and
multi-residential tax rates. In Toronto, the residential city tax rate is
0.700544, while the multi-residential rate is 2.924268. These figures are
the percentages by which property assessment is multiplied to come up with
the property tax.
This inequity means a single mother living in a small, rented, one-bedroom
apartment assessed at $80,000 pays the same taxes to the City of Toronto
(about $2,339) as a wealthy executive who owns or rents a luxury condominium
apartment assessed at $334,000.
I doubt there's any sound policy reason why a Toronto tenant living in an
apartment worth exactly the same as my house pays more than four times the
taxes I do as a homeowner.
Even though it's technically the landlord who pays property taxes to the
city, the burden of paying the landlord's expenses still falls on the
tenant. Under Ontario's rent control regime, any tax increase may be added
to the rent, with tribunal approval. Similarly, the full impact of any tax
decrease must be passed to the tenant.
As a Toronto homeowner, I'm not unhappy at having my taxes subsidized by
tenants, although I do feel guilty about it. But as a residential landlord
and a director of a landlord organization, I believe it's just as unfair to
impose higher taxes on apartment units as it would be to charge higher gas
taxes to those who drive leased vehicles.
A democratic society cannot function equitably if one group is singled out
for discriminatory, regressive or even punitive taxation. And even if I'm
not in that group, I cannot in good conscience justify being the beneficiary
of taxes that discriminate against others in society, just because I'm a
If this sounds like my political views are well left of centre, they're not.
In fact, they are quite the opposite.
Based on figures from 2000, the municipal component of property taxes on a
$125,000 home or owner-occupied condo in Toronto was about $875 (excluding
education taxes, which are equalized by provincial law).
The tax on an apartment of the same value was $3,655.
And this over-taxation isn't new. In 1993, the 1,100-page report from the
Fair Tax Commission noted: "On average, tenants are over-taxed relative to
single-family homeowners." The report concluded: "We can see no
justification for a distinction in tax policy on the basis of the type of
tenure enjoyed by the occupant."
|A democratic society cannot
function equitably if one group is singled out for discriminatory,
regressive or even punitive taxation.
The commission recommended that all residential property should be
assessed on the same basis, whether it is occupied by an owner or a tenant.
Similar studies in Toronto by Anne Golden and David Crombie also called for
the elimination of punitive tax on multi-residential tenants.
In the fall of 1997, Metro Toronto council adopted the report of a housing
panel and recommended that the newly amalgamated City of Toronto phase in
equalization of property taxes.
Would this mean higher taxes for Toronto homeowners? Not necessarily,
especially if the province steps up to the wicket to end the regressive
And if the property taxes do go up somewhat so my neighbours are not taxed
unfairly, then so be it.
One Ontario municipality has already taken action to end discriminatory
taxation. Following advice from a community advisory committee, Niagara
regional council recently agreed there is no basis for discriminatory tax
treatment of renters, and adopted a five-year strategy last May to reduce
Manitoba used to tax apartments and rented condominiums at 1.5 times the
residential rate and 2.2 times the rate of owned condominiums. A 10-year
phase-out of the differential began in 1992 and is now complete. Tenants and
homeowners are now taxed at exactly the same rate.
Similarly, Calgary recognized the inequities following the recommendations
of a municipal tax review committee in 1996. City council adopted a program
to phase out the remaining gap over three years. Last year, Saskatoon did
the same thing.
In many highly urbanized jurisdictions, such as California, Massachusetts
and British Columbia, there is no tax distinction on the basis of ownership.
In Ontario, the responsibility for setting rates for various classes of
properties was dumped onto municipalities under the Fair Municipal Finance
Act. The finance minister, however, announced on Feb. 5, 1998 that the
multi-residential rate should be, at most, 10 per cent higher than the
Ontario has long since passed the point where there is any justification for
treating tenants and owners differently. All citizens should be treated, and
We need to begin phasing in the equalization of residential taxes. Whether
we are owners or tenants, Ontario citizens deserve no less.
Bob Aaron is a leading Toronto real
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