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Market Update for August 25
The deferral will give the government time to build a “more accurate and equitable property tax and assessment system,” Finance Minister Peter Bethlenfalvy said in a letter to a coalition of 10 municipal, commercial and real estate groups that had publicly pleaded for a reassessment to provide financial clarity for businesses in Ontario. Bethlenfalvy cast the delay as an important protection for families who are “feeling the pinch” of inflation and “deserve
predictability” in their household budgets.
The coalition, which includes the Association of Municipalities of Ontario, said the soon-to-be-eight-year gap between reassessments is making it very difficult to produce accurate property tax forecasts for investors who have delayed or cancelled their projects in response to the uncertainty.
The reassessment delay may also trigger higher property tax payments for some as municipalities raise tax rates to offset outdated property values. In the current scenario where your assessed value doesn’t change to reflect current market trends, then the only option for municipalities who need more revenue is to increase the tax rate.
News of the government review follows a recent investigation into Ontario’s property assessment system, which found homeowners are paying unfair shares of property tax because the publicly funded Municipal Property Assessment Corporation (MPAC) consistently under-and over-assesses homes’ worth compared to their sales price.
During a reassessment, MPAC will assign new values to properties across the province based on factors such as location, size and construction quality using a valuation date set by the government. Municipalities use the assessment value to figure out how much homeowners and businesses will pay in property tax.
The province quietly updated the Assessment Act this week. All assessments conducted in 2024 by MPAC will continue to be based on the valuation date of January 1, 2016. MPAC, a publicly funded non-profit organization that assesses more than 5.5 million properties across Ontario, is responsible for returning an updated assessment roll each year that includes changes such as permitted additions, renovations, new structures or new construction.
In 2022 alone, MPAC added more than $37.8 billion to municipal rolls across Ontario through its assessments of new construction and renovated properties. Municipalities pay more than $200 million annually for this service. The City of Toronto alone paid $46.5 million last year.
MPAC said it welcomes the “opportunity to work with the province to ensure the property assessment process is optimal for our customers — both property owners and municipalities.”
The more time that passes between the assessment date and the present, the harder it is for homeowners to figure out their true current value. The longer a jurisdiction goes without reassessing property values, the greater the tax inequities.
The investigation found that even in 2016, when the real estate market was much less inflated, in a sample of 12,000 Toronto homes that sold that year, those who owned the most affordable properties were routinely paying more than their fair share of property tax while those with the most expensive properties were comparatively paying less. Mayor Olivia Chow and the NDP opposition called for a review of MPAC’s assessment system.
MPAC has said it disagrees with the findings and that several internal and external reviews of its assessments have found that it meets international standards. Every other jurisdiction in Canada has continued with reassessments in the face of the pandemic, which Ontario initially cited as its reason for the delay. Ontario should be no different.
If you really want to address fairness you’ve got to do an assessment update. Lots of people are paying more than should be and lots of others are paying less than they should. The only way to fix that is to do an annual reassessment.