

MARKET INSIGHT FOR THE WEEK ENDING August 25th, 2023
The Ontario government is postponing a provincewide property tax reassessment while it conducts a new review of the accuracy and fairness of the system.
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reassessment delay may also trigger higher property tax payments for some as municipalities raise tax rates to offset outdated property values.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.
Here are the top 5 trending stories of the week:
- Despite Rate Headwinds, Canadian Home Prices Manage A Near-Record Jump In July “Canadian home sales slipped for the first time in six months between June and July as interest rates did their part to quell consumer spending. Prices, on the other hand, continued to trend upward according to new national data. More specifically, the latest Teranet-National Bank Composite House Price Index — it tracks observed or registered home prices across 11 CMAs, so long as they have been sold at least twice — saw a cumulative month-over-month increase of 1.8% last month (before seasonal adjustments), marking the fifth straight month of increase.”
- Ottawa considering a cap on international students to ease housing pressure, says Fraser “The federal government is considering a cap on the number of international students to ease the pressure on the housing market, says the man now tasked with tackling Canada’s housing crisis. “I think that’s one of the options that we ought to consider,” federal Housing, Infrastructure and Communities Minister Sean Fraser told reporters as the Liberal cabinet gathered in Charlottetown on Monday.”
- Here are the parts of Toronto where home prices are surging and dropping the most “The Chief of Staff for Ontario’s Housing Minister heavily steered the selection process for Greenbelt land removal in a manner that was “not transparent, objective, or fully informed,” and showed “bias” and “preferential treatment” to certain developers, found a report released by Auditor General Bonnie Lysyk on Wednesday morning.”
- Starts vs. sales imbalance raises affordability alarms, economist says “The dichotomy between housing starts and sales is raising questions about the future of affordability in the housing sector, according to a recent report from Marc Desormeaux, principal economist at Desjardins. In July 2023, Canadian housing starts experienced a noticeable setback, dropping to 255,000 on a seasonally adjusted annual rate (SAAR). This decline coincides with the first decrease in home sales in six months.”
- Renewed calls to remove GST from rental housing construction costs in Canada “In recent months, there have been a number of renewed calls for the Government of Canada to remove its Goods and Services Tax (GST) on the cost of building secured purpose-built rental housing. Advocates calling for the move assert it would have a meaningful impact on the financial viability of building much-needed rental housing, enough to push projects across the line into the realm of viability amidst the highly challenging market and inflationary conditions.”

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