Renters finally getting property tax justice
Media commentary on Ontario Premier Kathleen Wynne’s recent announcement of housing initiatives has focussed on rent control and real estate tax on speculative properties. However, buried among these 16 housing initiatives is a measure that finally redresses an injustice in Ontario’s property taxation that renters have had to bear: a proposal that the multi-residential sector be taxed at the same rate as the residential sector.
Historically the multi-residential sector (apartment buildings of 6 units or more) were treated as businesses and taxed at a higher rate than residences. However, while the landlord received the property tax bill for his/her building, it was the tenants who paid this tax through their rents. This creates the anomaly of a condominium building in Ottawa facing a rental building, built by the same developer and of equal quality, where the renters there pay 1.45 times the property tax as their condo cousins, who pays the lower residential property tax rate (based on 2017 Ottawa property tax rates), despite receiving the same municipal services.
This injustice is underlined by the fact that the average household income of renters in Ottawa (at $51,725 a year) is less than half compared to homeowners ($118,200 a year - 2011 Statistics Canada NHS data). And, according to the same data, over 38% of these renters are paying more than 30% of their gross income on rent – that’s over 45,000 renters carrying an unjustifiably higher property tax burden they can ill afford.
This injustice has been long known by the Ontario Government – in 1993 the Ontario Fair Tax Commission examined this issue (among others) and determined that there was no justification for a distinction in property tax rate policy on the basis of tenure by the occupant of a dwelling unit. The Commission recommended that all residential property should be assessed on the same basis whether the property is occupied by an owner or a tenant.
This recommendation was later echoed by the 2001 City of Ottawa Task Force on Property Assessment & Property Tax Issues (which I chaired) when it examined this matter. As a result Ottawa City Council adopted a policy of gradually reducing the multi-residential tax rate from 2.78 (in 2001) times the residential property tax rate, to the now 1.45 in 2017. It has been a slow process but, with the recent Ontario Government announcement, the end is now in sight.
However, while the Ontario Government’s initiative to redress this property tax inequity is welcome, the Government will have to ensure that the reduction in the multi-residential tax rate to the residential rate is passed on to renters. The Residential Tenancy Act will need to be amended to provide for this. It won’t be a big windfall for renters (the 2001 City of Ottawa Task Force estimated approximately $20 a month on average), but it is a matter of justice.