August 19, 2004
Tax Policies
Corporate Finance
Toronto City Hall
Re: Review of Property Tax Ratios
The Federation of Metro Tenants Associations takes this opportunity to place our position on the record with respect to multi-residential tax ratios.
In the City of Toronto, tenants pay property tax at a rate 3.8 times higher than homeowners, including condominium owners. This cost is completely passed on to tenants and adds more than $100 to the monthly rents paid by tenants in Toronto.
Condominiums and co-operatives do not pay this rate.
The effect of the 3.8 ratio is that a tenant living in an apartment with an appraised value of $75,000 is paying much more tax than a condominium owner with an appraised value of $150,000, and more tax than a homeowner in a $260,000 house. On average in Ontario, tenants pay 2.7 times greater than homeowners. In Ottawa, the ratio is approximately 2.0.
The rent law in Ontario requires tax reductions to be passed on to tenants. The current Government has promised to end vacancy decontrol, which should mean that tax savings are permanently beneficial to tenants.
Further, the Ontario Government has taken some positions on this matter that indicates a preference to end the status quo. Municipalities cannot charge the multi-residential rate to new rental buildings and they cannot allow the ratio to increase. In 1997, the Government of Ontario recommended a "range of fairness" that would see the ratio be no higher than 1.1 by the year 2006.
The Fair Tax Commission recommended in 1994 that tenants should pay at the same rate as homeowners.
This year, the City of Ottawa added an extra 1% increase to homeowner taxes, while reducing multi-residential by 1%. This was seen as a step in moving towards equality and this step received the editorial endorsement of the Ottawa Citizen newspaper.
The FMTA recognizes that achieving an equitable tax position for tenants to homeowners will require a shift of taxation. At the end of the day, the City will require the same amount of revenue to provide services to all citizens.
Just to get our City to the average (for the Province) would be a start, but not nearly enough. The only fairness is equality. The ultimate solution may be to end municipal property tax as we know it, and shift to a municipal income tax system.
We take no position with respect to the commercial and business tax ratios. We observe that for business, property tax is deductible for income tax purposes. We also observe that lower rents will provide tenants with more disposable income to be spent in local businesses.
We are prepared to work constructively for fair change with the City. It is an issue where tenant and landlord advocates are on the same side. Although we know that in the process of change there will be opposition, we believe that all fair-minded people fundamentally agree with equality.
This inequity must be ended as soon as possible. Although, we are not unsympathetic to low income homeowners, most low income people are tenants. This adds to the regressive nature of property tax.
We urge the City of Toronto to move towards a fair and equal tax system as quickly as possible.
Sincerely,
Dan McIntyre
Program Co-Ordinator