Toronto is now paying the price for a decade of low property taxes, report says

Thestar.com
January 8, 2020
Jennifer Pagliaro

A decade of austerity budgets at city hall has cost Toronto greatly when it comes to transit, housing and child care, a new report from advocacy group Social Planning Toronto outlines.

The report, “Toronto After a Decade of Austerity: The Good, The Bad and the Ugly,” comes just days before the city’s budget deliberations begin on Friday. It makes the case for council to raise new revenues through three measures: Increasing the municipal land transfer tax on luxury homes, introducing a vacant home tax, and reintroducing the vehicle registration tax.

“For the past decade, Toronto city council has made the political choice to keep property taxes low -- the lowest rate in the GTA, Hamilton, and Ottawa -- and to reject other options to raise revenues. That choice has come at a cost to our city,” the report says.

“It has starved our city of the necessary resources to create affordable housing, to end homelessness, to improve the public transit system, to increase access to high quality and affordable child care, to address pedestrian and cyclist safety, and to pay for the critical public services our communities rely upon.”

Social Planning is a non-profit organization that advocates for social justice initiatives at city hall, with roots dating back to 1937 when it was known as the Toronto Welfare Council. The report was authored by Beth Wilson, the group’s lead on policy and research.

Although the report applauds Mayor John Tory’s recent move to increase property taxes by 8 per cent over the next six years to fund transit and housing projects, Social Planning says it’s only a start.

The report highlights stark realities about affordability in the city today: The average rent for a one-bedroom unit increased by 33.7 per cent between 2010 and 2018; the Toronto Transit Commission continues to have the lowest government subsidy per rider of all mass transit systems in Canada and the U.S.; and child care in Toronto is the most expensive in the country, with more than 17,000 children on wait lists for subsidized spaces.

The impact of austerity

Social Planning Toronto highlighted several key numbers in a new report showing how residents have been squeezed when it comes to transit, housing and childcare over the last decade.

24.9% increase in the cost of a monthly TTC pass in the past decade

$1.11 per rider subsidy for the TTC in 2018

33.7% increase in average one-bedroom rent between 2010 and 2018

13,645 people on the waitlist for supportive housing at the end of 2017

17,282 kids waiting for subsidized childcare as of September 2019

“Toronto at the end of the ‘10s has significant challenges,” the report says. “We have an affordable housing crisis that is a daily struggle for hundreds of thousands of renters, a homelessness crisis that is taking lives, child care that is often hard to come by and the most expensive in the country, and a public transit system that requires substantial investment to meet the needs of our communities today and tomorrow.”

Tory’s tax proposal can help to illustrate the lost opportunity of the past decade often cited by the mayor’s critics.

The newly approved tax increase would allow the city to support $6.6 billion in recoverable debt to invest in transit and housing projects now.

If a tax increase allowing the same investment had been implemented 10 years ago, it could have helped pay for desperately needed repairs to Toronto Community Housing buildings; instead, hundreds of units have been shuttered and the repair backlog is now expected to reach $3.2 billion by 2028. The money might also have gone to the TTC, which needs $26.1 billion for unfunded capital projects.

Had Toronto raised property taxes years ago, says Coun. Gord Perks, it would have been able to solve two of its most urgent problems with money to spare.

“We would not need a shelter system, because we would have sufficient housing for people who are currently homeless,” Perks said. “We would have enough (TTC) vehicles that you could reliably get around the city and not expect to be late because of an emergency every couple of weeks. And there would be a lot left over.”

The Social Planning report also notes that the amount of money the city spends in operating dollars per resident, when adjusted for inflation and population growth, has declined over the last decade. According to city data, spending per capita on things like emergency services and libraries and road repairs was $4,393 in 2019 compared to $4,598 in 2010.

“There is one common denominator that unites all of these issues, and that is proper funding,” the report says. “By all means, the city of Toronto and every order of government should do all it can to improve our communities using existing resources -- but that’s not going to build a better city. Years of austerity budgets illustrate the point; years of doing more with less have left us with deepening challenges, widening inequities, and mounting crises in our communities.”

The group’s proposed tax solutions are all measures the city has the power to implement today.

First, Social Planning says the municipal land transfer tax could be increased for homes valued at $2 million or more, and/or a new tax tier could be added for higher valued homes. The additional revenue, the report says, could help pay the capital costs to build affordable and supportive housing.

How much those changes could raise depends on the percentage charged, at what tier -- homes over $2 million, $3 million or more -- and the number of homes in the applicable tiers.

Currently, the top tier is for homes valued at $2 million or more, at 2.5 per cent. Rates are based on the value of the property.

Councillors Joe Cressy, Ana Bailao and Brad Bradford previously pitched a 3 per cent tax for homes valued at $3 million or more, which they estimated could raise $5.1 million annually. That was based on 774 homes valued at that amount in 2018.

“There’s no question that there are revenue tools available to the city today that we could use that would go a long way to improving affordability,” said Cressy. “When it comes to luxury homes, we have seen a 376 per cent increase in homes sold for more than $4 million in the last nine years. Meanwhile, we are not collecting more revenue from those homes.”

The second measure proposed by Social Planning is a vacant home tax, which the province granted the city authority to enact in 2017. It would charge homeowners for residential properties deemed vacant.

That type of tax is being used by Vancouver, the report notes. Data from Vancouver shows the 1 per cent tax on a home’s assessed taxable value has had two positive effects, the report says: Decreasing the number of vacant units eligible to be taxed by 22 per cent between 2017 and 2018 and raising $39.4 million in 2018.

The amount of revenue Toronto could raise from a similar tax would depend on how vacancy is determined and how many units that standard applies to, as well as the rate.

City staff, at council’s direction, is currently looking at how such a tax could be implemented here.

The last suggestion, the vehicle registration tax, has long been controversial at city hall. First introduced by former mayor David Miller, it was axed by Rob Ford’s administration. The tax was charged per vehicle at $60 and $30 for motorcycles. When it was cancelled in 2010, it was raising $64 million annually.

Attempts at council to resurrect the tax have repeatedly failed. Social Planning argued the revenues of reintroducing the tax could be used to subsidize public transit and fares for low-income riders.

Tory’s public stance on taxes has shifted over his five years in office. In 2019, he quoted his mentors when he pitched a plan to raise property taxes above the rate of inflation to fund transit and housing projects: “You can never go wrong doing the right thing.”

But he used the same language in a 2015 speech on the council floor during budget deliberations when he called keeping property taxes at the rate of inflation the “right thing” to do -- a promise he had made in the 2014 and 2018 elections.

In 2020, Tory’s office continues to parse his view, saying he still plans to keep the increases to base property taxes -- which substantially fund city operations -- at or below the rate of inflation. But combined with the property tax increase to benefit the so called City Building Fund for transit and housing, homeowners tax rates will increase by more than inflation this year.

“Mayor Tory was elected and re-elected on a mandate to invest in key services, which we have done every year and which we will do again this year, while finding efficiencies and keeping the operating budget property tax increase at the rate of inflation,” Tory’s spokesperson Don Peat said in a statement.

Of the City Building Fund increases, Peat said, “This is the only way given both the limited current tools available to us and the current political climate, that we can raise the billions of dollars we need to invest in the future of this city. And the Mayor has committed to working with the other governments to secure billions in matching funding to invest in transit and housing.

“The Mayor is confident that this is the best way forward, the right way forward and the right thing to do if we want to protect Toronto’s economic success.”

As for the tax measures recommended by Social Planning, Peat said the mayor supports the ongoing study of the vacant home tax. He noted staff were already asked to look at increasing the municipal land transfer tax for luxury homes but have not recommended any changes. And, he reiterated, Tory does not support reintroducing the vehicle registration tax.