Doug Ford’s compromising Ontario’s economic competitiveness with property assessment delay, business leaders warn

Thestar.com
July 24, 2023

Ontario is compromising its economic competitiveness and making taxes less predictable by continuing to delay a new provincewide property reassessment, Premier Doug Ford is being warned.

In a July 14 letter to the premier, a coalition of municipal, business and real estate industry representatives urged Ford to commit to a date for the Municipal Property Assessment Corp. (MPAC) to conduct a new reassessment.

Most properties in Ontario are taxed based on their value as of Jan. 1, 2016.

Since then, Ontario has seen property values shift considerably, meaning assessments for many commercial and residential properties no longer reflect current market values.

Ontario was scheduled for a reassessment in 2020, but the provincial government, unlike many jurisdictions, postponed it due to the COVID-19 pandemic.

“For both municipalities and businesses, a well-functioning and up-to-date assessment system supports strong communities and makes Ontario an attractive place to invest,” reads the letter, co-signed by 10 groups including the Association of Municipalities of Ontario (AMO), the Ontario Chamber of Commerce and Canadian Property Tax Association.

Reassessments redistribute the tax burden

Reassessments redistribute the tax burden so that properties that have increased in value compared to others pay an increased portion of property taxes.

“Frequent reassessments do not increase property taxes, but instead stabilize and make taxes more predictable … We urge your government to formally commit to a reassessment date,” the letter states.

Ford’s office referred questions about the letter to a spokesperson for the Ministry of Finance, who said in an email that the government’s priority is “maintaining stability for taxpayers and municipalities at this time of economic uncertainty.”

“The reassessment postponement does not have a financial impact on municipalities, as the Municipal Property Assessment Corp. continues to maintain the assessment roll and ensure it is regularly updated to reflect changes such as new construction,” said Felix Burns, a senior adviser in the office of Finance Minister Peter Bethlenfalvy.

Unfair share
A recent Star investigation revealed that residential properties in Toronto are routinely taxed more than they should be while others aren’t taxed enough, and that this inequality is too often shouldered by those with the least expensive houses. This is because the Municipal Property Assessment Corp., the publicly funded agency responsible for assessing properties for tax purposes, consistently under- and over-assesses homes’ worth compared to their sales prices.

The Star analyzed sales and assessment data for nearly 12,000 Toronto residential properties that sold in 2016 and found MPAC assessed the most affordable homes at values higher than their sale price more often than it over-assessed the most expensive homes.

Reassessments redistribute the tax burden so properties that have increased in value compared to others pay an increased portion of property taxes, the municipal and business partners told the premier in a letter.

Sean Kilpatrick
MPAC says the Star’s reporting is “inflammatory and misleading to property owners when it comes to the quality and accuracy of their assessment.” An internal quality control audit that the agency provided to the Star says MPAC’s work “raises no concern” of systemic inequity.

‘Illusion of stability’
Peter Frise, a former senior economist in the Ontario Finance Ministry’s property tax policy division called the reassessment delay “a complete illusion of stability.”

“Real-world markets are not subject to that pause; they’re not pausing. They’re moving and the gap between tax assessments and actual property values grows,” he said. “The longer we delay, the bigger the shock will be.”

Frise is now a vice-president with Municipal Tax Equity Consultants, which works with cities across the province to develop property tax and revenue policies. He predicts many properties will see unprecedented rates of change in their assessed values, and said MPAC needs to share its assessment data with municipalities as soon as possible so they can mitigate the impact on taxpayers.

Colin Best, president of the Association of Municipalities of Ontario and a Halton regional councillor, said the province’s assessment system is more fair, predictable and “simply better” when it is updated regularly.

“Delays cause practical and political challenges that grow worse over time. Municipalities are waiting for the Ontario government to do its part and give MPAC permission to do the reassessment that MPAC is perfectly ready and able to deliver,” said Best, one of the signatories of the letter to the premier.

Other provinces have continued assessments
Since 2016, the coalition’s letter notes, “the other nine provinces will on average have reassessed properties more than six times.”

Ontario is “out of step and that creates concerns” said Robert Brazzell, a spokesperson for the Greater Toronto chapter of NAIOP, an association representing commercial real estate developers. “People and businesses wonder, why did that happen? When will we get back to a normal assessment cycle? Or will we? And what does that mean about the government’s understanding of property tax and best practices?”

Raymond Williams is chair of tax policy at the Canadian Property Tax Association, an education and advocacy group representing the property tax industry, and one of the signatories of the letter.

As a commercial property tax consultant at Altus Group, he creates tax forecasts for companies looking to develop new properties in Ontario. He says the uncertainty created by a lack of a recent reassessment “has actually led to development and investments in new properties … either being deferred or flat-out cancelled.”

“It’s really delayed a lot of investment,” he said.

Some commercial properties have been substantially devalued during and after the pandemic, such as shopping centres and office buildings, but are still paying tax on the same high assessed values from before the pandemic, notes Michael Brooks, CEO of REALPAC, an association representing Canada’s commercial real estate industry, and a signatory of the letter to the premier.

“It’s punishing for them and their small-business tenants. And not fair,” Brooks said.