Toronto Islanders have been paying far less property tax than mainland homeowners and renters. A motion at city hall aims to change that

Thestar.com
Feb. 7, 2024

Toronto Islanders pay dramatically less in taxes than other city dwellers -- something a motion headed to council aims to change.

"There's something wrong here," Coun. Jon Burnside (Ward 16 -- Don Valley East), who filed the motion to be heard at council this week, told the Star. "In what world does somebody pay $1,500 annually in property taxes? The answer is on no world other than the Island."

Toronto Islanders, who own their house but lease the land under it, on average pay about $1,530 per year in property taxes, for homes with an assessment value of $241,785, according to a 2022 analysis from the City of Toronto's Revenue Services Division.

On the mainland, homeowners paid an average of roughly $4,400 annually in 2022, based on a property's assessed value as determined by the Municipal Property Assessment Corporation, an agency hired by the province to do this work.

For the past 30 years, Island life has been protected by a law that permits residents on Ward's and Algonquin Islands to hold title to their homes and lease the lots on which their houses stand until 2092.

They have direct access to municipal services including an elementary school, ferry service and fire station, which Burnside said can cost taxpayers up to 10 times the amount to operate as its mainland counterpart.  

"People supporting Islanders argue, 'Well, they don't own the land,' " Burnside said. "Neither do apartment dwellers but the tax is still included in their rent."

Burnside asked city staff for those numbers, too.

Tenants in Flemingdon Park pay an average of $4,320 in property tax annually as part of their rent for a single-bedroom unit, the city estimated. Two-bedroom renters were paying $5,520 per year based on average rent of $2,295 in the same area.

The Toronto Island Community Association declined the Star's request for comment.

"We are not willing to meet and discuss this matter," chair Tony Farebrother wrote in an email.

The Toronto Islands Residential Community Trust Corporation, which manages the land and buildings associated with the community, was unavailable for comment.

Property tax is the single-biggest expense many homeowners incur, apart from a mortgage. But they pay it on faith that the tax is, as it is supposed to be, administered fairly.

Burnside would like to see the city utilize a tool in its tax arsenal to ensure Islanders aren't paying less than their fair share.

The tool, called "area rating," allows the city to employ a special tax rate to an area with unique circumstances. He's asking city council to direct the chief financial officer and treasurer to determine whether it's feasible to use this tool on the Island.

"We'll ask for the report and see where it goes," Burnside said.

Burnside said the problem with the Island rests in the fact that home prices are set by the trust and sold through a lottery system. The trust set a cap on the value of Island homes that is substantially lower than what they would fetch on an open Toronto real estate market. The assessment industry relies on open-market transaction data to set values for tax purposes.

MPAC confirmed it is responsible for assessing the homes on Toronto Island.

"Since the homes on Toronto Island are not bought and sold on the open market, we use the cost approach to value these properties. This approach involves determining the value of the land and adding the replacement cost of the buildings, adjusted for depreciation," spokesperson Paula Chung said.

Land lease values are provided to MPAC by the Toronto Island trust administrator leading up to each provincewide reassessment. The last provincial reassessment was Jan. 1, 2016. The next cycle was intended to begin four years later but Premier Doug Ford postponed it because of the pandemic.

A home's age, size, condition, construction quality, and any improvements can affect assessment value using the cost approach, Chung wrote in an email.

A street-by-street analysis of 261 Island homes completed by the City of Toronto found the current value assessment of properties in 2022 ranged from $88,000 to $715,000 with annual property tax payments as low as $556 to a maximum of $4,518.

In December 2022, the average price of a detached home in Toronto was $1.6 million. The average assessment value of residential properties in the city that year was $697,185, since the province has not yet called for a reassessment and valuations for tax purposes are still supposed to peg a home's worth as of Jan. 1, 2016 and not its value in real time. This leaves the average 2022 homeowner in Toronto paying roughly $4,406 per year.

This isn't the first time the equity of the city's tax system has come under scrutiny.

A Toronto Star investigation last year revealed that Ontario’s property tax system is neither fair nor transparent.

The series' exhaustive and innovative data analysis showed that homes are routinely taxed more than they should be, while others aren’t taxed enough. Worse yet, the burden of this tax inequality is shouldered by those with the least-expensive houses, while owners of some of the city’s most-expensive homes, nestled in some of the toniest neighbourhoods, catch a break. A retired tennis pro, a Toronto sports team executive and a former Blue Jays infielder all own or owned homes that were assessed at significantly less than what they paid for them. Working class families, meanwhile, are often paying too much tax.

This hidden systemic unfairness exists, the reporters found, because the publicly funded agency tasked with valuating properties for tax purposes has a flawed methodology that consistently under- and over-assesses homes’ worth compared to their sales prices.

Mayor Olivia Chow has called for a Toronto-wide review of the property tax system following the Star's investigation.