Budget winners and losers
May 15, 2017
Taxes on apartment buildings are going down this year and that should automatically mean lower rents, but the city is not required to notify tenants, so landlords may get to keep the windfall. They join hotel owners, commercial businesses and industrial corporations as major winners from council’s 2017 budget decisions, while low-income city workers and HSR riders are among the losers.
Provincial law “requires rents to be decreased automatically when property taxes decrease” but only makes those automatic if the taxes paid by the landlord fall at least 2.5 percent in a given year. And when that happens, city governments are required to notify the affected tenants as to how much their rent must go down.
The province estimates that one-fifth of tenant rent goes to city taxes, so requires landlords to give tenants that portion of any tax reductions they receive. Since tenants don’t get tax bills from the city, many are unaware that they effectively pay such a large part of their rent in municipal taxes or that they are hit much harder than house owners.
For at least the last decade, the tax rate for apartments in Hamilton has been 2.74 times the rate on single family homes despite provincial pressure to equalize the two. The Queen’s Park policy began in 1998 and advocated lower business taxes as well. The latter were cut in Hamilton by 40 percent in 2001-2005, but the city has refused to do the same for apartment buildings.
Now interim provincial rules have blocked council from raising apartment taxes this year while the Wynne government reviews “the significantly higher property tax burden for multi-residential apartment buildings and its effect on housing affordability”. That review is just getting underway, but it has forced a 2.2 percent tax cut for Hamilton apartments built since 1991 and that should mean marginally lower rents for tenants in those buildings of nearly half a percent.
But since the reduction is less than 2.5 percent, the city is not obligated to inform tenants or to take any other action to ensure the rent reductions actually take place. That could leave the owners of the apartment buildings as much bigger winners from the tax cuts at a time when affordable rental accommodation is increasingly hard to obtain in Hamilton.
In a media release, Mayor Eisenberger boasted that the 2.1 percent tax hike on single-family homes delivered by council means “one of the lowest tax increases in memory for Hamilton and is lower than many other municipalities”. There was no mention in the release of the apartment building cut, or the fact that taxes on industrial properties will fall by 0.8 percent and those on commercial businesses are only going up by 0.4 percent.
The focus on achieving a low residential tax hike comes at a time when the average price of houses has climbed dramatically. While that means higher taxes for those homes with above-average increases those will be minor compared to the substantial growth in the real estate wealth of the homeowners.
Other budget winners this year include the hotel industry that will get an extra $100,000 a year for perks to attract visitors. That’s in addition to $150,000 extra approved last year, but still $100,000 short of what the industry was seeking. The increase was opposed by councillors Matthew Green and Aidan Johnson.
Green also opposed the police budget that now makes up nearly a fifth of the city’s operating expenditures, and he voted against the scaled back transit budget that postponed the previously endorsed plan to use tax dollars to achieve HSR service standards this year and handle population growth. Children and others using the spray pads to cool off also lost out when an extension of open hours was rejected.
Along with transit riders, city staff were negatively affected by this year’s budget decisions – both through the elimination of some jobs and a rejection of a proposal to pay all civic employees at least $15 an hour. The refusal to allocate just over $1 million to meet this “living wage” goal was opposed by three councillors – Aidan Johnson, Terry Whitehead and Matthew Green.