Tenants may see rent decreases this year thanks to new tax rules imposed on municipalities by the provincial government. But they’ll get no extra help from the city which is keeping its tax rate on apartments about two and a half times higher than on single-family homes. As part of their rent, the average tenant pays over $2000 a year in city taxes.
Worried about unaffordable rents, the Wynne government has blocked tax increases on multi-residential buildings in all cities where their rates are already more than twice as high as on single-family homes. That means this year’s property tax hike in Hamilton can’t be applied to apartment buildings.
Tenants aren’t provided with tax bills, but nevertheless about one-fifth of their rent payments end up in city coffers. “The average multi-residential unit pays taxes of $2,016 which is the equivalent of a residential property assessed at $190,000,” explains a staff report that went to Hamilton councillors last week.
Ward three councillor Matthew Green asked for the report a year ago, expressing apprehension about “a disproportionate burden on renters”. He was also worried about the rapid increases in average Hamilton rents in the wake of big jumps in the price of houses.
“I know that the increasing costs of rent are increasingly becoming a greater percentage of people’s overall monthly income,” Green said, “forcing people into a crisis of precarity in terms of where they are able to live in this city.”
The steep rise in house prices only affects taxes on a home if it is greater than the average across the city, but the speculative market is adding to the property wealth of homeowners. Tenants don’t share those benefits but their rents on average jumped more than five percent last year in Hamilton and the apartment vacancy rate plummeted by more than a third.
Green’s concern was countered by Tom Jackson who worried that lower taxes for tenants would mean higher ones for homeowners. “The last thing I want to do is going down a path that shifts even more burden to the single family homeowner who as we know many of them themselves are of modest income and tapped out to some degree,” said Jackson.
This week’s city report puts numbers on what that shift might look like. It says reducing the apartment tax rate to the same level as houses would be made up by increasing other residential property taxes by almost seven percent. Alternatively gradually lowering the ratio to the two-to-one maximum set by the province may result in a 2.7 percent increase over that time for other residences.
But the report argues that lowering apartment taxes won’t likely reduce rents. While acknowledging that Hamilton rents have jumped 39 percent since 2008 – only exceeded in Ontario by Toronto at 41 percent – the report says “what is important to note, however, is that the average rent has increased even in those municipalities that have had a significant reduction” in the tax rate on apartments
The report also reveals that Hamilton has the highest apartment tax rate in the province (2.69 times the single family house rate) and that only Toronto and Thunder Bay have rates that are even. Kingston, Brantford, London, Waterloo, and Niagara are all at or below two times, and Ottawa is sitting at less than 1.5 times.
Some municipalities like Barrie have made their tax rate on apartments the same as on other residences. That’s also how the provincial government charges education taxes. And many cities, including Hamilton, do this for recently constructed apartment buildings while continuing to charge far higher rates on older apartments.
Toronto is also restricted by the ban on raising apartment taxes. Their staff report explains the provincial reasons for the provincial freeze:
“Over the past year, the province has been working in consultation with municipalities, as well as other affected stakeholders, to examine issues related to the tax inequity between multi-residential and other residential properties. As a result of the review, the Province is mandating continuation of the freeze on the municipal property tax burden on multi-residential properties where the multi-residential tax ratio is greater than 2.0.”