Toronto Property Tax Hike Proposal: A Cause for Concern Among Homeowners and Experts

As Toronto grapples with its latest financial challenge, a proposed property tax increase is stirring significant concern among homeowners, real estate experts, and city officials. Shelley Carroll, the city's budget chief, announced a potential 9% property tax increase for 2024 during a recent press conference. Coupled with a 1.5% hike for the city building levy, the total increase could soar to 10.5%, a significant leap from last year's rates under former Mayor John Tory.

Photo Cred: Cole Burston

The Impact of the Hike

This proposed hike, the largest since Toronto's amalgamation about 25 years ago, is sparking worry among various stakeholders. Robert Brazzell of Colliers Canada points out that this increase is notably higher than what is being observed in other Ontario cities. The proposed rate, influenced by factors like the pandemic, immigration, high interest rates, and inflation, is poised to further intensify Toronto's affordability crisis.

The Root Cause and Possible Outcomes

Toronto's operating shortfall, estimated at around $1.8 billion, lies at the heart of this tax conversation. Despite securing $400 million in provincial funding, the city still faces significant financial challenges. Carroll mentioned the possibility of an even higher increase, up to 16.5%, if additional federal funding is not secured for refugee support services. This potential hike includes a "federal impacts levy" of 6%, contingent on securing $250 million from the federal government by January 26.

Implications for Buyers and Renters

The proposed tax increase could have widespread effects. First-time homebuyers may find property purchases even more out of reach in Toronto, which already imposes a unique land transfer tax. Kenan Yousef, a Realtor at Strata.ca, warns that the hike could drive both homeowners and prospective buyers to more affordable markets. Renters are not immune either, as property owners may pass on the increased tax burden through higher rents.

The Effect on Housing Supply

Yousef also notes that a steep hike could adversely affect the real estate market, particularly new housing supply. Investors in pre-construction projects, who factor in maintenance fees and property taxes, might find such investments less appealing if costs rise significantly.

Seeking Sustainable Solutions

Both Brazzell and Yousef emphasize the need for a more sustainable approach to managing Toronto's financial issues. With the Budget Committee set to deliberate on the proposed hike, Mayor Olivia Chow is expected to present her budget on February 1, followed by a City Council vote on February 14.

The real estate community is closely monitoring these developments, understanding that the final decision will have far-reaching implications for Toronto's housing market and overall affordability. Stay tuned for updates as we continue to navigate these challenging times in the Toronto real estate landscape.