Renters often pay higher municipal taxes than homeowners

Founder and CEO , SVN Rock Advisors Inc.
  • Dec. 16, 2021

I was recently interviewed by Steve Paikin on TVO’s The Agenda about a little-known disparity between municipal taxes charged to homeowners and residential tenants in Ontario.

It’s widely believed that only property owners pay property tax but it’s actually not true, and in fact renters sometimes pay more property tax than those in single-family dwellings. They just pay it in their rent.

This discrepancy first came to be in the 1970s when municipalities were setting their budgets.

It’s not hard to see that homeowners would be more likely to push back on higher taxes than renters (because taxes are “seemingly” borne by the landlord). Municipalities saw this opportunity over time and took advantage of it.

As one would expect, even though it is the landlord who pays the tax, these costs trickle down into higher rents for tenants. If taxes imposed on building owners were not so high, then tenants would likely see a lower rent being charged to them.

Changing municipal tax rules

In about 1998, the Mike Harris government started enacting legislation which caused municipalities to equalize the rates. However, this is only happening slowly so there are still some disparities in place.

For example, while Markham has harmonized rates across different types of housing, other cities like Hamilton, Brampton and Toronto show significant differences (see below):

Residential

Multiresidential (Rental)

Toronto

.61%

1.09%

Hamilton

1.21%

2.37%

Brampton

.96%

1.53%

This is generally only the case in older buildings in the province.

Most Ontario cities have harmonized rates for new apartment construction so when it comes to tenants in a newer building, they are likely not subject to higher tax rates compared to residential.

It is fair to expect that over time, we will see rates across housing types harmonize even more. But this is left up the individual municipalities, so it is difficult to say how long it will take before this disparity goes away.

The fact that apartments are subject to higher (or in some cases, equal) taxes than single family homes is, on its face, illogical since the amount of service required from a municipality for a high-rise building (in terms of utilities, waste collection, etc.) is minimal – i.e. one or two lines for water and electricity for a 200-unit building, compared to the services required from a municipality for a neighbourhood of 200 homes!

Thinking about it this way, it would make sense for landlords (and by extension, renters) to be paying less municipal tax than homeowners.

Apartment supply and demand

During the interview, Paikin asked me if this is the case shouldn’t tenants be outraged? My answer was that I would be a little outraged about this, but more outraged by the lack of choice and apartment supply in the province.

As an example, Toronto has about 10 apartments per 100 people and Ottawa has about eight apartments per 100 people. Vaughan on the other hand has 0.1 apartments per 100 people – that’s an order of magnitude of 90!

Why is that?

Well, in 1975 when rent controls were introduced in the province, apartment development stopped. As a result, many of the newer cities like York Region, Ajax and Pickering have a significantly lower supply of apartments for renters and would-be renters.

If there was more choice of rental housing, tenants would have more options and if they don’t like what’s happening to them, in terms of their rent or anything else, they have the option to move.

Unfortunately, right now for many that just isn’t possible in their market.

Increase apartment development

Tenants in Ontario are looking for many things right now – more fair tax rates is just one. Better supply is most definitely another.

I believe apartment development is a solution that needs acceleration if we are to solve our current housing crisis. It is complicated with multiple levels of government legislation, taxation and uncoordinated programs.

If solved, we could see a landscape where apartment development begins to break down the barriers of access, choice, affordability and creates healthy competition.

Almost sounds like a potential win-win for both the population and developers . . . (?)



Derek Lobo is the CEO of SVN Rock Advisors Inc., a unique full-service brokerage firm. He has focused his entire career on the North American apartment building business. He’s recognized…

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Derek Lobo is the CEO of SVN Rock Advisors Inc., a unique full-service brokerage firm. He has focused his entire career on the North American apartment building business. He’s recognized…

Read more



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