Ontario’s property tax assessments are still based on 2016 values, but increases may loom

For Ontario property tax time stands still

In Ontario, property taxes have not been reassessed for 8 years, effectively stopping time as if it was still 2016, when office buildings are flourishing, downtowns are lively, and the movement to online shopping and related warehousing needs is in its infancy.

In the real world, and in property tax regimes outside Ontario, things have evolved with the times. Online shopping has exploded, thereby increasing the values of industrial properties, and office and retail markets have bifurcated. Interest rates have risen and remain at elevated levels.

The disconnect between Ontario property assessments and the implications for Ontario taxpayers is something we address in the 2024 Canadian Property Tax Rate Benchmark Report. The report examines the differences in tax regimes and challenges facing commercial real estate across the country. In Ontario, taxpayers may not be expecting change – but assessors have been busy ensuring that any “new growth” – new buildings or increases in value – is added to the assessment base, as quickly as possible.

The report discusses commercial-to-residential tax ratios, Toronto parking taxes and future tax increases

Altus Group’s annual Canadian Property Tax Rate Benchmark Report compares assessment and taxation for commercial real estate across 11 major cities. The good news for Ontario properties? Commercial-to-residential ratios continue to decline in Toronto and Ottawa. The average ratio for 11 cities across Canada was 2.83. Ottawa is 2.33, down 3.7%, and Toronto 3.11, down 4.3%.

This year’s report also examined assessments and sales in each city and benchmark property tax rates per square foot. In the assessment/sale ratio analysis, it is clear that assessments have not kept pace with current value – but there is a clear disparity in Toronto, where industrial assessments were 18-43% of sale current sale prices, while office was 35-80% and retail 22-80% of sales. Based on this analysis, industrial properties in Toronto will see substantial tax increases when the province does reassess, while many office and retail properties will see relief.

Figure 1 – Ontario 2024 assessments / 2023-24 sale prices

Source: Altus Group

Analysis of tax rates per square foot for benchmark property types highlighted underassessment of industrial properties. While the benchmark office, retail and multi-family properties in Toronto and Ottawa pay some of the highest taxes in the report, tax rates for industrial properties were at or below the median rate.

Want to learn more about comparable property tax rates and ratios across Canada? Download the Canadian Property Tax Rate Benchmark Report

Ontario assessors are busy finding new values to add to the assessment roll

Although the province has suspended reassessment, the Municipal Property Assessment Corporation (MPAC) continues to assess new buildings and improvements to buildings. This year, they have introduced new changes that will result in some new assessments — particularly for multi-family properties — being added much sooner than expected.

Figure 2 – MPAC new assessment by property type

Source: https://www.mpac.ca/en/OurServices/ResearchandInsights

New multi-family properties to be fully assessed at first occupancy

In previous years, MPAC did not have a formal policy regarding the timing of assessments for properties being developed for multiple occupancy. Policies varied across the province, but generally a developer could expect to receive a bill when 50% of the units were occupied. MPAC’s new policy will add the entire assessment as soon as the first unit is complete – meaning taxes must be paid on the full value before tenants are in place to cover the cost.

The assessment may be delayed, or applied at less than full value, if some of the units have not yet been issued an occupancy permit. To minimize unrecoverable costs, developers may want to stagger occupancy on a floor–by–floor basis.

Supplementary and omitted assessments, and year-end changes

MPAC is authorized to add value to the roll for the current year and up to two prior years. Most property owners prefer to have assessments issued sooner rather than retroactively, but in some cases, value should not be added at all. For example:

• Farmland may be taken out of the farmland tax class when non-farm machinery is observed on site, even if farming activity is continuing

• Assessments may be added for new tenants in previously occupied space, despite new occupancy not adding value to the property

• Repairs that require a building permit may be assessed as “improvements” to the property

• Assessors may change their opinion of value for the following year, based on changes in tenant mix, or errors in their interpretation of income and expense data, or change in property classification or description

Conclusion

For property owners who receive an assessment notice in Ontario over the next several months, there is a strong likelihood that the assessment will show a change in assessed value. Make note of the deadline to appeal and review the assessed value to confirm whether the change is warranted. If you have questions about what types of changes would qualify for an additional assessment, contact one of our property tax experts.

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