Taking another look at increasing property taxes in Toronto

Earlier this year, the Centre for Urban Research and Land Development released a report saying that the City of Toronto could afford to hike residential property taxes by approximately 20% when compared to the median Greater Toronto and Hamilton Area municipality. 

As you can guess, this turned some heads, especially of those who own a home in Toronto. The one factor that may have been skewing the data was the fact that Toronto has way more condos than other areas of the GTHA. So CUR decided to look at only owner-occupied detached homes to make for a more fair comparison. 

Turns out the differences between Toronto and the other 28 GTHA municipalities didn’t really change much, but there were some areas of interest worth noting. 

When considering all types of dwellings, the average property tax paid in Toronto was $4,027, which is just 10.2% below the median GTHA community. The effective tax rate (percentage of market value) was 0.51% in Toronto - a whopping 21.3% below the median. The tax burden (percentage of household income was 2.74%, which is 21.7% below the median. While Torontonians were paying less than those in the median GTHA community, their homes were valued 20% higher, and Torontonians’ average income was also 11.6% higher. All these figures combined is what led CUR to believe that Torontonians could afford a 20% property tax hike. 

Now for the more fair comparison. For owner-occupied detached homes, the average property tax paid in Toronto was $5,079, which is actually 2.4% higher than the median GTHA municipality. Though Torontonians were paying more, the effective tax rate was 23.3% lower than the median at 0.5%. Toronto’s tax burden for owner-occupied detached homes was 2.68%, which is also 23% lower than the median.

So, it already seems like Torontonians can afford a 20% hike in property taxes and we haven’t even gotten to the income and home values yet. The average household income in the owner-occupied detached home category was $189,669 in Toronto, and $144,938 in the median GTHA community, equalling a difference of nearly 31%! 

The average value of an owner-occupied detached home in Toronto was $1,022,193, and just $715,302 in the median GTHA community. That’s almost a 43% difference. So, Torontonians in owner-occupied detached homes are paying 2.4% more in property taxes, but when it comes to the effective tax rate, tax burden, household income, and average home value, there’s still room for a 20% hike. 

It looks like CUR was right from the beginning. 

But the one thing that doesn’t seem to be considered is the Municipal Land Transfer Tax. Torontonians may be paying less than they can afford when it comes to property taxes, but it’s important to remember that Toronto is the only municipality with a MLTT! This amounts to thousands of dollars in taxes paid up front at the time of closing.

If you bought the average detached home in Toronto for $1,022,193, you’d pay $16,919 in provincial LTT and then another $16,919 in municipal LTT for a total of $33,838. Now let’s look at the average detached home in the median GTHA community where MLTT isn’t a thing; it would cost $12,026 in provincial LTT to buy a $715,302 detached home in any of the other GTHA communities. 

We’ll agree that when comparing property taxes across the GTHA, Toronto is on the low side, but it’s without a doubt the number one most expensive municipality when it comes to LTT.