Commercial-to-residential property tax ratio tells tale of three cities with missed opportunity in Vancouver and recent pause in Toronto while Montreal begins to trend positive
TORONTO (October 24, 2017) – Altus Group Limited (“Altus Group”) (TSX: AIF), a leading provider of commercial real estate services, software and data solutions to the global commercial real estate industry, in partnership with the Real Property Association of Canada (“REALPAC”) today released the 2017 Canadian Property Tax Rate Benchmark Report, which provides an in-depth look at property tax rates in ten major urban centres across Canada.
Governments face the ongoing challenge of funding municipal budgets while trying to manage the perceived fairness of the different property tax rates paid between commercial and residential taxpayers. Both residents and business owners pay property taxes, but the rate they pay varies as taxing authorities set these rates at their discretion.
Conducted by Altus Group, this report analyzes the ratio of tax rates between commercial and residential properties. The report reveals that in eight of the 10 cities surveyed, commercial tax rates were at least double those of residential tax rates. This indicates that a commercial property would incur property taxes more than twice the amount of an equally valued residential property. For the tenth consecutive year, Vancouver, Toronto and Montreal posted the highest commercial-to-residential ratios in the country.
|Year-Over-Year Commercial-to-Residential Tax Ratios|
“With the increase in property values, tax rates should trend lower as municipalities are able to collect the same amount of tax revenue given that the higher property values create a larger assessment base,” said Terry Bishop, President of Property Tax Canada at Altus Group. “A lower commercial property tax ratio should help make cities more competitive, promote job growth and can help to generate more stable and sustainable revenue.”
While both commercial and residential property tax rates in Vancouver saw a decrease in 2017, the ratio between the two increased by over 11 per cent to 4.87, the highest in Canada. Vancouver continues to be the only city to post a commercial-to-residential tax ratio in excess of 4:1, well above the average of 2.85:1. The city’s record-breaking housing market provided a potential opportunity to adjust the residential tax rate and close the gap between residential and commercial tax rates. However, the city of Vancouver elected to decrease its residential property tax rate by almost 20 per cent over the last year while the commercial rate only decreased by 10 per cent driving the commercial tax ratio up.
For a thirteenth year, Toronto’s commercial-to-residential tax ratio declined, decreasing to 3.81. However, despite the multi-year downward trend, this year showed a slight pause with a less than one per cent decline from the previous year. This means commercial rates will need to decrease further if the city is to achieve its goal of improving the business climate and increasing competitiveness with its target ratio of 2.50 by 2023.
Meanwhile, Montreal continues to carry the highest commercial property tax rate in Canada. However, it successfully halted a 10-year upward trend by decreasing its commercial-to-residential ratio to 3.77. While representing only a 1.21 per cent decline in its ratio, this is a positive step towards bringing commercial taxes down to a level more in line with the rest of the country.
The report also examines the property tax ratio on multi-residential properties which compares the residential property tax rate to the multi-residential property tax rate. The findings indicate that Ontario renters are carrying a disproportionate burden of property tax. While renters are being taxed equally to homeowners in most of Canada with an average ratio of 1:1, Ontario cities are showing that apartment buildings built before 1998 carry significantly higher ratios with Ottawa at 1.38 and Toronto leading the pack at 2.21. The higher levels of taxation on older multi-residential buildings can pose a potential challenge for landlords looking to direct funds to needed repairs, maintenance and building infrastructure upgrades.
A copy of the Altus Group 2017 Canadian Property Tax Rate Benchmark Report can be downloaded at https://www.altusgroup.com/news_insights/canadian-property-tax-rate-benchmark-report-2017.
About Altus Group Limited
Altus Group Limited is a leading provider of independent advisory services, software and data solutions to the global commercial real estate industry. Our businesses, Altus Analytics and Altus Expert Services, reflect decades of experience, a range of expertise, and technology-enabled capabilities. Our solutions empower clients to analyze, gain market insight and recognize value on their real estate investments. Headquartered in Canada, we have approximately 2,300 employees around the world, with operations in North America, Europe and Asia Pacific. Our clients include some of the world’s largest real estate industry participants across a variety of sectors. Altus Group pays a quarterly dividend of $0.15 per share and our shares are traded on the TSX under the symbol AIF.
For more information on Altus Group, please visit: www.altusgroup.com.