Rising valuations impacting sustainability of small business as cities perform balancing acts to provide relief

TORONTO (October 28, 2019) – Altus Group Limited (“Altus Group”) (TSX: AIF), a leading provider of software, data solutions and independent advisory services to the global commercial real estate industry, in partnership with the Real Property Association of Canada (“REALPAC”) today released the 2019 Canadian Property Tax Rate Benchmark Report, which provides an in-depth look at property tax rates, both commercial and residential, in eleven major urban centres across Canada.

Property taxes are paid by both business property owners and residential property owners, however the rates they pay vary because they are set at the discretion of taxing authorities. The ongoing challenge that governments face is to find ways to fund municipal budgets while at the same time balancing the perceived fairness between commercial and residential taxpayers.For over 16 years, Altus Group has conducted this report analyzing the differing tax ratios between commercial and residential properties. The 2019 report found that eight of the 11 cities surveyed have a commercial rate which is at least double that of the residential tax rate. This means that a commercial property would incur property taxes more than twice the amount of an equally valued residential property, having dramatic impacts on Canadian small businesses.Montreal, Toronto and Vancouver posted the highest commercial-to-residential ratios in the country, for a twelfth consecutive year. However, Calgary and Montreal saw the highest ratio increases in 2019, indicating a growing burden on commercial rate payers in those cities.

 

Year-Over-Year Commercial-to-Residential Tax Ratios
City 2019 2018 % Change
Montreal 3.931 3.782 3.942
Toronto 3.703 3.783 -2.093
Vancouver 3.643 4.398 -17.166
Quebec City 3.434 3.568 -3.749
Calgary 3.310 3.056 8.305
Halifax 2.870 2.798 2.542
Average 2.838 2.898 -1.353
Ottawa 2.509 2.595 -3.322
Edmonton 2.406 2.443 -1.491
Winnipeg 1.962 1.985 -1.143
Regina 1.742 1.744 -0.126
Saskatoon 1.713 1.722 -0.576

 

“Despite seeing some major shifts this year, the commercial-to-residential tax ratio is still an issue of relative fairness as we continue to see several cities across Canada shifting the burden of property taxes to business owners,” said Terry Bishop, President of Property Tax Canada at Altus Group. “Expecting businesses to shoulder the same burden while values decline, or taxes increase beyond business growth, is unsustainable. Measures that compress the gap between residential and commercial tax rates are positive steps that can help the viability of all businesses.”


Market-By-Market Trend Analysis

  • Montreal’s commercial-to-residential tax ratio first rose above the average in 2008 and has been steadily climbing since, now sitting at 3.93, the highest of all of the cities surveyed.
  • Toronto continues an eleven-year trend of lowering commercial rates with a decrease of 5.29%; however, it maintains the second highest commercial-to-residential tax ratio.
  • For the first time in 20 years, Vancouver posted a commercial-to-residential tax ratio below 4:1, with a decrease of 17.17%, the largest decline of all 11 cities surveyed. This is attributed to a decrease of 14.05% in the commercial tax rate combined with a modest increase of 3.76% in the residential tax rate.
  • Quebec City’s commercial-to-residential tax ratio is the fourth highest of all cities surveyed. It has been steadily climbing for 15 years; however, it decreased by 3.75% this year.
  • For the second consecutive year, Calgary saw the largest ratio increase of all 11 cities at 8.31%. Calgary also saw the largest increase in commercial tax rates for the fourth year in a row, jumping by 13.36% in 2019, representing a 55% overall increase in Calgary’s commercial tax rate over the last four years.
  • Halifax’s commercial-to-residential tax ratio has remained relatively stable since 2006 but has slowly been increasing over the past few years. It now sits above the average for the first time in six years.
  • Ottawa’s commercial-to-residential tax ratio of 2.51, sits just below the average ratio for the 10th consecutive year.
  • Edmonton sits just below the average with a ratio of 2.41 and has remained relatively stable over the last four years.
  • Although Winnipeg’s ratio has remained fairly stable for three years, it posted the highest 2019 residential rate at $12.33, an increase of 1.76% from last year.
  • Regina remains quite stable posting a 1.74 commercial-to-residential tax ratio, with only slight increases in both commercial and residential tax rates in 2019.
  • Saskatoon continues to show the lowest commercial-to-residential tax ratio at 1.71, a slight decrease from last year.


Increased Pressure on Small Business

The rising valuations on commercial properties in Vancouver, Toronto and more recently Montreal, have begun to put more pressure on the sustainability of small commercial businesses. While small retail in these markets is being impacted by rising values, Calgary retailers are being equally impacted, but by declining values. In Calgary, the rapid decline in values of downtown core office buildings has caused a similar redistribution of taxes to small commercial properties which have not declined in value at the same rate.

Although each city is addressing this issue with their own unique approach, these solutions will compound the problem of inequities in commercial property taxes and create further disparities in commercial tax rates. Assessment phase-ins and tax mitigation measures such as capping, rebate programs and graduated tax rates, only serve to compound the existing inequities in taxation and prolong the inevitable tax increases. Reducing the gap between residential and commercial tax rates is a measure that can help the viability of all businesses.

A copy of the Altus Group 2019 Canadian Property Tax Rate Benchmark Report can be downloaded at https://www.altusgroup.com/canadian-property-tax-rate-benchmark-report-2019/


About Altus Group Limited

Altus Group Limited is a leading provider of software, data solutions and independent advisory services 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 insight and recognize value on their real estate investments. Headquartered in Canada, we have approximately 2,500 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. 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.

Jeff HaywardHayward

Vice President, Global Marketing & Communications

Last updated on October 30th, 2019 at 03:56 pm

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