Domenic Gallippi
Mortgage Agent Level 1 - M23007938
domenic@bettermortgagesbydom.ca
Tel: 416-801-6616 | Cell: 416-801-6616
Domenic Gallippi
Mortgage Agent Level 1 - M23007938
domenic@bettermortgagesbydom.ca
Tel: 416-801-6616 | Cell: 416-801-6616
Toronto’s 2025 budget introduces a 6.9% increase in property taxes for residential properties, including a 5.4% base increase and a 1.5% levy for the City Building Fund, which supports infrastructure projects. For the average home valued at $692,000, this means an additional $268 annually. The added revenue will fund crucial city services, such as hiring more first responders, expanding food programs, freezing TTC fares, and increasing traffic wardens to ease congestion.
While property taxes are essential for funding municipal services, recent increases have raised questions about their fairness, affordability, and the value homeowners are receiving in return. The 6.9% increase follows a 9.5% hike in 2024 and a 7% increase in 2023, leading many to ask:
Are these increases justified given rising home prices?
Do they reflect the actual cost of services?
Are homeowners seeing improvements in services, or are they paying more for the same?
Property taxes are a critical revenue source for municipalities, supporting services like public transit, emergency response, waste collection, and infrastructure maintenance. In Ontario, these taxes are calculated based on assessed home values by the Municipal Property Assessment Corporation (MPAC). However, MPAC assessments have been frozen since 2016, creating a gap between assessed and real market values. This discrepancy means homeowners in fast-appreciating areas pay lower taxes than those in less dynamic neighborhoods, creating inequities.
A major question is whether the rising property taxes correspond to the increased cost or quality of services provided. For example, Toronto residents may feel that their higher tax payments haven’t resulted in noticeable improvements in services like:
Snow Clearing and Road Maintenance: While some residents report a decline in efficiency, the rising costs of fuel, labor, and materials may justify higher funding needs.
Public Transit: Despite increased funding, transit services like the TTC continue to face operational issues and service reductions in some areas.
Other Services: Programs like waste collection and recreation may have stagnated, prompting taxpayers to question the value they are receiving.
This disconnect raises concerns: Are tax increases simply a response to inflation, or do they reflect inefficiencies or mismanagement?
In 2020, the COVID-19 pandemic led to a freeze on property reassessments, leaving taxes based on outdated 2016 property values. While this shielded homeowners from sudden increases, it delayed the inevitable: aligning property taxes with current market values. As a result, municipalities have relied on across-the-board tax hikes, which lack fairness and precision.
The cumulative tax increases over the last few years have significantly raised the cost of homeownership. For instance, a home assessed at $800,000 in 2016 paid $8,000 annually in property taxes. By 2025, the tax bill will rise to $10,672, an increase of $2,672 in just three years. For families on tight budgets, these increases may pose financial challenges.
Property taxes also impact mortgage affordability. Lenders factor in property taxes when calculating a borrower’s Gross Debt Service (GDS) ratio, which limits the amount borrowers can spend on housing. Higher property taxes reduce potential buyers’ borrowing capacity, potentially excluding first-time buyers from the market.
Rising property values naturally suggest that taxes should increase, but this assumes that municipal services have expanded or improved in line with the market. Many argue that this has not been the case. If services haven’t improved, is it fair to expect homeowners to bear the full burden of rising taxes? Additionally, inflation and rising service costs should be better communicated to taxpayers to ensure transparency and maintain trust.
Regular Reassessments: MPAC should resume regular property reassessments to restore fairness and transparency. However, these updates should be phased in gradually to avoid sudden shocks to homeowners.
Re-Evaluate Service Funding and Delivery: Municipalities should audit how tax dollars are spent, ensuring efficiency and addressing any stagnation or decline in services. Rising costs due to inflation must be communicated clearly to residents.
Alternative Revenue Models: Property taxes shouldn’t bear the full burden of funding municipal services. Exploring other funding options, such as user fees or provincial support, could help distribute the costs more fairly, reducing the reliance on property owners.
Relief for First-Time Buyers: Targeted relief, such as tax rebates and down payment assistance, can help first-time buyers manage the rising costs of homeownership, easing their transition into the market.
In response to public feedback, the City of Toronto has expanded tax relief measures for seniors and individuals with disabilities. The income threshold for property tax deferral and cancellation has increased by 5%, raising the eligibility cap to $60,000. This change allows an additional 2,300 households to qualify, bringing the total to 13,000. These residents will also benefit from rebates on water and waste services.
Toronto’s rising property taxes highlight the need to balance tax rates with market realities while ensuring that homeowners receive fair value for the services they fund. Policymakers must address service quality concerns, provide clear justifications for rising costs, and explore alternative funding models to ensure the burden of financing municipal services is shared more equitably. Ultimately, property taxes should reflect both the real value of homes and the real value provided to taxpayers in municipal services, ensuring that the costs of living in Toronto remain fair and manageable.
Key Takeaway: Property taxes are essential for supporting community services, but they must be aligned with both market values and the tangible benefits homeowners receive. The financial burden should be shared more equally across all residents, not just property owners.
