Toronto has room to hike property taxes by 20% to fund city services, researchers say

Toronto has room to hike average property taxes on homes by around 20 per cent, according to a new report from Ryerson University.

The research provides a stark contrast to the city's latest budget — which ties property taxes to the rate of inflation, a move critics say hinders the city's ability to deliver crucial services, from snow clearing to public housing repairs.

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Across the Greater Toronto and Hamilton Area, more than 20 municipalities "recorded higher average property taxes than Toronto," wrote the report's author, Frank Clayton, a senior research fellow at Ryerson University's Centre for Urban Research and Land Development.

"Only homeowners in Milton, New Tecumseth, Georgina, Hamilton and Burlington paid less," he continued.

The report, published on Thursday, is based on an analysis of unpublished data from the 2016 census. 

It found average property taxes paid within the region ranged between roughly $3,400 and nearly $7,000 for each home, with Toronto at around $4,000.

In a comparison of property taxes as a percentage of household income, Toronto dropped even further on the list — ranking second-lowest, only above Milton.

"Why not increase taxes one or two percentage points above the inflation rate, and have money to finance needed infrastructure and other services caused by population growth, and the aging of our infrastructure that has to be replaced?" Clayton asked during an interview with CBC Toronto.

"You can't just raise taxes and say, 'We're going to spend it on something,'" he added. "You have to convince residents they're going to benefit from whatever these additional tax revenues are going to be spent on."

'There's room if we want to invest'

"This report mostly confirms what many of us have been saying for a long time," said Coun. Gord Perks, who called for property taxes above the rate of inflation in this year's budget.

"The property tax burden Torontonians carry is well below what people in the Greater Toronto Area carry, and there's room if we want to invest in the city to make it a better place to live."

Around 20 per cent of room exists to comfortably hike rates, according to Clayton, who wrote that increase would still put Toronto in the "middle of the range of taxes" levied by other municipalities in the region.

In contrast, Toronto's latest budget contains an overall property tax increase of 1.8 per cent and a 2.55 per cent increase for residential homes, tied to the rate of inflation — fulfilling a vow Mayor John Tory made during both the 2014 and 2018 municipal elections.

"In order to balance the budget, the mayor and his allies are sacrificing the work to keep our assets in a state of good repair ... It's a budget that means more potholes, more buildings crumbling in Toronto Community Housing, less investments in our parks and public spaces, libraries not getting necessary upgrades," Perks said.

"This means, right across the board, we're falling behind. What we saw in this report is there's room to solve those problems."

City staff, in a recent briefing note, highlighted the growing "state of good repair" backlog Toronto faces in the years ahead. 

Despite nearly $20 billion in investments in the 2019 budget, the backlog estimate — which is tied to maintenance of roads, TTC vehicles, parkland, and more than 58,000 public housing units — is projected to increase from $7.5 billion at the end of 2018 to $9.5 billion by 2028.

There are also unfunded areas, such as a plan approved by the Toronto Public Library Board to standardize open hours across the system to boost access to services. 

Slated to be phased in starting this year, the plan was not included in the 2019 budget due to "fiscal challenges," city staff wrote in a recent budget note.

'Short-term gains, long-term pains'

In a statement, Tory's communications head, Don Peat, defended the mayor's stance on property taxes, saying voters "across Toronto in every ward" overwhelmingly voted in favour of his campaign promise.

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"Despite a tough budget year, the proposed budget includes no service cuts, makes additional investments in many areas — including transit, policing, housing, and libraries — and delivers again on the Mayor's promise to keep tax increases at the rate of inflation," Peat wrote.

Christine Van Geyn, Ontario director of the Canadian Taxpayers Federation — who backs a complete freeze on property taxes in the city — said Clayton's report didn't take into account the double land transfer tax in Toronto, a "huge hit" on anyone buying a house, or the trickle-down impact on the already-competitive rental market.

"Raising property taxes on seniors on fixed incomes, who may own their home debt-free, could actually force those people out of their homes," she added. 

To that, Clayton said: "If somebody benefits from the rising property values, and it's tax-free, I don't feel too sorry for them," adding homeowners with low incomes could be allowed to defer property tax payments until selling their home.

Overall, keeping property taxes low only offers "short-term gains, long-term pains," Coun. Mike Layton said.

"What we're doing now, year over year with these austerity budgets and inflationary increases, is putting us further and further behind," he added.

The last few weeks of winter, Layton noted, show the depth of the problems facing the city if more investments aren't made in one crucial area: snow clearing.

"When it takes a week to even get a response on when [the city will] check to see when neighbours can have snow removed or a street cleared, and when people are stuck in their homes because they use mobility devices, that's not the level of service we should be delivering," he said.

Perks acknowledged a sudden, major tax hike of up to 20 per cent would cause another type of challenge for residents, but said incremental increases beyond inflation, over a number of years, would help the city "catch up."

"Then we're in a place to have the city Torontonians want," he said.

The city's latest budget is heading to Tory's executive committee for approval on Monday.