Toronto tenants get less but pay more
Sky-high tax rates are fuelling the equality debate
Toronto Star - October 21, 2001
Not on the horizon: Tenants of Toronto's large apartment buildings probably won't see their tax rate harmonized with homeowners.
When Elinor Mahoney made the move from being a tenant in a one-bedroom apartment on Jarvis St. to the owner of a two-bedroom house in East York, something quite surprising happened.
Her municipal property tax bill went down by half - from $2,200 to $1,100.
She had been renting in a large apartment building, and Toronto taxes tenants of larger buildings at four times the rate of condo and homeowners.
Most tenants don't realize it because the tax is hidden in their rent. But it means a tenant living in a Toronto apartment worth $75,000 pays the same amount of municipal property tax as someone who owns a $295,000 house or condo - just over $2,000 a year - even though the average Ontario tenant's household income is half that of a homeowner.
Other cities in Canada and the United States have phased in equal tax rates for tenants and homeowners, and so has the province of Ontario. But Toronto has made no such move.
The higher rate on buildings with seven or more apartments puts an additional $400 million in city coffers each year. The only other way the city could raise that money is through homeowners. (Ontario does not allow the tax on businesses to be raised.) But unlike tenants, homeowners get notices from the city telling them exactly how much property tax they pay, and they know what an increase means.
"It's a completely unfair system of taxation. Tenants get less service than any other resident and they pay more," said Councillor Jack Layton.
"When these tax rates were struck, tenants didn't even have the vote in Ontario, so naturally it made sense to stick it to the tenant."
Toronto tenants have had limited municipal voting rights since at least 1850, but they didn't get full rights - equal to those of homeowners - until 1972. And they still don't exercise their voting rights as often as homeowners do. Almost half of Toronto's population, or 1.1 million people, rent, but in municipal elections, homeowners vote in twice the numbers that renters do.
There's a political adage that "a homeowner's vote is worth two of a tenant," said Layton (Ward 30, Toronto-Danforth).
"The councillors are very attuned to the property owners in their wards," said new homeowner Mahoney, who works on tenant issues at Parkdale Community Legal Services. "No one has ever stood up and said the homeowners should pay their fair share."
If tenants were charged the same rate as homeowners - and if the system was tightened to make sure tenants, not landlords, got the full benefit of the change - the rent on a $915-a-month apartment could drop by $135, or 15 per cent.
The tax rate is now 0.7 per cent for homes (individual homes, condominiums and apartments in buildings with fewer than seven units) and 2.9 per cent for apartments in larger buildings.
But despite the potential windfall, there is currently scant interest by tenants, or their advocates, in lobbying for change.
"The whole idea of property tax is something tenants don't really get," Mahoney said.
But homeowners do. And to come up with $400 million, by redistributing it to both the homeowner and apartment classes, would mean a municipal tax increase of more than 30 per cent for homeowners.
That is unpalatable after property value reassessments already dumped increases on the doorsteps of Toronto homeowners, and the city is warning that more may be on the way.
"The city's position," said Case Ootes, Toronto's deputy mayor, "is we should be bringing the rate down. The problem is how do we do that given the shortage of funds we have to deliver our services."
Government reports, provincial and local, calling for a more fair taxing of all tenants have been gathering dust for decades. Some of the more recent ones include the 1996 Golden task force and the 1993 Ontario Fair Tax Commission. All have concluded that tenants are overtaxed compared to homeowners.
The Golden task force didn't ignore the financial implications a change would have on homeowners, but stated: "These impacts should not prevent municipalities from implementing changes and, over time, achieving greater equity."
Toronto isn't the only city in the province to have differing tax rates for large apartments and single-family homes, but its inequality is among the highest. In Mississauga, for example, large apartment buildings are taxed at 1.7 times the rate of homes.
In every province west of here, cities have either implemented full tax equality for all homes, regardless of whether they are owned or rented, or are in the midst of phasing it in.
Ontario's position is that businesses - including large apartment buildings - have long been overtaxed.
In 1998, the province, which levies a property tax for education spending, reduced the amount it took from tenants so that it was the same as what was taken from homeowners. It urged cities to do the same by creating "ranges of fairness," where the difference in rates should be no more than 10 per cent.
In its own attempt to encourage developers to build rental units, the city agreed to tax any newly built apartments at the homeowner rate for the first eight years. So far, that has not created a surge in building.
Each year, Toronto's population grows by 100,000, yet no substantial rental housing has been built in decades, leaving the city with a vacancy rate of 0.6 per cent. That means only six apartments out of every 1,000 are available. There are even fewer at the lower end of the market.
So why aren't Toronto tenants up in arms about something that could dramatically reduce their rents?
Many are simply not aware of how much of their rent is tied to property tax. There is also a deep mistrust of landlords, who currently are the only people pushing for this tax change.
"There isn't even the mist in the morning amount of altruism in any move they make. If they're promoting it, it must be bad for tenants," said Councillor Michael Walker (Ward 22, St. Paul's), who chairs city council's tenant defence subcommittee.
The Fair Rental Policy Organization, which represents owners, developers and landlords, has approached tenant groups in the past trying to push for a united front on this issue."They basically told us to take a hike," said Vince Brescia, the organization's president.
Mahoney, who's been a tenant advocate for decades, remembers that.
"They came saying, `You know it's discriminatory, we know it's discriminatory, together we could be quite powerful,'" she said.
Nobody took the bait.
"The tenants always get screwed," Mahoney said.
It's making sure that doesn't happen, councillors say, that holds them back from creating a fair tax system.
"If you could reduce the taxes on tenants gradually (so homeowners don't get a huge increase all at once), and at the same time ensure their rents were going down, then you'd be accomplishing a goal of affordable housing, ... but if you can't, what you're doing is further enriching the landlord," Layton said.
Brescia calls this fear mongering and says the province's Tenant Protection Act requires any tax reduction of at least 2.5 per cent to be passed on to the tenant through a rent reduction.
The problem with that, tenants' advocates counter, is that if landlords don't do it, there is very little chance they'll be punished for it. Tenants must first be aware of their rights and, second, be willing to fight at the Ontario Rental Housing Tribunal.
But even if the rent reduction is given as it should be, rent decontrol means that once the current tenant moves out, the landlord can raise the rent for the next tenant, thereby pocketing as profit a tax cut that was intended to help tenants.
In an average Toronto apartment building, there is a 20 per cent turnover each year.
Brescia doesn't deny some of the arguments that tenant advocates put forward, but he is adamant that a reduction in tax will result in a reduction in rent.
"In the long run, it all filters down," he said.
But without guarantees, councillors say they aren't about to take on this issue. And right now, few others are even thinking about it.
"I'd be willing to pay more, if it would mean that tenants paid less," said Mahoney, who nearly apologizes for owning a property, pointing out that "it is a small house."
But not many people are likely to join her - and she knows it.
"The only way you could get it through city council is if you had a bunch of councillors not planning on running for re-election, who were willing to exercise their rights (in favour of tenants)," Mahoney said. "Or if tenants started pushing for it and turned out in greater numbers at elections."
But that is even less likely to happen today than in years past. As a group, Toronto tenants are becoming poorer, less educated and more vulnerable. They often work multiple jobs or are single parents.
"The people we are shifting to the bottom are less likely to vote, or even able to, in the case of newcomers," Mahoney said. Toronto gets 40 per cent of Canada's new immigrants, and some 80 per cent of those people will be renters.
"It's not apathy," Mahoney said about tenants' lack of political activism. "It's dire straits. Their lives are pretty desperate. They're far too busy to chase after politicians."
Few tenants know anything about this, said Paul York of the Greater Toronto Tenants Association, and "we're not in a position to widely educate tenants on this because we're small."
Why don't landlords, who are pushing the most on this issue, send tenants an itemized rent bill, showing exactly how much goes toward property taxes?
The rental industry in Ontario already loses 82,000 households a year to home ownership, due to the "subsidization of home ownership at the expense of rentals," Brescia said.
"We're trying to keep our tenants," he said. "We don't want to show them that it would be better to buy a house."