Altus Group Limited, 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 2018 Canadian Property Tax Rate Benchmark Report, which provides an in-depth look at property tax rates in eleven 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 for over 15 years, this report analyzes the ratio of tax rates between commercial and residential properties. The report reveals that in eight of the 11 cities surveyed, commercial tax rates are 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 eleventh consecutive year, Vancouver, Toronto and Montreal posted the highest commercial-to-residential ratios in the country. However, Calgary and Quebec City saw the highest ratio increases in 2018, indicating a growing burden on commercial rate payers in those cities. For the first time in 14 years, Calgary ranks above the average ratio. Quebec City’s ratio has been steadily climbing for 15 years. For at least the nineteenth consecutive year, Vancouver remains the only city with a commercial-to-residential tax ratio in excess of 4:1, even despite posting the largest decrease of 9.721%.
“The commercial-to-residential tax ratio is still far from being fair 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. “Municipalities should recognize that bringing down the commercial property tax rate is important to help make their cities more appealing to businesses, which helps create job growth and leads to sustainable revenue for the city.”
For the thirteenth year in a row, Vancouver saw a decrease in commercial tax rates in 2018 with the largest drop of all the cities surveyed at 12.782%. However, given Vancouver’s high commercial property assessments, significant pressure is being placed on businesses. Despite this decrease in the commercial rate, Vancouver continues to post the highest commercial-to-residential ratio. Instead of further balancing the commercial-to-residential ratio, Vancouver introduced new property taxes targeting foreign buyers and high-value properties which broadens their tax base.
Calgary conversely saw the largest increase in commercial tax rates in 2018 for the second year in a row, with a jump of 9.478%. As the downtown office market continues to struggle with high vacancy, Calgary is experiencing a drastic shift of tax liability towards the commercial tax base, opposed to the residential tax base. This has resulted in industrial and retail properties seeing unprecedented tax increases over the last four years in Calgary.
Quebec City has one of the highest estimated commercial taxes per $1,000 of assessment at $36.09, just below Montreal which remains the highest of all cities surveyed at $37.76. One factor contributing to the high commercial tax rates in Quebec is the lack of specific taxes on services such as water, which many other Canadian cities charge to offset high property taxes. While the commercial-to-residential tax ratio in Quebec City has increased steadily since 2003, including a jump of 7.380% this year, Quebec’s residential property tax rate experienced the largest drop in rates anywhere in Canada in 2018 with a decrease of 7.468%.
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 multi-residential building owners are being taxed equally to homeowners in most of Canada, Ontario cities are showing that apartment buildings built before 1998 carry significantly higher ratios with Ottawa at 1.358 and Toronto leading the pack at 2.069. The higher levels of taxation on older multi-residential buildings can pose a potential challenge for landlords needing to fund repairs and maintenance, and as a result, are often passed onto tenants through increased rent.
A copy of the Altus Group 2018 Canadian Property Tax Rate Benchmark Report can be downloaded here.