Ontario’s Next Property Reassessment Remains Uncertain

In November of 2021, the Ontario Government released its Fall Economic Statement. In the section entitled “Property Tax Stability and Competitiveness,” the government stated that its priority was “maintaining stability for taxpayers and municipalities at this time.” Having already postponed the Province-wide reassessment twice (from 2021 to 2022 and then from 2022 to 2023), the government announced that it would once again push the next reassessment to 2024, leaving all property assessment values frozen as of January 1, 2016.

Will the Reassessment Happen in 2024?

Earlier this month, a group of industry and municipal organizations wrote to Premier Doug Ford, urging his government to move forward with the long overdue reassessment. The organizations behind the July 14, 2023 letter included the Association of Municipalities of Ontario, the Canadian Federation of Independent Business, the Ontario Chamber of Commerce and six other organizations. The group warned that the delay in reassessment “is compromising the province’s economic competitiveness” and that frequent reassessments are needed in order to “stabilize and make taxes more predictable.”  Representatives from both the office of the Premier and Minister of Finance have said that the status quo maintains stability for both taxpayers and municipalities.

Stability involves more than leaving things unchanged.  Both taxpayers and municipalities need to plan for the year(s) ahead. Not knowing when, how or if a property reassessment will take place creates uncertainty for financial budgeting for all, whether you are a landlord, business owner or a municipality. Property taxes are one of the most significant expenses for property owners and the greatest source of revenue for municipalities. A predictable property tax system is essential to maintaining stability and efficiency in property management and revenue collection.

In addition, a property tax system that is based on out-dated market values can create unfairness within property tax classes. For instance, the Commercial tax class is likely the tax class with the most diverse types of properties included within it (offices, retail, hotels, warehouses – to name a few).  When reassessments are delayed, the system fails to respond to market changes, leading to the over-taxation of properties. Currently, assessment values are based on January 1, 2016 values. Since the pandemic, it is well-recognized that the office sector has been hit hard, resulting in higher vacancy rates and lower rental rates. On the opposite end of the spectrum, industrial warehouses have seen a surge in demand and, consequently, value. Retail properties land somewhere in the middle. This means that office buildings are currently paying a higher level of property tax than they would be paying had a reassessment already occurred.

It must be understood that, for the most part, taxes are supposed to be “revenue neutral” to municipalities, save and except council-approved budgetary increases. In other words, as property assessments increase as a whole, tax rates decrease by a proportionate amount. This results in municipalities collecting, more or less, the same amount of revenue each year. However, revenue neutral does not mean that everybody’s taxes stay the same. The tax rate for a particular class of property is adjusted by a municipality based on the average change (increase) for the entire class of property. A property’s taxes will increase if its assessment increased more than the average increase in assessment within the class, and they will decrease if the opposite occurs. That is why frequent reassessments help to ensure that the distribution of taxes is as fair as possible.

The assessment roll must be finalized and presented to municipalities by the second Tuesday in December. At this time, it looks unlikely that a reassessment will happen for 2024.