Perverse Property Taxation
GroundSwell, May-June 2007]
We received our household's final property tax bill for 2007 in
the mail yesterday. Along with the bill there are always inserts
explaining all the numbers. For land use activists they make
Like most cities and towns, Toronto City Council arbitrarily sets
the tax rate differently for the various types of buildings and
zonings. Most shocking is that houses are taxed at 0.5% of their
property value while apartments pay a whopping 2.0%. It is grossly
unfair that apartment properties must pay at 4 times the rate as
It gets worse. Let's take two identical sized lots, side by side.
On one lot is a house worth $500,000 and on the other is a 10-unit
building worth $5 million. Since the apartment building is worth 10
times more then the house and since the city taxes multi-unit
buildings at 4 times the rate as houses, the city generates 40 times
the revenue from this apartment building as from the house next door
on the same sized lot.
No wonder rents are so high and condos so expensive. And no wonder
cities and towns are surrounded by horrendous sprawl instead of
being designed as walkable communities linked by transit. Developers
can't afford to build multi-unit buildings unless they charge
extremely high rent.
Ontario should switch to Land Value Taxation (also called Location
Value Taxation) which would require municipalities to shift property
taxes off buildings and onto the land below the buildings. Only the
land would be assessed and one tax rate would be applied to land
values within each zoning.
This system is used in 700 jurisdictions around the world where it
encourages optimal density without sprawl. If the land under
multi-unit buildings were taxed equally to the land under houses,
rents would plummet and condo prices would drop, providing
affordable housing without government subsidies. If cities
right-valued land through LVT, walkable communities would be built
rather then car-dependent, energy-wasting, socially-isolating,
culturally-barren, suburban sprawl.