The controversial new legislation was recently passed in Ontario
It was an announcement that caused a ripple of interest among Ontario homeowners and mortgage professionals alike: the provincial government pushing ahead last October with Bill 23, the so-called More Homes Built Faster Act, with fears rising that it could have big consequences for the collection of property taxes in the province.
Billed as an effort to tackle Ontario’s ever-escalating housing supply crisis, the legislation aims to help the province achieve a target of 1.5 million homes built over the next decade by incentivizing construction and removing some of the red tape facing developers.
However, the controversial bill has drawn criticism for permitting development in parts of the protected Greenbelt, an area of green space including forests and wetlands based in the south of the province.
Critics have also viewed the move as one that could see property taxes shoot upwards as municipalities seek other ways to gather the income that would normally come from the fees charged to developers to build certain types of homes.
How will the new legislation impact municipal coffers?
In a mid-December CBC poll of the Greater Toronto Area’s 25 municipal governments, a majority indicated they were unsure how they would handle the significant hit to their bottom line as a result of the legislation.
Eight of those municipalities told CBC they were considering tax hikes to mitigate those losses, with East Gwillimbury reportedly weighing up increases of more than 100%.
Mississauga, meanwhile, has spelled out its qualms over the “concerning impacts” the legislation could have for the municipality including a potential $1 billion hole in revenue over a 10-year period and a lack of clarity over how effective the measure will actually be.
“The province wants to build 1.5 million homes over the next 10 years. Mississauga’s share is 120,000 new homes,” a section on the municipality’s website reads.
“However, there’s no process in the bill requiring developers to build homes, even if municipalities have provided approvals and granted discounts. The bill doesn’t require developers to pass any of the savings they may gain onto new homeowners.”
Ontario premier Doug Ford pushed back against the inevitability of big property tax hikes during a January press conference, indicating that revenue from new homebuilding would “create more revenues up to the city coffers,” having also said in December that he believed reducing financial waste could help make up the shortfall.
Are property tax hikes on the horizon in Ontario?
A doomsday scenario of huge property tax increases has yet to materialize. In its 2023 budget unveiled earlier this month, the City of Vaughan emphasized its “continued commitment to keep property tax rates low,” introducing a 2.9% hike for the year ahead while noting that it remained cognizant of the Bill’s potential impact in the future.
“City staff continue to monitor Bill 23’s impacts on growth-related revenue moving forward,” the budget announcement read, “as this legislation will have longer-term effects on the size and timing of Vaughan’s ability to implement critical city-building projects.”
Leah Zlatkin (pictured top), chief operating officer at Mortgage Outlet in Toronto, told Canadian Mortgage Professional the bill had been a talking point among some clients for other reasons – namely, its potential to impact the value of their home as an investment.
That’s especially true where a rapid pace of new construction could negatively affect property values in an area, she said.
“For homeowners, this impacts the asset that you have invested your money into,” she said. “Many people in Canada buy housing assuming that housing prices will continue to steadily go up. And they view it as not only a place where you’re planning on living, but they view it as an investment strategy and with this kind of rapid growth and developments potentially slated in for the next few years, that can dramatically impact the value of your assets.
“Most Canadians aren’t saving for retirement effectively, except for the fact that they own a home. Now, how does that impact those people who have invested in this asset, and now this asset is maybe no longer as valuable because there’s a flood of supply?”
Have you been fielding calls from clients on the potential impact of Bill 23? Let us know in the comments section below.