Overdue Property Assessments
Canadian Apartment - Barbara Carss
Ontario’s overdue property reassessment is on hold until at least 2024, leaving many commercial ratepayers with a further wait to realize tax reductions from pandemic-related value erosion. As announced last week in the provincial economic statement, market values from January 2016 will remain the benchmark for apportioning the municipal property tax burden for the 2022 and 2023 tax years — a decision that is projected to produce significant tax shifts when new assessments are finally in place and to prompt more appeals to Ontario’s Assessment Review Board in the interim.
“It’s not a market based system anymore because we’re too far removed,” asserts David Gibson, a property tax consultant and director with Yeoman & Company Paralegal Professional Corporation. “The four-year assessment cycle is already too long. At best, it should be one; at worst, it should be two years. Now, the 2016 base year is going to be seven years old before it’s replaced.”
“Elected officials don’t want a scenario where residential ratepayers get new assessment notices saying that in 2016 the market value was $1 million and now the market value is $2 million. They don’t want the ‘Does that mean my taxes are doubling?’ narrative during an election”
The Ontario government maintains this third postponement of a new assessment cycle, which was initially set to begin in 2021, arises from input received through its ongoing review of property assessment and taxation, involving consultations with municipalities, residential and commercial taxpayers, and industry associations. The start-date was first pushed to 2022 and then to an unspecified date — which was nevertheless widely believed to be 2023 because the provincial Assessment Act has been amended to establish January 2021 as the base date for the market valuations — in response to the COVID-19 pandemic. That’s also the given rationale for the further delay.
“During these consultations, the government heard a wide range of views expressed by municipal and taxpayer representatives. The government has considered the advice that was received and has concluded that the priority is maintaining stability for taxpayers and municipalities at this time,” the economic statement confirms.
Alternatively, Gibson speculates that neither the provincial government nor municipal councils are keen to have updated property assessment notices arrive in voters’ mailboxes in the election year of 2022. He recalls the upheaval in the late 1990s when market value assessment was first introduced province-wide to adjust valuations that often had not been scrutinized in dozens of years. At the time, many homeowners feared that significant increases in assessed values would translate into directly corresponding increases in taxes.
“Elected officials don’t want a scenario where residential ratepayers get new assessment notices saying that in 2016 the market value was $1 million and now the market value is $2 million. They don’t want the ‘Does that mean my taxes are doubling?’ narrative during an election,” Gibson hypothesizes.
“Long delays in updating assessments are known to create inequities in taxation. It’s bad news particularly for those businesses most impacted by declining revenues and property values as a result of the economic fallout of the pandemic,” says Terry Bishop, president, property tax, for Altus Group in Canada. “While the Province’s stated priority is to maintain stability for taxpayers and municipalities, the last thing businesses need is stability of their tax levies when revenues have fallen dramatically.”
“With much industry devastation and depressed revenues since March of 2020, it is not acceptable to see the 2023 tax year assessments being based on pre-COVID values, and values that will be seven years old by that timeframe,” concurs Tony Elenis, president and chief executive officer of the Ontario Restaurant, Hotel and Motel Association (ORHMA). “ORHMA is disappointed in the Ontario government further postponing property tax reassessment until 2024.”
Christopher Jobe, Toronto manager for the commercial real estate advisory firm, Turner Drake & Partners, projects a major change in the status quo when the reassessment finally occurs. “Compression in capitalization rates over the seven-year span separating the valuation dates would see values increase by as much as 30 to 60 per cent in some property classes — industrial, multi-residential and some retail, in particular — even before consideration of improvements in operating performance,” he says. “Increases on a number of sectors — hospitality, power centres, and some enclosed and neighborhood retail — are expected to be much more temperate and, in some instances, assessed values could potentially decrease.”
However, the shifts won’t necessarily fully favour the latter group of properties immediately. When recalibration of outdated assessments created extreme tax shifts within property tax classes in the late 1990s, it also spawned an elaborate cap and clawback apparatus that some municipalities, such as Toronto, still employ today. This places a ceiling on annual assessment-related tax increases for designated hard-hit properties but, to balance out revenue collection, reduces decreases that should be assigned to other properties.
RENTERS LEAVING THE GTA
Average rent prices in Toronto have now been rising for seven months straight, as of October — a significant trend considering that they completely tanked amid the COVID pandemic, turning markets upside down both locally and in smaller cities all over Ontario. And yet, while we've been seeing consistent price growth on a month-over-month basis since last spring, we had yet to see rents tick up year-over-year in the GTA until now. The latest Toronto GTA Rent Report from Bullpen Research & Consulting and TorontoRentals.com shows that October marked the first month since March of 2020 that average rents in the Greater Toronto Area actually increased compared to the year previous.
Rents rose a humble 1.6 per cent in October across all property types in the GTA between October of 2020 and October of 2021, reaching a new average of $2,137. Toronto proper experienced an annual increase of 3.9 per cent in October, according to the new rent report, while average rents for Richmond Hill, Burlington, Ajax, and Markham all shot up by well over seven per cent during the same time period. "The narrative that tenants are fleeing the downtown core for larger units in suburban areas is still showing up in the data," notes the report.
"While Toronto also experienced a positive change in average rental rates, York, East York, and North York (all areas that are closer to Toronto) experienced negative year-over-year changes in average rental rates." Whether despite or because of more activity on Toronto's rental market lately, the "mass exodus" of young renters from Toronto's downtown core observed earlier in the pandemic appears to be ongoing. One only needs to look at the record rent price spikes in Ontario cities far beyond the GTA's border to see continued evidence of this trend.
Skyrocketing rents in coveted downtown neighbourhoods could be driving some Torontonians into the arms of our city's suburbs, especially as the vast majority of office employees continue to work from home.
A SHOWERS WORTH OF SAVINGS
Canadians typically use an average of 329 litres of water per person every day which is second only to the United States in the developed world. Astonishingly, this number is more than twice as much, on average, as Europeans who pay substantially more for their water. Canadians consume a staggering 65% of water in their bathrooms, and approximately 35% of all residential indoor bathroom water usage in Canada comes from showering and bathing. In fact, the average North American family uses about 150 litres of water each day just from showering.
With our relatively low cost of water, Canadians are not typically mindful about their average water consumption habits. If you ask Canadians how many times a day they flush the toilet or wash their hands do you think they would be able to easily answer? What if you asked the same people how many litres of water an average ten-minute shower uses, do you think they would have any idea? And what if you asked residential building owners or managers how many shower heads units are currently leaking, do you think they would be able to estimate the amount of money being lost down the drain? THIS IS EVEN MORE SO WITH RENTERS AS THEY DO NOT PAY DIRECTLY AT ALL FOR WATER.
Leaky showerheads, low-flow showerheads, as well as tenant non-compliance, are three key issues that residential building owners currently face that have a direct impact on their Net Operating Income
Did you know that depending on the rate of a drip, a single leaky showerhead can waste as much as 15,000 litres of water each year? Multiply these amounts by the number of units in a portfolio, and literally thousands of dollars of are being washed down the drain. If you take into account that some of this leaking water may actually be warm water, further energy dollars are also being wasted with every single drip.
The actual water flow from the showerhead itself is often a greater contributing factor in financial loss for residential building owners than leakage. Canadian and American plumbing regulations dictate that water flow from showerheads must be limited to 2.5 gallons (9.5 litres) of water per minute, however, studies show that the average water flow in showers is approximately 4 gallons per minute. This translates to an over usage of 1.5 gallons per minute of water including hot shower water and approximately an extra 20% of energy costs.
The most efficient way to prohibit tenants from changing the amount of flow from the units’ showerheads is to install Anti-Tamper Shower Head Regulators. These regulators are installed directly on the showerhead water supply pipe in the wall behind the shower, which is invisible to tenants and virtually impossible to tamper with. The regulators provide both consistent and comfortable water flow, however, should tenants attempt to change the showerhead, the actual flow of water will remain constant. Furthermore, and perhaps most importantly, once the regulators are installed, there is no further need for maintenance inspections which cost valuable time and money for building owners and reduces disruptions for tenants.
Installing Anti-Tamper Shower Head Regulators from WCC Water Management Services is a key component in building the foundation of “Smarter Buildings” It ensures building owners are utilizing and leveraging technological solutions to help mitigate the fact that most tenants are not mindful of controlling their wasteful habits of our precious natural resources. To find out more about how WCC can become your trusted partner in water technology solutions, call today for your free assessment to see how much Anti-Tamper Shower Head Regulators can help reduce your water consumption and operating cost.
Regards, Errol Small Managing Partner
WCC Water Management Services Ltd.
2707 YONGE STREET - TORONTO - $14,300,000 / $297,000 Per Suite / 2.10% Cap Rate
This is a low rise walk up rental apartment building dating from the 1950's and located in prime mid town Toronto. It comprises of 48 rental apartment suites mostly bachelors and small one bedrooms. This is a low maintenance building with no elevator, under ground parking or balconies. The building is heated with a gas fired hot water boiler on a radiant system. The rents are far below market and although the building is separately metered for hydro, the landlord is paying for the cost at this time. The property was fully marketed and sold to a private investor.
143 MAIN STREET SOUTH - BRAMPTON – $24,000,000 / $307,600 Per Suite / 2.90% Cap Rate
This property is located in Brampton in a single family residential neighbourhood. It consists of a 78 large rental apartment suites mostly one and two bedroom sitting on a large 1.35 acre site. It was constructed in the 1964. The property has on site laundry and surface and underground parking. There is a brick exterior, balconies and double windows (2008). There is additional land to build units on site. Rents are still below market. The property was fully marketed and was purchaser by a private investor.
601 DUNDAS STREET EAST - OSHAWA - $14,100,000 / $235,000 Per Suite / 3.80% Cap Rate
This property is located in a west central Oshawa 5 minutes from the GO Station. It is a 1.50 acre site improved with a 5 storey rental apartment building with a total of 60 suites. It is of concrete construction with brick exterior, double windows, balconies and flat roof. It was built in 1982 has mostly two bedroom suites. There are 100 surface parking spaces. The rents here are low and there is potential to build more on site. There are 23 two level suites and one elevator to service all levels. There is on sit e laundry. This property was fully exposed to the market and was purchased by a private investor.
78-80 NEPTUNE STREET - NORTH YORK - $7,316,400 / $318,100 Per Suite / 2.15% Cap Rate
These are two low rise walk up rental apartment buildings with a total of 23 suites on half acre site. The asset is surrounded by similar rental apartment buildings of a similar vintage. It is located neither the Bathurst and Wilson intersection and Baycrest. The buildings have a brick exterior, are concrete with double widows, flat roofs and some balconies. The property was not fully exposed and was purchased by a development hence the low cap rate paid for this location. A property a few doors down got approval to demolish the existing 25 suite rental building and build a new 10 storey rental building on the site. Perhaps the Buyer here has the same idea.
THE APARTMENT GROUP
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LORENZO DIGIANFELICE, AACI
Broker of Record, Owner