July 19, 1999
To:Policy and Finance Committee
From:City Clerk, Assessment and Tax Policy Task Force
Subject:New Multi-Residential Property Class: Additional Issues
Recommendations:
The Assessment and Tax Policy Task Force recommends that:
(1)the following recommendation 4 in the report (February 24, 1999) from the Chief Financial Officer and
Treasurer relating to the inclusion of low-income units in any new development in the new multi-residential class be
referred to the Business Reference Group as part of the comprehensive tax policy review;
"That, if there have been no building permits issued for this new property class, the province be requested to
amend Ontario Regulation No. 282/98 to include in the description of the new multi-residential property class that
the municipality can, by by-law, set an appropriate number of low-rental units within properties eligible for
inclusion in this new class."
(2)the Ministry of Finance and OPAC be requested to amend O Reg 282/68 (subsection 10) to clarify that any
newly constructed units that are new construction or conversion from a non-residential use other than "common
area" space in a building that would otherwise be included in the multi-residential class, be included in the new
multi-residential property class; and that such amendment allow for a retroactive application for all of 1999.
The Task Force reports, for the information of the Policy and Finance Committee, having requested the Commissioner of
Community and Neighbourhood Services to report to the Policy and Finance Committee, at its meeting to be held on July
20, 1999, on the definition of "common area" and the impact of Recommendation No. 2 above on potential loss of services
and facilities for tenants, including outdoor amenity space and facilities, as a result of additions.
Background:
The Assessment and Tax Policy Task Force, on June 28, 1999, had before it a joint report (June 16, 1999 from the Chief
Financial Officer and Treasurer and Commissioner of Community and Neighbourhood Services respecting New
Multi-Residential Property Class: Additional Issues, and recommending that:
"(1)Recommendation 4 in the report (February 24, 1999) from the Chief Financial Officer and Treasurer relating to the
inclusion of low-income units in any new development in the new multi-residential class be referred to the Business
Reference Group as part of the comprehensive tax policy review; and
(2)City Council request that the Ministry of Finance and Ontario Property Assessment Corporation jointly commit that
the newly created multi-residential property class will be applied to all new rental units created in the City of Toronto
which would otherwise have been classed as multi-residential."
The Task Force's recommendations are noted above.
City Clerk,
Assessment and Task Policy Task Force
Frances M. Pritchard/fmp
990628.2
June 16, 1999
TO:Assessment and Tax Policy Task Force
ORIGIN:Chief Financial Officer and Treasurer &
Commissioner of Community and Neighbourhood Services
SUBJECT:New Multi-Residential Property Class: Additional Issues
Purpose:
To provide information relating to assessment issues and property eligibility for inclusion in the New Multi-Residential
Property Tax Class for new multi-residential rental properties.
Financial Implications:
None.
Recommendations:
It is recommended:
- That Recommendation 4 in the report (February 24, 1999) from the Chief Financial Officer and Treasurer relating to the
inclusion of low-income units in any new development in the new multi-residential class be referred to the Business
Reference Group as part of the comprehensive tax policy review; and
- That City Council request that the Ministry of Finance and Ontario Property Assessment Corporation jointly commit
that the newly created multi-residential property class will be applied to all new rental units created in the City of
Toronto which would otherwise have been classed as multi-residential.
Background:
At its meeting of March 2 - 4, 1999, City Council considered a report from the Assessment and Task Policy Task Force
(February 24, 1999) and adopted a recommendation, among others, that the Chief Financial Officer and Treasurer, in
consultation with appropriate officials, review Recommendation 4 in the report (February 24, 1999) from the Chief
Financial Officer and Treasurer and report back in time for consideration in the year 2000, such report to clarify that any
benefit be passed on to the residential tenant:
"(4). That, if there have been no building permits issued for this new property class, the province be requested to amend
Ontario Regulation No. 282/98 to include in the description of the new multi-residential property class that the
municipality can, by by-law, set an appropriate number of low-rental units within properties eligible for inclusion in this
new class"
Council also referred the briefing note from the General Manager, Shelter Housing and Support Division (dated March 3,
1999), be referred back to the Assessment and Tax Task Force for further consideration.
Comments:
1.Recommendation 4 - Low-income Unit Option in New Multi-Residential Class
This recommendation was included in the February 24, 1999 report in which tax ratios were established by Council for the
new multi-residential property class. It was included for Council to consider whether it would be an appropriate tool to be
used with the creation of the new multi-residential class to encourage new rental construction that would allow
municipalities the option of requiring a specified number of low-income units in any new development in this new class.
The result would be that Council could, if it wished, require the inclusion of a minimum number of low-income units in
any new or converted apartment building placed in the new multi-residential class.
The recommendation included a provision that the authority for the new multi-residential class (Ontario Regulation
282/98) only be amended if no building permits have been issued and therefore, no properties included in the new
multi-residential class. Consequently, if the Province amended the regulation to require low-income housing units as part
of any new development, there would be no impact on existing properties since no new properties exist in the class yet. It
should be noted that we do not anticipate much rental housing construction, even with the new class, because the
applicability of the new class is limited to just eight years by provincial regulation, after which the building is assessed as
multi-residential. This means that the benefit of the reduced rate does not have a significant impact on the economics of
development for new development. Developers can instead register new construction as condominium (even if units are
intended for rental) and thereby attain the residential/farm rate over the life of the building. However, as discussed below,
even with the eight year limitation, the class may be of use to landlords adding new units to existing multi-residential
buildings.
There are a number of issues that relate to the provision of low-income units in any new development, including
government funding, permanency, subsidization either directly to the tenant or to the developer, ensuring affordable rents
and impact to the developer (in particular, whether the developer would not proceed with the development if restrictions
are imposed).
Given the scope of this issue, it is recommended that it be considered by the multi-residential panel of the Business
Reference Group that will be completing a comprehensive review of tax related impacts and options prior to the next
re-assessment.
- Briefing Note - General Manager, Shelter Housing and Support Division (March 3, 1999)
Council referred the briefing note from the General Manager, Shelter Housing and Support Division (dated March 3,
1999), back to the Assessment and Tax Task Force for further consideration.
The Assessment Act allows the Minister of Finance to prescribe property classes, some of which may provide a
municipality the option of having the property class apply within that municipality. Ontario Regulation No. 282/98 created
a new multi-residential property class. City Council passed a by-law October 31, 1998, that created the class and have it
apply to the 1999 tax year, as part of several initiatives aimed at improving the supply of rental housing.
Ontario Regulation 282/98 (Section 10) provides that the new multi-residential property class consists of property that
would otherwise have been in the multi-residential property class (i.e. rental residential buildings with seven or more units)
but which units have been built or converted from a non-residential use pursuant to a building permit issued after the
by-law was passed, and which units were ready for occupation on or before the day as of which the land is classified for the
taxation year.
The City has the right to establish the class; however, it is the province which assigns each property its class through the
Ontario Property Assessment Corporation (OPAC). OPAC and Ministry of Finance staff have had discussions with City
staff and have indicated that the new multi-residential class applies only to new construction or conversion of entire
buildings. It would not be applicable to newly created units or previously common space that may be converted to new
apartments. The regulation is interpreted as referring to buildings as a whole although it is not unusual for one property to
have more than one assessment portion which may have different tax classes. With respect to conversion of common area
space to rental units, the Province has noted that common areas are considered to have already been used as a part of the
rental building by tenants and is therefore not new space.
The Provincial interpretation eliminates the possibility of converting portions of buildings and placing them in the new
class to be taxed at a lower rate compared to the remainder of existing units in the same building. Taxing similar
apartments in the same building at different rates creates inequities within the building. The intent of the Provincial
initiative would appear to both encourage new rental construction while ensuring tax equity is maintained. Construction or
conversion of entire buildings achieves both goals. Placing five units in a building of 100 units in the new multi-residential
class creates tax inequities within that building.
However, while taxing similar units at different rates creates inequities within the building and is, therefore, at odds with
Provincial policies, it can make it feasible for units to be created which is in line with City of Toronto goals for increasing
the supply of rental housing. A recent report by Greg Lampert for the province (Responding to the Challenge: The
Economics of Investment in New Rental Housing in 1999, Feb.1999) points out that rental housing development can
generally be more financially feasible for owners wishing to intensify the use of existing properties. By permitting the new
class to apply to newly created units within or attached to an existing multi-residential rental property, the cost of creating
the unit becomes more feasible.
Given Council's objective of improving the supply of affordable housing, this report recommends that Council request the
Ministry of Finance and Ontario Property Assessment Corporation jointly commit that the newly created multi-residential
property class will be applied to all new rental units created in the City of Toronto which would otherwise have been
classed as multi-residential. Staff of the Shelter, Housing and Support Division and Finance Department should be
requested to communicate with Ministry of Finance staff and Ontario Property Assessment Corporation in this regard.
Conclusion:
Recommendation 4 in the report (February 24, 1999) from the Chief Financial Officer and Treasurer relating to the
inclusion of low-income units in any new development in the new multi-residential class should be addressed as part of the
comprehensive tax policy review to be undertaken by the Business Reference Group.
The multi-residential property class for new rental housing will reduce the gap between the economic rent and market rent
of new rental construction -- whether a new building or new units within an existing building -- and should positively
impact on additional rental housing supply. Council established the new class as one measure to help stimulate supply of
rental housing. This report recommends that Council request the Ministry of Finance and Ontario Property Assessment
Corporation jointly commit that the newly created multi-residential property class will be applied to all new rental units
created in the City of Toronto which would otherwise have been classed as multi-residential.
Contact Names:
Paul WealleansJoanne Campbell
Phone: 397-4208Phone: 392-7885
Wanda. Liczyk.Shirley Hoy
Chief Financial OfficerCommissioner, Community &
and TreasurerNeighbourhood Services
