A taxing situation
Just when you thought it couldn't get any worse, along comes your new assessment
By Karen Howlett
November 15, 2008
Carmen Doyle received her new property tax assessment in the mail last month, showing that her two-storey semi on Ravina Crescent is worth $398,000, dramatically higher than the last assessment in 2005 that pegged the value of her house at $285,000.
That was predictable enough. What she couldn't have predicted at the time of her assessment was that her house value - along with that of many others in the city - is now likely dropping, and may continue to do so over the coming months.
The new assessments are pegged to housing values calculated on Jan. 1, 2008, the peak of the real-estate market. Property values have declined since then because of the weakening economy, leaving many of the assessments off side. The average home price in the city was $394,583 in October, down 10.5 per cent from the same month a year ago, according to figures released yesterday by the Canadian Real Estate Association.
The new assessments will be phased in over four years, with concomitant tax hikes. The assessments reflect the fact that property values have jumped by about 22 per cent in the city since 2005, said the Municipal Property Assessment Corp., the provincial agency that assesses home values.
"The assessments were done ... when the real-estate market was burning hot," said Councillor Paula Fletcher (Ward 30, Toronto-Danforth). "The change in a year will be astronomical. How do you have a fair assessment that will take into account the peaks and the valleys?"
An assessment increase will likely translate into a tax hike if a property's assessed value rises by a greater percentage than the average increase across the city. Residents living on fixed incomes will be among the hardest hit. Joe Dinino, who is 86, has lived in the same house in Toronto's Seaton Village neighbourhood for 49 years. He said the house he bought for $13,000 in 1959 is now worth $331,000, according to his most recent assessment.
"That's too much," Mr. Dinino said.
His property was assessed as having a greater value than the amount he was actually offered for it last May, when real-estate prices were still booming. A builder who wanted to demolish his house and build a new one on his property offered him $300,000, which he turned down.
Mr. Dinino pays taxes of $2,600 a year on his house. He'll find out in January what percentage rise he is facing.
Also hard hit are Toronto residents who own property in cottage country. Bob Topp, a 74-year-old retired chartered accountant, rents an apartment in the city and lives four months of the year in a cabin near Parry Sound, north of the city, that has been in his family for four generations.
The taxes are now $6,000 a year for a waterfront property a little larger than a hectare. But Mr. Topp expects that his taxes will jump to about $9,000 a year because his assessment has increased another 57 per cent, well above the average for the area. At the same time, he said, his retirement income is declining along with the stock market.
"It's taken a big whack out of our investment position and we're facing another cost increase," said Mr. Topp, who is also chair of Coalition After Property Tax Reform. "So it's a real squeeze."
City councillors and home owners say the four-year assessment cycle is just one of the flaws with the system. They say assessments are inconsistent from one house to another, especially in more traditional neighbourhoods, where the architecture and levels of home maintenance are more diverse.
MPAC says assessments will rise an average of 5.4 per cent next year in the City of Toronto. Residents of wards 14, 19 and 30 - all older neighbourhoods clustered near the downtown core - will see their assessments climb an average of 7 to 8.4 per cent, they say.
Astra Burka said the assessment on her home near Clinton and College has increased 40 per cent over the four years. Her situation is novel. She lives in a "laneway house" that is tucked behind another house on a deep property.
Ms. Burka, an architect, designed the contemporary, stucco building, which she acknowledged is more difficult to compare to traditional homes in her neighbourhood. But she wonders how MPAC can justify a 40-per-cent increase when residents' income doesn't increase by a similar percentage.
"Houses that don't have street addresses are a different can of worms," she said in an interview. "The system doesn't mean anything. It's a total farce."
Ms. Fletcher said the provincial government needs to re-examine the system and look at doing assessments more frequently. "The fact that payments are spread over four years is not as painful, but nonetheless, it is sticking in people's craw that this assessment was done when people's houses were worth a lot more than they are today," she said.
Source: www.theglobeandmail.com