When setting their buying budgets, would-be homeowners typically focus on the upfront costs such as the down payment, closing costs, and land transfer tax. They’ll also look to ongoing carrying costs, like monthly mortgage payments and utilities, to determine their overall affordability.
But, there is one expenditure that is sometimes left out of the big picture, and it can cost thousands of dollars per year: paying property taxes.
Paying your taxes will be a financial obligation over the course of your home’s ownership, so it’s important to understand how they may impact your household’s bottom line. This is especially noteworthy in today’s pandemic-era housing market; as many Ontarians have switched from urban to small-town or rural living, they may not realize that while their home has a relatively smaller price tag, it may come with a higher tax rate.
That’s because property tax rates vary across the province, based on municipalities’ size, councils’ operating budgets, and the value of local housing markets. Typically, larger urban centres, such as the City of Toronto, can offer lower property tax rates due to a larger pool of taxpayers, and higher real estate prices. A town or rural community, meanwhile, will often implement a higher tax rate due to a smaller population and potentially fewer resources to service the area.
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Your municipality’s tax rate is just one factor; the second element is the most recent value assessment of your home, which is determined by the Municipal Property Assessment Corporation (MPAC). The amount you actually pay in tax is calculated by multiplying your city’s residential tax rate by this assessment value.
However, as Ontario home prices saw unprecedented growth over the last year – the benchmark home value for the province rose 19.7% between September 2020 and 2021, with the average property selling for more than $1 million in many local markets – it’s important for homeowners to be aware of how their value assessments may change over the coming years.
Which Ontario Municipalities Have the Highest Property Tax Rates in 2021?
To see how tax rates differ across the province, and how they’ve fluctuated from 2020, Zoocasa has compiled 2021 property tax rates for 35 Ontario municipalities. This year’s edition also calculates how much homeowners would pay in taxes in each municipality, based on four sample assessment values: $500,000, $750,000, $1 million, and $1.5 million.
For example, a Toronto homeowner with a property valued at $500,000 would pay $3,055.07 in property taxes based on the city’s rate of 0.611013, the lowest on the list. In comparison, a similarly-priced home in Windsor, which has the highest tax rate of 1.818668, would have a tax bill of $9,093.34.
However, it’s important to note that a $500,000 budget would go considerably farther in the latter, as the average home price in Windsor was $535,452 in September, compared to $1,090,096 in Toronto. As well, a lower or higher property tax rate and amount shouldn’t be the only indicator that guides a home buying decision. Buyers should consider the big picture of their lifestyle and financial needs when determining what properties, budget or cities fit them best; property taxes are just one financial consideration to be aware of.
Compared to 2020, there’s been very little fluctuation in municipalities’ rankings; the lowest five remain unchanged, with all located within the Greater Toronto Area:
Richmond Hill: 0.659549
Thehighest five are also consistent with 2020’s ranking, and all located in northern Ontario, with the exception ofWindsor:
Thunder Bay: 1.59108
Sault Ste. Marie: 1.588067
North Bay: 1.568182
How Is Property Tax Calculated?
You can determine the amount you’ll pay in property tax by multiplying your most recent home value assessment from MPAC with the residential rate set by your local municipality. In the province of Ontario, these are based on the following:
The MPAC-provided assessment of your home’s value. This is based on your home’s characteristics such as the size of your lot, its overall condition, whether or not there have been structural changes or renovations, and whether or not it has a basement or pool. MPAC also takes into account the values of comparable properties in your neighbourhood.
The Education Tax Rate, implemented by the province of Ontario, the proceeds of which are used to fund regional schools.
The Residential Tax Rate, which is determined annually by a municipality’s city council.
How Real Estate Values Impact Property Tax Policy
Municipalities with higher local real estate prices and larger populations tend to have lower property tax rates as there are more taxpayers funding the city’s pot and floating their operating budget. For example, Toronto has long boasted the lowest tax rate in the province, given its population size and expensive home prices.
Similarly, GTA cities Markham and Richmond Hill, round out the lowest three with rates of 0.632908% and 0.659549% respectively, and have among the highest average home prices in the region at $1,352,869 and $1,441,035.
In contrast, the cities with the highest tax rates often have the lowest-priced real estate.
Another factor is the city’s commercial-to-residential tax ratio; in most municipalities, businesses pay at least double the amount of tax than homeowners, with the Canadian average at 2.73. Generally, a higher commercial property tax rate translates to a lower residential rate, and vice-versa; a local council may opt to hike the latter if they feel their community needs to offer more competitive advantages to businesses.
Home prices were sourced from real estate boards, including the Toronto Regional Real Estate Board, Realtors Association of Hamilton-Burlington, Niagara Association of Realtors, London & St. Thomas Association of Realtors, Barrie & District Association of Realtors, Ottawa Real Estate Board, Windsor-Essex County Association of Realtors, and Canadian Real Estate Association.
Home prices are all average prices, except for Thunder Bay, where the benchmark price was used.
Home prices were for October 2021.
Property tax rates:
Property tax rates for 2021 were sourced from each municipality’s website.
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