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Why did owners of vacant units in Toronto get $367M in tax rebates?

By: Matt Elliott Metro, Metro Published on Wed May 07 2014

Our governments could buy a lot of things with $367 million.

That would be enough to make a huge dent in the repair bill at Toronto Community Housing. It could also pay for the planned LRT along Queens Quay East – the one students at the new George Brown campus have been waiting for. It’d buy us three St. Clair streetcar right-of-ways, one kilometre of underground subway, half the major repairs needed to the Gardiner Expressway or about 2,059 years of Mayor Rob Ford’s salary.

Here's another thing about that figure: $367 million ($366,573,038, to be exact) is also the amount paid by our municipal and provincial governments in the form of property tax rebates to owners with vacant commercial or industrial units over the past 13 years.

Why has this happened? As with most things, Toronto can point a finger at the province. Under a provincial program designed to provide tax relief, owners of entirely or partially vacant properties can apply for a rebate on their property tax bill — 30 per cent for commercial properties and 35 per cent for industrial.

To get the rebate in Toronto, owners need to provide proof they’ve been attempting to rent their space, though properties that require major renovations or are simply “unfit for occupation” are also eligible for the rebate.

This week, city staff released a report detailing the payouts from this program. Because our schools are still partially funded with property taxes, some of the rebates paid are on the education portion of the tax bill. Here’s how things break down by year:

I’ve excluded 2012 and 2013 because rebates for those years are still being processed.

However, the numbers got really interesting when staff examined where rebates were being paid throughout the city. Nearly half of all the money paid out — 43 per cent — went to owners of properties located in Ward 20, Ward 27 and Ward 28. I’ll forgive you if you don’t know your ward boundaries by heart, but those three represent the heart of downtown Toronto. Their collective boundaries stretch from about Bathurst Street in the west to the Don Valley Parkway in the east, extending up from Lake Ontario to north of Bloor Street.

Collectively, $159 million has been given to downtown property owners since 2001. It’s worth noting that general property values in those areas also increased dramatically over the same period.

The report does note that many owners have only applied for the rebate once. And indeed, that’s true in 40 per cent of the cases where rebates were paid for properties across the city. Another 39 per cent of rebate-receiving properties have received payouts for just two to four years, while 16 per cent received rebates for five to nine years. Another 521 properties — or about five per cent of the total — have received rebates for 10 to 12 years, effectively the entire life of the program.

If this all seems hard to justify, that’s because it probably is. It’s hard to pin down the exact rationale for the rebate program — which applies to all municipalities in Ontario — but it could make sense as a stopgap measure, helping property owners weather short-term vacancies during periods of economic uncertainty. But it's fair to be concerned that it's doing a lot more than that, distorting the market by giving building owners some incentive to hold on to to vacant buildings, watch their property values rise and not bother lowering rents to attract tenants.

There are some potential solutions on the horizon. In Ottawa, they’ve looked at capping rebates to three years. That seems fair. If a property owner can’t find a tenant in three years, maybe property ownership isn’t for them. Similar reforms haven’t yet taken hold in our city, though there have been some grassroots efforts to look at requiring owners of vacant units receiving tax rebates to make their space available for non-profit and other community uses — because anything is better than a vacant unit.

Especially considering that those vacant units are costing us all a lot of money.

This post was originally published at http://www.metronews.ca/views/toronto/ford-for-toronto-matt-elliott/2014/05/07/owners-of-vacant-units-in-toronto-received-367-million-in-tax-rebates-but-why.html on 2014-05-07T00:00:00.000Z

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