The prospect of two different property tax rates applying on the same multifamily building looms for the 2026 tax year in Ontario. The newly released 2025 provincial budget signals the pending introduction of an optional property tax subclass that would allow municipalities to reduce the property tax rate on qualifying affordable rental units by up to 35 per cent.
“Eligible properties could be either existing or newly built and would be required to meet the definition of affordable rental units in the Development Charges Act, 1997,” the budget document states.
Thus far, there are few other details, but the Development Charges Act defines affordable rents as no more than 30 per cent of income for residents at the 60th percentile of all renter households’ gross annual income within a given municipality. In private rental accommodations, those might be units that are reserved for low-income tenants through an agreement with social agencies, or they might be units that have not turned over in several years, with allowable annual increases still pegged to tenants’ initial rent.
The announcement follows hints in the Ontario government’s 2024 fall economic statement, which identified a new optional property tax for affordable rental housing as one of three priorities emerging from an ongoing review of the property tax and assessment system. Advocates for the rental housing industry commend the initiative.
“Lower property taxes on affordable rental units will mean more affordable living for families across Ontario. This will make a difference in keeping down the cost of living, which is something everyone can support,” maintains Tony Irwin, president and chief executive officer of the Federation of Rental-housing Providers of Ontario (FRPO). “FRPO supports the proposed optional property tax subclass contained in the Ontario Budget.”
Property tax rates are applied on the assessed value of multifamily buildings, which the Municipal Property Assessment Corporation (MPAC) determines based on factors such as overall rental income and operating expenses. It would presumably be up to municipalities to determine which units qualify as affordable and how to apply the discount.
“There are still unknowns on implementation, but this does address existing affordable housing where most other programs have focused on newly developed units,” observes Ryan Fagan, principal and the lead on complex property tax with the consulting firm, Ryan ULC. “There are existing programs in Toronto and Vancouver that fully exempt affordable housing, but it is not uniform across all units and not found in the majority of municipalities across Ontario.”
This would be the third optional property tax subclass the Ontario government has created in recent years. The small business subclass, introduced for the 2022 tax year, allows an up to 35 per cent discount on the commercial property tax rate for ratepayers who meet criteria that adopting municipalities specify. The subclass for new multifamily rental development, authorized in a 2024 regulation, allows municipalities to set the tax rate on new multifamily rental developments, with seven or more units, as much as 35 per cent lower than the residential property tax rate for a period of up to 35 years.
Several Ontario municipalities have now enacted the small business subclass, while Toronto, Mississauga and York Region (encompassing municipalities at the northern end of the Greater Toronto Area), are among the earliest adopters of the optional subclass for new multifamily rental developments. Toronto will convey a 15 per cent property tax reduction to new multifamily rental, which is on par with the 15 per cent discount that ratepayers in its small business subclass receive. Mississauga and York Region have opted to aim for the full 35 per cent reduction, but have built in flexibility for Councils to adjust that during annual budget deliberations.
Regardless, the municipalities won’t be collecting or foregoing any revenue from specified landlords for awhile. Under provincial rules, the subclass comes into force for building permits issued after a municipality has passed a bylaw to adopt it. No eligible buildings have yet been built and occupied.
The Ontario government has also addressed two other priorities for assessment reform — related to student housing and demand for improved access to MPAC’s trove of information — highlighted in the 2024 fall economic statement.
An amendment to the Assessment Act to clarify that land that accommodates university-operated student housing is exempt from property taxation even if it is located separately from that university’s main campus, was passed as part of the Budget Measures Act (Bill 216) in November. The new budget bill (Bill 24) includes proposed amendments to allow MPAC to convey notices electronically to consenting property owners, and to set up a framework for how municipalities, school boards and roads and local services boards can use assessment information for operational planning or other research.
The budget document does not indicate when a province-wide property reassessment may occur, but does highlight two more initiatives in progress.
“Potential tools are being evaluated to help municipalities manage their assessment base,” it reports. “Work is also underway with MPAC on plans to enable them to provide centralized online access to assessment roll information rather than requiring on-site viewing in municipal offices.”
