Let’s go back in time a little bit.
In late May, 2016, the Municipal Property Assessment Corporation (MPAC) sent out their 2016 Property Assessment Notices.
These lovely documents provide an assessed value for your property, based on a secret formula developed by MPAC scientists in a bunker in the wilds of Northern Ontario.
That might be a bit of an exaggeration.
Truth be told, to establish your property’s assessed value, MPAC analyzes sales of comparable properties in your area. They call this a Current Value Assessment (CVA) and they look at 200 different factors to determine what exactly a comparable property would be for your home.
How does MPAC calculate the assessed value for your home?
The exact formula, including factors considered, weighting and adjustments made is not shared with the general public or even nosy Realtors like us.
MPAC does tell us that five major factors account for approximately 85% of the value:
- lot dimensions
- living area
- age of the property, adjusted for any major renovations or additions
- quality of construction
Other features that may affect value include: number of bathrooms, fireplaces, garages, pools, whether properties have water frontage, and so on.
When were we supposed to get an updated assessment?
The last assessment that MPAC sent out was dated January 1, 2016.
Prior to COVID, over five million homeowners in Ontario received Property Assessment Notices every four years like clockwork. They would provide you with an updated assessed value for your home that would be phased in over the next four years, so that by the end of the cycle, you would be paying property taxes based on that value. Then the whole thing starts over again.
Well, it used to start over again. The last time that MPAC sent every homeowner these updates was in May, 2016. It was supposed to happen again in May, 2020, but due to COVID, that was delayed. Despite the fact that we’re writing this article now in October, 2023, they still haven’t done a province wide update and everybody’s property taxes are based on those 2016 assessed values.
Who delayed it, why did they decide to do that and why does it keep getting delayed?
While MPAC is responsible for doing property assessments in Ontario, they don’t actually get to decide when to do it, or not to do it. MPAC is an independent, not-for-profit corporation funded by all Ontario municipalities, accountable to the Province, municipalities and property taxpayers.
It is the Province of Ontario that actually decides when MPAC does their work, in the form of the setting of a specific date for the valuation. This valuation date, established by the Ontario government, is a fixed day on which all properties are valued and it marks the beginning of the assessment cycle.
The rationale for the delay back in 2020 was to “provide additional stability” to homeowners due to COVID. It is unclear how the planned assessment cycle moving forward would destabilize the real estate market, but the spring of 2020 was a very unsettled time, so it does make some sense to delay it. Keep in mind that MPAC would have been working on those valuations throughout the latter half of 2019, so it wasn’t as if they didn’t have the staff available to deliver the updated assessments. They were done, they just weren’t implemented.
The big question is why the assessment cycle keeps being delayed, long after COVID became less impactful? There does not appear to be an answer to that question from either MPAC or the Government of Ontario. When we review the Ministry of Finance or the Treasury Board sites, there is no explanation given, and when we placed a call to MPAC, their representative did not have any insight as to why it hadn’t occurred since 2020.
Is no one getting property assessment sent to them?
Despite the fact that the full Ontario-wide general assessment cycle hasn’t taken place since 2016, MPAC does continue to mail out property assessment notices to a number of homeowners.
If a property owner recently moved, changed the school board that their taxes support or made changes to their property, a notice will be sent. In November, 2022, MPAC sent out more than 770,000 of these types of Property Assessment Notices and we expect to see a similar number sent out in November, 2023.
It is quite interesting to us that while these are “updated” assessment numbers, they are simply updates to the 2016 assessed value. For example, if you had a home worth $600,000 in 2016 that you did an addition to in 2022, MPAC calculates what your home with that addition would be worth back in 2016. If that addition was worth $500K in today’s market, but worth $100K back in 2016, your assessed value would go up by that $100K amount.
When will it finally be updated?
Based on our conversation with a representative from MPAC, we know that for the year 2024, your property taxes will continue to be based on the 2016 assessed values. Beyond that, there has been no legislation or indication of timing for when it will return to the regular assessment cycle.
If a general assessment is done in 2024, it will likely be based on 2022 values, which is problematic in a number of ways as 2023 saw some dramatic changes in prices compared to 2022.
Unfortunately, we can’t provide any clearer guidance as to when it will take place, but given how outdated the valuations are now, we certainly hope it happens soon.
Will your taxes skyrocket once your home is assessed at a more accurate level?
The nature of how assessed values are used to determine your property taxes is confusing to many homeowners, so it is natural to wonder if a doubling of your home’s assessed value would mean a doubling of your property taxes.
The short answer to that question is “No”. Just because your home is valued at a lot higher doesn’t mean your property tax bill will also become a lot higher. This has to do with the fact that formula for your property taxes uses your assessed value, but also the total tax rate. That is comprised of the city tax rate, the education tax rate and the city building fund.
If your assessed value goes up considerably, you will pay a greater proportion of the total amount needed to provide services in the community, just as all the other homes that have increased in value will as well. It is that latter part that causes the confusion. If everyone has a higher assessed value from MPAC (and this is almost certainly the case for almost everyone), then the municipality lowers their total tax rate as they aren’t allowed to collect more property tax revenue than the amount needed to provide services.
All things being equal, before you panic at the new assessed value and what the jump in value means to your taxes, an increase in assessment does not necessarily mean you will experience an increase in property taxes. If the assessed value of a home has increased by the same percentage as the average in the municipality, there may be limited increases in property taxes.
Here’s a link to a short video by MPAC that goes through it in a bit more detail.
While this is how it works, we’d be surprised if cash-strapped municipalities didn’t use the new higher assessed values as a reason bring in more property tax dollars to help with their books.