What will MPAC do with it’s “Land in Development” rates, now that developments are failing?
Many, many taxpayers in the GTA have received the same answer when questioning massive increases to their commercial and industrial property tax assessments; Highest and Best Use. It is an appraisal term based on the idea that property always sells for its absolute maximum value. How it has been applied in Ontario property tax assessments is that when land is bought- even for a speculative, not even close to being approved potential development- the assumption is that not only is the parcel worth every penny paid, but the neighbors are worth that much too. What has been missed in all of this is that trees don’t grow to the sky; that it is unlikely that every square foot of Toronto will someday be covered with high rise apartments. Some investments are premature. Some are outright bad.
According to a recent report in the Globe and Mail, there has been an increase in cancellations. Not just cancellations of projects that didn’t sell, but “fully sold-out, large scale projects.” The report notes: “These projects all shared similar traits: Units were presold on or before 2016 (before condo prices began to rapidly rise in the GTA) and often lacked full planning approval.”
What does this mean for property tax assessments? I contend that assessors should be very cautious about increasing assessments based on a use which isn’t currently legal. Certainly neighboring properties shouldn’t automatically have their assessments increased because some cash rich corporation made a speculative investment. Many jurisdictions refrain from increasing assessments until the development is imminent.
If even projects which have long been fully sold are failing, what does that say about the “highest and best use” of properties near such developments? Taxpayers should seriously consider appealing their assessments if they are based on such speculation.