Rebate the municipal property tax on net-new purpose-built rental for each building’s first twenty years, with the cost shared three ways by Canada, Ontario and Toronto on the Partnership to Build template — and the City’s share bridged against the $2.84 billion in development-charge balances collected for growth projects not yet delivered.

Summary

Rental must be the primary new supply for housing in Toronto but the housing type faces serious challenges. According to RBC research, ownership costs currently consume close to two-thirds of a typical household’s income ⁶. At the same time CMHC reports rising costs and slower rent growth that are pushing the next rental project below viability ¹. To combat this the government has taken some steps to reduce the tax burden on new rental builds. Ottawa removed the GST from new rental in 2023 and Ontario matched with its provincial portion ³. The last major layer holding back the economics for new units is the recurring municipal tax.

Toronto should rebate the municipal property tax on net-new purpose-built rental each building’s first twenty years, on a published schedule that holds flat and then declines to full taxation — and split the cost with Canada and Ontario, the governments that collect the income tax and HST rental construction creates. The City’s share is bridged against $2.84 billion in development-charge balances collected for projects not yet delivered ⁴, and the program takes force only when the funding agreements are signed.

The Recommendation

Toronto should rebate the municipal property tax on net-new purpose-built rental for each building’s first twenty years, on a published schedule that holds flat and then declines to full taxation and split the bill with the two governments that collect the taxes rental construction would help stimulate. This would be a one time-limited discount on the cost that weighs heaviest on a rental building’s operating economics, funded in defined shares by Canada, Ontario and the City.

Every new rental project pays income tax on every construction wage and every operating job, and sales tax through its supply chain revenue that flows to Ottawa and Queen’s Park and new housing in Canada’s largest city stimulates more economic growth in wages than other jurisdictions. The City collects none of it; its recurring take is the property tax, the same tax that CMHC’s viability arithmetic counts against the next project ¹. The government whose tax most burdens the creation of new rental units is the one least able to afford removing it, because property tax is the largest single source of the City’s own-source revenue. Sharing the rebate three ways matches each government’s cost to the fiscal return it already collects from construction and allows for all three levels to achieve their housing objectives.

Property tax is the highest leverage incentive to improve because it is a major operating expense. A dollar of annual rebate is a dollar of net operating income — and net operating income is what a building is valued and financed on. For example at a 5 percent capitalization rate, a dollar of recurring annual relief would support 20 dollars of appraised value, and at 4 percent, 25 dollars. This leverage would convert a modest public cost into significant financeable equity.

Steps have already been taken in this direction. In September 2023 the federal government removed the full five percent GST from new purpose-built rental; Ontario matched by rebating its eight percent provincial portion ³. Both senior governments paid to lower the cost of building rental housing in Toronto. The recurring municipal tax is the layer still standing but the logic that led to the first agreements would also indicate that it should be temporarily removed.

The strongest external comparator ran the experiment in reverse. When New York’s 421-a property-tax exemption lapsed in June 2022, proposed multifamily filings fell 78 percent by the industry board’s count, leading the state to add a successor as part of its 2024 budget ¹⁰. This illustrates how sensitive the economics of rental construction are to property-tax treatment. By implementing a rebate in conjunction with the other levels of government the City can remove a cost and let projects compete for private capital on their own merits. No new machinery is needed for this to work grants to owners are lawful within a Community Improvement Plan under section 28 of the Planning Act ⁸, an instrument the City has operated at scale through IMIT and operates today through its successor, the EDGE program ⁹, and the Housing Secretariat already runs the rental-incentive apparatus ⁷. Eligibility would be confined to net-new rental units, and every project’s schedule for the declining rebate published.

The Problem

CMHC’s Spring 2026 report puts Toronto’s 2025 housing starts well below the ten-year average and last per capita among the seven large metropolitan areas: apartment starts of 18,986 against a 26,856 average, ground-oriented starts of 7,101 against 11,760 ¹. Condominium presales collapsed, stalling the ownership pipeline ¹. The rental pipeline that must fill the gap remains thin against the need, and CMHC reports rising building costs, slower rent growth and longer lease-up periods raising viability thresholds for the projects that would extend it ¹. A rental building earns its return over decades of operations, so a permanent annual cost — property tax first among them — weighs on the start decision in a way no one-time fee does.

The purpose-built rental incentives stream has unlocked more than 7,000 net new homes, and the City is asking the Province for $596 million to reach nearly 16,000 more that are ready to start ⁷; the Partnership’s Phase 2 rental incentive caps at 10,000 homes ². In August 2026, Canada and the City added a further package — up to $2.7 billion in federal financing and $703.7 million from the City, for 5,600 rental homes ^[11]. Each is real, funded and finite. A tax rebate is not an envelope: it scales with exactly the construction it exists to cause, and costs nothing when nothing is built.

One more fact belongs in the record: the City is not cash-poor against growth. Its development-charge balances closed 2024 at $2.84 billion — money collected from builders for growth infrastructure that has not yet been delivered ⁴. Those funds remain legally dedicated to capital under the Development Charges Act; the recommendation borrows their timing, not their purpose, as bridge financing while intergovernmental payments arrive.

Toronto’s supply channels are running far below their own decade averages — and the shortfall is local, not national: Toronto’s per-capita starts were the lowest of the seven large metropolitan areas in 2025 ¹. The line that matters is the apartment line, because it holds both the collapsed condominium pipeline and the rental pipeline that must replace it. The three-way rebate is priced for this moment: it pays nothing unless a building goes up, and its cost lands on the three treasuries in proportion to what each stands to collect.

Implementation

Design the rebate and adopt it conditionally. City Council direct the Executive Director, Housing Secretariat, with the Chief Financial Officer and Treasurer, the Chief Planner and Executive Director, City Planning, and the City Solicitor, to bring forward a rebate of the municipal property tax on net-new purpose-built rental — a twenty-year published schedule declining to full taxation, eligibility confined to net-new rental units, delivered through the Open Door administration and the purpose-built rental incentives stream ⁷, with grant authority routed through a citywide residential Community Improvement Plan under section 28 of the Planning Act ⁸ — reporting to the Planning and Housing Committee within two cycles of the new term, for decision by the Council elected October 26, 2026. The program takes force only upon execution of the funding agreements in point 2, and every approved project’s schedule is published.

Negotiate the three-way funding agreement. City Council direct the City Manager and the Chief Financial Officer and Treasurer to seek a successor phase of the Canada–Ontario Partnership to Build under which Canada and Ontario each fund a defined share of the rebate — the June 2026 template extended from the one-time charge to the recurring one ² — and formally request the Government of Ontario, and call upon the Government of Canada, to bring matching commitments forward when the legislature and Parliament sit this fall. Write the condition and the expiry into the agreement itself, and treat the loss of either partner’s share as a program sunset rather than a City liability.

Bridge the City’s share against growth reserves, and report. City Council direct the Chief Financial Officer and Treasurer to structure the cash flow so rebate payments are advanced against the City’s development-charge reserve balances — $2.84 billion at year-end 2024, held against growth projects not yet delivered ⁴ — and made whole as federal and provincial reimbursements flow, leaving the funds’ statutory purpose intact; and to report annually to the Executive Committee on uptake — applications, units started, rebates paid, partner shares recovered — with a five-year review that measures additionality: whether rebated projects out-build the counterfactual. If they do not, Council amends the program; it is a by-law, not an entitlement.

Financial impact. The rebate applies only to taxes that exist because a new building exists, so no current revenue is touched: the City’s share is forgone new assessment, and Canada and Ontario reimburse their shares by agreement. The timing gap between rebates paid and reimbursements received is bridged against reserve balances and repaid in full. Administration is absorbed within the Housing Secretariat’s approved budget; the Chief Financial Officer and Treasurer would confirm the treatment.

Risks and objections. The first objection is distributional: a tax rebate flowing to landlords while renters struggle. The answer is mechanical rather than rhetorical. The rebate exists only if new rental homes exist, its cost is borne by no current taxpayer in any year, and the beneficiaries of a working rental pipeline are the renters who occupy it — the supply is the relief. Publishing every project’s schedule keeps the bargain inspectable.

The second objection is dependence: the program leans on two other governments’ money, which is conditional and expires. That is why the condition is the design — no signed agreements, no program — and why point 2 writes sunset terms into the agreement itself. Both governments have twice paid to cut the cost of rental construction ^3,2; asking them to fund the last tax layer extends a bargain they authored, and the five-year additionality review gives every party the evidence to renew or retire it.

Sources

• [1] Canada Mortgage and Housing Corporation — Housing Supply Report, Spring 2026. https://www.cmhc-schl.gc.ca/professionals/housing-markets-data-and-research/market-reports/housing-market/housing-supply-report Accessed July 8, 2026.
• [2] City of Toronto — news release, “City of Toronto secures $1.5 billion in Canada-Ontario Partnership to Build funding to support housing and reduce development charges” (June 23, 2026). https://www.toronto.ca/news/city-of-toronto-secures-1-5-billion-in-canada-ontario-partnership-to-build-funding-to-support-housing-and-reduce-development-charges/ Accessed July 8, 2026.
• [3] Department of Finance Canada — “Enhanced GST Rental Rebate to build more apartments for renters” (September 14, 2023), with Canada Revenue Agency, GST/HST Memorandum 19-3-9, “Purpose-built Rental Housing Rebate” (covering Ontario’s matching rebate of the 8% provincial portion of the HST). https://www.canada.ca/en/department-finance/news/2023/09/enhanced-gst-rental-rebate-to-build-more-apartments-for-renters.html Accessed July 22, 2026.
• [4] City of Toronto — 2024 Development Charge Deferred Revenue Activity and Balances (Executive Committee item 2025.EX28.15). https://secure.toronto.ca/council/agenda-item.do?item=2025.EX28.15 Accessed July 22, 2026.
• [5] Statistics Canada — 2021 Census Profile, Toronto, City (census subdivision), housing tenure. https://www12.statcan.gc.ca/census-recensement/2021/dp-pd/prof/details/page.cfm?Lang=E&DGUIDlist=2021A00053520005 Accessed July 8, 2026.
• [6] RBC Economics — Housing Trends and Affordability, Q1 2026 measure for Toronto. https://www.rbc.com/en/thought-leadership/economics/featured-reports/housing-trends-and-affordability/ Accessed July 8, 2026.
• [7] City of Toronto — news releases, “City of Toronto unlocks more than 7,000 net new rental homes through purpose-built rental housing incentives stream” and “City of Toronto fast tracks purpose-built rentals, breaks ground on 448 rental homes.” https://www.toronto.ca/news/city-of-toronto-unlocks-more-than-7000-net-new-rental-homes-through-purpose-built-rental-housing-incentives-stream/ Accessed July 8, 2026.
• [8] Government of Ontario — Planning Act, R.S.O. 1990, c. P.13, section 28 (community improvement), e-Laws. https://www.ontario.ca/laws/statute/90p13 Accessed July 8, 2026.
• [9] City of Toronto — EDGE (Economic Development & Growth in Employment) Incentive Program, successor to the IMIT Program (program page; CIP By-law 1386-2024). https://www.toronto.ca/business-economy/business-operation-growth/business-incentives/imagination-manufacturing-innovation-and-technology-imit-program/ Accessed July 8, 2026.
• [10] https://assets.ctfassets.net/6zi14rd5umxw/66uraPsc2BJLWP91aF2JXi/c1684aff38a85f35376dc50c2ba1856c/FOUNDATION_PERMIT_REPORT___December2023final.pdf
• [11] [CITATION MISSING IN SOURCE DOC — the body cites [11] for the August 2026 Canada–City rental financing package ($2.7B federal / $703.7M City, 5,600 homes) but the doc’s source list has an empty [11] entry. Needs to be supplied before publishing.]