Rising commercial rental property prices is forcing a record number of small businesses out of neighborhoods.
Municipal tax has hit small restaurants particularly hard to a point that many of these small businesses are becoming unprofitable.
Restaurants and other businesses across the city at risk of being “taxed out” of Toronto, according to new research from Ryerson University’s City Building Institute, which highlights the widespread impact of higher taxes thanks to the province’s most recent property reassessment two years ago.
And while city council put a tax cap of 10 per cent in place this year after an outcry from heavily-taxed business owners on Yonge Street, many say it is a short-term solution and a long-term fix is required.
The Municipal Property Assessment Corporation (MPAC) is the body responsible for assessing all properties in Ontario in compliance with the provincial legislation and regulations.
To assess property taxes, MPAC looks at how much properties are selling for around the building it is appraising to determine its current value. That MPAC value is then multiplied by the city’s tax rate to determine how much the property owner will pay.
As a result, a booming real estate market like Toronto’s translates into higher taxes for local businesses.
The problem is that the system currently looks at a commercial property’s value according to what it could be, rather than what it is — creating a link between rising property values and rising commercial property taxes.
The researchers in their exhaustive study has found that higher municipal taxes leave small businesses unable to handle the higher rates, this in turn leads to layoffs or closures in development-heavy areas.
All along Wellington Street West, for instance, value assessments for buildings have skyrocketed, which means higher taxes.
In many prime areas in the city values jump by anywhere from 30 to more than 100 per cent, leaving small business owners in a quandary.
The research team is raising red flags about the widespread trend through an upcoming exhibit called Taxed Out, launching on September 12 at the Urban Space Gallery on 401 Richmond Street West.
The “surges” are happening not just downtown, but in midtown at Yonge Street and Eglinton Avenue West and along Queen Street East.
And those wishing for that change may find renewed hope in the new provincial government.
Given the current trends as small business owners give up their leases and move, those coveted spaces are scooped up by corporate retail or restaurant chains that can afford the new rent increases. It is the little guys who cannot run their businesses profitably if rents keep going up. -CINEWS