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May 01, 2018

Impact of Land Use Planning on Property Assessment

Impact of Land Use Planning on Property Assessment
As planners it is important we understand how the plans we create and implement have a real impact on both property owners and municipalities who rely on accurate property assessments to generate tax revenues. By virtue of their nature, planning policies, which regulate or restrict land uses, have the potential to drastically influence the value of properties.

Under the Assessment Act, all Real Property in Ontario (also referred to as “Land”) is liable to assessment and taxation (subject to certain exemptions) based on its current value. Current value 
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Definition of Land & Real Property Under the Assessment Act
refers 
to the amount a willing buyer would pay to a willing seller to purchase a property as of the legislated valuation date. 

In Ontario, assessments are updated every four years. For the 2017-2020 property tax years, the current value of a property would reflect its market value as of January 1, 2016. 

In most cases the current value of a property will reflect the designation and/or zoning on the property and its current use (i.e. a detached dwelling). In some instances, however, a property may have value in excess of its current use (i.e. a detached dwelling on a double lot that can be demolished and replaced with two detached dwellings). For underutilized properties such as these, or for properties that are in the process of transitioning from one use to another (i.e. an employment land conversion), the applicable planning policies are particularly important as they help to provide insight into the future potential of the property.

Official Plans by definition describe a region’s or municipality’s policies on how land in their community may be used now and in the future. As such, the designation applied to properties under an Official Plan or Secondary Plan can have an immediate impact on the future potential of that property and its associated value.

For example, under the Growth Plan policies, which direct development to Settlement Areas, the inclusion of a property within a Settlement Area boundary can immediately and substantially increase the value of a parcel of land. Similarly, a property that is located within the bounds of a designated Urban Growth Centre may have a much larger capacity to accommodate additional growth (and an expectation that it will do so) than an adjacent property that is designated as Stable Residential.
 

Assessment System in Ontario

More specifically, the potential use of a property and its associated value may vary on a site-by-site basis, within a particular Official Plan designation due to anticipated densities, the nature of adjacent properties, or the presence of barriers to development (i.e. irregular lot configurations, Natural Heritage features or listed Heritage structures).

When a property is being fully and appropriately utilized and there are many comparable sales in the immediate area, determining the value is fairly straightforward. However, for properties which are being purchased for redevelopment, or land uses which do not regularly transact on the open market, MPAC must look to a variety of other sources to determine the current value, not the least of which include planning policies, regulations and guidelines.

Who is MPAC?

The Municipal Property Assessment Corporation (MPAC) is an independent, not-for-profit corporation funded by Ontario municipalities. It is the largest assessment jurisdiction in North America and is responsible for assessing and classifying more than 5 million properties in compliance with the Assessment Act and regulations set out by the Government of Ontario. Assessed values are used by municipalities to calculate property taxes. There are several main components in Ontario’s property assessment taxation system. Each plays an important role.
 
To learn more about MPAC and how it assesses properties please visit mpac.ca.
 

Post by Uzo Rossouw, RPP and John Chmielewski

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