A couple of weeks ago I was asked whether heritage-designated houses — either individually designated under Part IV or captured within a Part V heritage conservation district — suffered under a higher property tax assessment.

My immediate response was that designation, in and of itself, does not trigger an increase in the assessment.

However, after the individual posing the question cited a couple of examples which seemed to suggest the contrary, I realized my initial answer was based on opinion and not facts.

As a result, I promised to look into the matter and, over the past few days, have spent some time looking into the arcane theatre of property tax.

So, in Ontario and, operating under the authority of the Municipal Property Assessment Corporation Act, we have a not-for-profit corporation funded by all Ontario municipalities.

This organization, the Municipal Property Assessment Corporation is responsible for assessing and classifying all Ontario properties (more than 5.6 million) in compliance with the Assessment Act and various other regulations established by the provincial government.

The corporation reports to the province, municipalities and property taxpayers of Ontario through a board of directors. The members of which are appointed by the finance minister and include provincial, municipal and taxpayer representatives.

In addition to the Municipal Property Assessment Corporation, there are three other players in the property assessment system.

First, the provincial government, which sets the assessment and taxation laws and determines education tax rates.

Second, the municipalities, which, through their annual budgets, establish revenue requirements, set municipal tax rates and collect property taxes.

And finally, you and I, property owners, who get the “privilege” of paying the tax.

Returning to the Municipal Property Assessment Corporation, once every four years on a legislated date, the organization is charged with completing an Assessment Update in which the individual value of each property in the province is identified.

Interestingly, the last time this province-wide assessment update occurred was in 2016. Due to COVID, the scheduled 2020 legislated date was postponed and in 2021, the Ford government decided to postpone the assessment update again.

And so, our current property assessments remain based on Jan. 1, 2016 assessed values.

At some point, this situation will be corrected and I can only imagine the level of shock and chagrin that will sweep across this province when a more than eight-year correction is applied to property values.

In any case, while the property assessment corporation suggests there are over 200 separate criteria considered in determining the assessed value, they go on to stress that there are only five major factors that generally are applied in the identification of “comparables” (similar properties which have been sold in proximity to the subject property), data that will be reflected in a property’s new assessed value.

These “major” factors include the age of the building, or buildings, total above-ground interior space in square feet, the location of the property, the size of the lot and the quality of building construction.

Let’s take a somewhat closer look at each of these “factors” in order, beginning with age.

Interestingly, the age of a building may change.

Let’s say that your house was built in 1980 and, in 2015, you completed a major renovation that included an addition.

It is possible in this case that 1980 becomes the “actual” age and 2015 becomes the “effective” age — the latter likely increasing its assessed value.

Next, the Municipal Property Assessment Corporation uses the exterior measurements of your home in order to calculate the total area of the interior above-ground space of the building — which does not include the basement, any decks, porches and attached garages.

Using the example above, because you constructed an addition, the interior living space has been increased and will, therefore, add to its assessed value.

Moving on, the corporation considers the location of a property in determining what others would be willing to pay for it if you sold it.

In a broad sense, the market area is defined and then, within that area, the location of the neighbourhood is considered in terms of desirability.

Then the “sub” or “homogeneous” neighbourhood — specific neighbourhoods within the general locational neighbourhood that the Municipal Property Assessment Corporation maps by identifying things like natural boundaries, similarity of housing stock (e.g. quality, size, age, type of housing), types of municipal services, historic significance (such as a heritage conservation district), amongst others — is weighed.

Finally, the corporation regularly reviews and updates its data to reflect changes that impact the neighbourhood — either positively or negatively — considering such items as municipal zoning changes and emerging incompatible uses or development.

In a very real sense, a similar consideration process as a competent professional realtor employs when recommending a market price for a particular property.

Then comes the size of your lot.

For a regularly shaped lot (i.e. same length of front/rear boundaries and side depth boundaries) it is a simple calculation of multiplying the frontage by the depth to arrive at total square feet.

Should the lot be irregularly shaped (differing front/rear and/or sidelines), the corporation averages the length of front and rear lines to arrive at “effective” frontage, then performs a similar calculation on the sidelines to define “effective” depth.

The total square footage of the lot is determined by multiplying the effective frontage by the effective depth.

Generally speaking, the more square footage contained by the lot boundaries means a higher assessed value assigned to this factor.

The quality of construction, that is to say, the quality of the materials, architecture and workmanship used and/or evident in the building of the house, is the fifth “major” factor in determining a property’s assessed value.

The Municipal Property Assessment Corporation uses 10 categories (classes) to assign the level of construction quality with class one being the lowest and class ten being the epitome of quality.

In addition, there are seven “half classes” that allow an inspector from the property assessment corporation to recognize a house which generally is in one quality class but contains elements that meet the standards of a higher level.

Once again, the higher the classification of building quality, the more it weighs in calculating the final assessed value.

Keep in mind, other things can affect a property’s assessed value: Secondary structures such as an accessory dwelling unit, a detached garage or an in-ground swimming pool; proximity to a highway, railroad or event facility; and features within the house, such as the number of bathrooms for example, all may have a bearing on the final valuation.

And, let’s be very clear, the Municipal Property Assessment Corporation does not calculate your annual property tax bill — that job falls to the local municipal government.

It simply provides the property assessment information to both the owner and the municipality and this data then forms the basis for the municipal tax calculation.

Moreover, should a property owner receive an assessment from the corporation that they do not agree with, it can be objected to by first filing a request for reconsideration (accessible on its website).

Further, should this route not provide satisfaction, the owner may then file an appeal of its assessment with the assessment review board. This board is an independent tribunal (decision-making body) of the Ontario Ministry of the Attorney General.

Now, let’s return to the original question we opened with, that is, does heritage designation or historic building located within a heritage conservation district increase a property’s assessed value?

Over the last three decades, all of the studies that have examined the actual sale prices fetched by both Part IV and Part V designated houses have conclusively shown that, to a significant degree, these properties depreciate less in a real estate bear market, appreciate faster when that market turns up and attain higher “sold” prices than other comparable properties which lack heritage protection.

So, yes, it may, under certain circumstances, add a little to the Municipal Property Assessment Corporation’s assessed value calculation. However, I might observe that the financial return on investment, which the property owner will derive from designation, far outstrips that potential cost.

As a final note, one only has to compare the average “sold” price of a residential property in Niagara-on-the-Lake versus any other municipality in Niagara to understand the corporation’s “desirability” criteria is already factored into the property assessment information for our small town.

Brian Marshall is a NOTL realtor, author and expert consultant on architectural design, restoration and heritage.