City budget dials back tax increases but raises questions about long‑term risks
Toronto homeowners are set to face a much smaller property tax hike in 2026 as city hall tries to balance cost‑of‑living pressure with long‑running fiscal strains that have worried borrowers, lenders and brokers across the region.
The proposed $18.9 billion operating budget included a 2.2% property tax increase, far below the 6.9% rise in 2025 and the 9.5% jump in 2024. It also featured a third straight year of Toronto Transit Commission fare freezes and a fare cap of 47 rides per month in 2026, dropping to 40 rides in 2027.
City officials said the 2.2% hike translated into about $91.53 more a year for an average Toronto home assessed at $692,140.
Mayor Olivia Chow framed the plan as an affordability play for residents already stretched by shelter costs.
“After paying rent or your mortgage, groceries and all your bills, there's not much left at the end of the month,” Chow said in a statement.
“Families are feeling the squeeze from the high cost of living. That’s why I’m focused on making life more affordable for Toronto families,” she said.
Chow said the budget “made the budget more fair by shifting the burden from families like yours to speculators and luxury property buyers,” citing council’s recent move to raise the municipal land transfer tax on homes priced above $3 million.
The plan also outlines funding to expand school meal programs, keep libraries open seven days a week and hire hundreds of new police officers and paramedics over several years.
Affordability gains but fiscal questions
Budget chief Shelley Carroll said the package includes a 5% tax cut for small businesses and reflects “an intentional planned reduction as part of our multi-year strategy to get Toronto's finances back on track,” adding that each department has been pushed to trim spending and boost efficiency.
The city said its credit rating has improved to AA+ and that a $1.8 billion operating deficit when Chow took office in 2023 has narrowed to about $1 billion.
It also noted that Toronto’s “new deal” with Ontario – $1.23 billion in operating support – is scheduled to fall out of the budget after this year, with talks under way to renew it.
Still, Coun. Brad Bradford warned that heavy reliance on reserves, projected at $1.7 billion, or roughly 9% of the operating budget – risked shifting today’s affordability relief onto future taxpayers.
“My concern this morning is that Mayor Chow is mortgaging Toronto's future to pay for her re-election prospects in the fall,” Bradford said.
Wider strain on borrowers and the housing market
The softer tax increase lands against a backdrop of deep affordability stress. Toronto remains among Canada’s least affordable markets, with households often spending 30% or more of income on shelter costs. In 2022, a middle‑earning household saving 10% of income each month would have needed 24 years to amass a down payment on an average Toronto home.
While mortgage payments as a share of income have eased, the path to homeownership remained daunting in major centres such as Toronto.
Mortgage‑focused readers would likely see the 2.2% rise as welcome relief compared with recent years, but the heavy use of reserves, projected $1.1 billion shortfall heading into 2027 and a decade‑long plan that would see reserve spending exceed projected balances by over $32 billion all raised questions about how sustainable this restraint would prove.
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