Brampton’s illegal basement suites stretching an already tight budget

Brampton’s limited housing stock is nothing short of a planning blunder. The influx of newcomers to the city, owing in part to somewhat lower housing prices than Toronto, proximity to the airport and the federal government’s immigration policies, has encouraged growth at a rate municipal officials struggle to keep up with.

The pressure is on to accommodate a rising population using whatever housing is available, which often means resorting to secondary suites. Sometimes referred to as basement apartments, they are an often-maligned form of housing whereby spare space in a normally single-family dwelling, typically a basement, is converted into a rentable suite. The landlord can then put the extra income towards the mortgage. All is well, right?

Not exactly. The city relies heavily on property taxes as its major source of revenue, and unauthorized suites are a barrier to cash flow. Only one property tax bill goes to such houses, but the increased number of people living there raises the burden on municipal and provincial services paid for through that bill, such as education and garbage collection.

Typically the presence of a leased suite would raise the tax assessment under MPAC (the Mortgage Property Assessment Corporation), hiking the tax bill to some degree. But the vast majority of secondary suites in Brampton aren’t authorized and therefore escape the taxman’s notice.

The city’s budget, a draft version of which was released in February, says little on the subject of action to remedy the problem and nothing about the impact secondary suites have on the city.

Data on how much revenue Brampton is losing as a result of illegal secondary suites is hard to come by, however other data points can help to shine a light on the question. According to Condos.ca, an online buying guide, the average price of a condominium, which is roughly equivalent to a basement apartment in size, in Brampton is roughly $380,936.

The total residential property tax rate on housing units in Brampton, which includes taxes from the city, region and the province for education tax, sits at 1.035591 percent, which means the average homeowner pays about $7200 in property taxes.

Media estimates suggest there may be 30,000 to 50,000 secondary suites in Brampton, though there is no way to say for certain. If the tenants in those suites were instead living in an average condo in Brampton with a tax bill of just under $4000, they could be paying upwards of $118 million in property taxes.

The city is losing a significant amount of cash from licensing fees as well. All told, the cost of registering an basement apartment— which includes costs of zoning, registration and permits— can cost $2,220. That represents potential revenue upwards of $66 million.

The revenue lost to illegal suites (as opposed to what the city might collect if those tenants were occupying legal apartments and condos, which garner tax income), could be in the hundreds of millions of dollars. That’s especially crippling as a high percentage of all revenue — some 70 percent — to the City of Brampton consists of property taxes. The difference must be made up through tax hikes.  

Councillor Jeff Bowman has been paying particular attention to the issue and will be tackling it in a town hall meeting alongside fellow Wards 3 and 4 Councillor Martin Medeiros. He points out another factor: “The City of Brampton also gets transfers from the Province and Region based on the census counts, and with illegal lodging and second units unreported, our population numbers are far below what they really are, and we are missing out on those payments for social services,” Bowman said in an emailed statement.

Councillor Jeff Bowman

“There is an argument to be made that our city services are being utilized by possibly thousands of people with no additional taxes being paid to support the services.”

Efforts have been underway since 2012 to bring secondary suites into the legal fold. The province’s legislation, titled Ontario’s Strong Communities through Affordable Housing Act, mandated that municipalities come up with a framework to allow the units, to fill the gap in affordable housing. Three years later, Brampton designed regulations to help landlords register their suites, which included requirements for egress and safety.  

The city’s 2018 budget also called for creating a Secondary Unit Task Force. Details are sparse on the makeup of the group, but it seeks “to promote compliance with the City’s bylaw and respond to illegal secondary units and lodging homes” through “advanced and innovative investigative strategies to combat the proliferation of illegal units in housing within the City of Brampton.”

“We recently had a report brought forward that indicated there were about 30 fires in the city in the past couple of years originating in second units, and of those, less than five were registered units. In one of these cases the number of residents boarding there was in the teens. That could have been a disaster in this city, but fortunately there were no injuries,” Bowman said.

Mississauga is taking a radical approach to dealing with its secondary suite problem. Councillor Carolyn Parrish revealed, at a Feb. 21 regional committee meeting, that her city is looking at removing development charges for secondary units included in new housing. That came out as part of a larger, much more heated discussion about how to increase affordable housing stock in Peel Region.

“First of all, we have have 33,000 basement apartments, that we guesstimate, in Mississauga. The trouble with those apartments is they probably don’t have the safety features that they need,” Parrish told The Pointer.

Safety is the main concern for city and regional officials looking to legalize secondary suites, and Parrish says those who choose to rent such suites built into new homes will have “basements that are safe and clean and ready to be occupied.”

Brampton Mayor Patrick Brown came into office on a promise to institute a zero percent tax increase, while focusing on making up the revenue by attracting business to the city. Staff had wanted a 5.4 percent increase to meet this year’s needs, while the 2019 draft budget offers a compromise, proposing a 0.8 percent increase.

Brown told The Pointer the 0.8 percent is a step in the right direction, but he would “love to get it down to zero.”

Mayor Patrick Brown

Attracting businesses to the city does present a rational way to ease the tax burden placed on residents, which Brown has adopted as part of his larger economic development plan.

“In order to bring businesses to Brampton you need to make taxes competitive. They’re interrelated,” he has said. “You can’t get businesses if taxes are uncompetitive, but you need businesses to keep taxes competitive.”

Additional revenue tools could achieve the same result, but Brown has signalled vehement opposition to them, as “that’s still more tax.”  

“I don’t want more revenue tools. There is only one taxpayer,” Brown said.

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