| Homeowners

When your inner Jillian Harris or Joanna Gaines has you itching for a change, we always advise our clients to take a step back and consider the pros and cons of home improvements. As real estate agents that have been around a little longer than we care to admit, we’ve seen some jaw-dropping, downright stunning renos and some oh, oh, what happened here renos. We’ve also heard stories of woe from homeowners who didn’t take the time to research their home improvements and paid the price. Whether it’s due to complications with permits that later impact home sales, unwise investments that cut thousands off home value, or even the impact of home improvements on property taxes, it always pays to understand how home renos impact your home. Here we offer a little common-sense info to help you make money-wise decisions on home improvements.  

What Home Improvements Increase Property Taxes?

Let’s nutshell it: Significant home renovations will usually result in a reassessment for property taxes. Although you think your renos might be under the radar, the Municipal Property Assessment Corporation (MPAC) conducts a province-wide assessment update across Ontario every four years. At the time we wrote this blog, the last assessment was in 2016 due to COVID restrictions. 

Most assessments are based on neighbourhood research, but MPAC also conducts in-person property inspections in the following scenarios: 

  • Your address has issued a building permit
  • Your home is a recent purchase 
  • There’s an MPAC neighbourhood inspection going on for a variety of reasons, such as: 
    • Lots of sales in the area with increasing prices 
    • It’s been a while since they’ve conducted a neighbourhood inspection 
    • There’s an increase in property tax appeals or Requests for Reconsiderations in your neighbourhood 
    • Your neighbourhood is in “transition,” which is usually related to “gentrification” that impacts property values

Because building permits are a common trigger for in-person visits, many home improvements are a red flag to MPAC for in-person assessments.  However, avoiding permits is not a good idea. 

Does the idea of a DIY sound a little too intimidating? Read our Not-So-Handy-Person’s guide to home renovations right here.

When You Need a Permit

Permits are important because they protect you from poor construction that can jeopardize your home. Not to get all “you should follow the rules” on you, but you don’t want to live in a house that’s not structurally sound or up to code. Not only is it unsafe, but you’ll run into significant issues when you sell. 

So, when do you need permits? Here’s the list:

  • Carport/attached garage 
  • Interior renovations including: 
    • Basement finishes 
    • Accessory apartments or the addition of a second suite
    • New or altered plumbing or mechanical systems 
  • New cut-outs required to install non-existent windows or doors  
  • Drain repairs
  • Green roofs
  • Chimney/fireplaces that are not direct vent gas 
  • Recladding with brick or stone veneer 
  • Additions 
  • Backwater valve installations 
  • Exterior basement stairwells or entrances 
  • Pool fence enclosures 
  • Deck/porch/balconies over 60 centimeters above the ground 
  • Accessory structures larger than ten square meters, like a garage

You don’t need permits for repairs or replacements, but you do for upgrades that impact building codes. Whether you DIY it or use a contractor, you’re responsible for getting building permits. While we love to support girl power and DIY weekend warriors if you don’t understand building code, you could find yourself in a bit of a pickle. Therefore, our motto is that anything that impacts walls, plumbing, and electrical is best left to the professionals. 

Tax Balancing Act

On the plus side, tax breaks or grants might help offset property tax increases. For example, the Substantial Renovations and GST/HST New Housing Rebate allow you to recoup up to $36,300 in the GST paid on your home renovation materials and services as long as changes are made to the majority of your home. There’s also the Canada Greener Homes Initiative. This could entitle you to up to $5,000 for eco-friendly upgrades for eligible home retrofits and up to $600 towards the costs of pre- and post-retrofit EnerGuide evaluations. 

Looking for more home renovation resources? Read these blogs:

Best Renovations for Return on Investment

Before investing time and money in renovations, we strongly advise discussing your home improvements with your real estate agent (or us, we’re happy to help!). We know what improvements add value to your home, which will be a waste of time, and which could hurt home value. For example, exterior renovations might not get you as psyched as a new kitchen, but they add lots of curb appeal, which translates into excellent ROI. They’re also the types of improvements assessors spot easily. However, exterior upgrades like new garage doors or trendy manufactured stone veneer that’s all the rage right now will see close to 95% ROI. So, you need to consider if potential ROI outshines the expected property tax increase.

While it might seem a mega kitchen or bathroom renovation is the direct route to increased home value, kitchen and bath renovations see far more ROI when you keep them simple and classy. For example, a major upscale kitchen reno over $175,000 only sees a 52.5% ROI compared to a meager sweet little upgrade for just $30,000, which sees 72%. Same for bathrooms. That $85,000 spa-city bathroom remodel you’ve been dreaming about only sees a 53.5% increase, while the demure bathroom costing about $28,000 gets you closer to 60%. The last thing you want to do is over-renovate with finishes the average buyer in your neighbourhood just isn’t willing to pay for. As well, lower-cost “cosmetic” changes don’t require permits. 

Wrapping It Up

It’s essential to consider the money invested and what it will get you when you sell, property taxes, and all. Modest home improvements done well usually tend to increase home value for the best ROI. Before jumping into your next home improvement project, be sure you understand the following:

  • The increase in property taxes and timing for the next MPAC assessment rotation
  • The permits required
  • The expected ROI
  • Possible rebates and grants

When you clearly understand these contributing factors, you’ll avoid issues and make the most of your home improvement plans. 

If you’re looking for the best Toronto real estate team to guide you on your real estate decisions, call The Christine Cowern team at 416.291.7372 or email us at hello@christinecowern.com. We’d love to work with you!