Toronto city council is forging ahead with a plan to axe a proposed stormwater surcharge dubbed the “rain tax,” and instead expand subsidies for homeowners to protect their basements from flooding and install green infrastructure.
The stormwater surcharge, which would have taxed property owners based on how much of their land is paved and unable to absorb rainwater, was met with a flood of negative media attention when it was announced.
City staff recently recommended dropping the proposed rain tax following pushback from residents. In doing so, they’ve drawn the ire of some environmentalists and a group of Toronto manufacturers who said the surcharge would have distributed the cost of flood mitigation more fairly.
Subsidies for homeowners
With the rain tax off the agenda, city council is eyeing other ways to manage stormwater, coming on the heels of devastating flooding last summer estimated to have caused nearly $1 billion in damage.
City council approved a motion on Wednesday to develop a plan to expand two existing subsidies for backwater valves and sump pumps, and introduce a third new incentive under the city’s Basement Flooding Protection Subsidy Program.
Currently, the city offers homeowners up to $1,250 to install a backwater valve, which prevents sewage from flowing back into one's home when the sewer system is overflowing, and up to $1,750 to install a sump pump, which removes water from low-lying areas like basements.
It’s unclear how these two subsidies will be expanded. The general manager of Toronto Water has been directed to report back to councillors in the third quarter of 2025 with recommendations for subsidy amounts and eligibility requirements.
Details on a new subsidy for homeowners to conduct stormwater resilience assessments on their homes will also be developed by the general manager.
City council has also directed city staff to look into implementing a “green infrastructure incentive program” to subsidize features like rain barrels. Currently, Toronto homeowners can apply for a number of rebates for eco-friendly home additions like heat pumps and rooftop solar panels, which are sponsored by various levels of government.
Apart from rain barrels, the motion did not specify what kinds of green infrastructure would be included in the incentive program.
Manufacturers, environmentalists speak out in favour of rain tax
City council agreed to “indefinitely suspend further consideration” of a stormwater charge on Wednesday. The issue has presented a rare case in which Toronto manufacturers and environmentalists appear to be on the same side of the fence.
The Toronto Industry Network (TIN), which represents manufacturers like Concrete Ontario, Irving and Shell Canada, expressed it was “surprised and disappointed” that the stormwater charge is no longer being explored.
The rain tax likely would have helped lower water bills for most manufacturers, who typically use large amounts of water for their operations.
As it stands now, a portion of all water bills already goes toward stormwater management — meaning individuals and businesses that use more water end up paying more for flood mitigation.
The rain tax would have reduced the overall rate Torontonians pay for water by about 25 per cent, the city estimated, by forcing property owners that contribute the most to flooding to foot a larger portion of the city’s stormwater management bill.
Under the now-abandoned plan, those property owners would have paid an extra $1.68 per square metre of “hard surface” on a property.
The city estimated that residential homeowners would have seen the largest increase to their water bill under the stormwater charge, with condo and apartment owners seeing the biggest reduction.
Most industrial property owners would have also seen a reduction to their water bill, except for the largest properties, the city estimated.
“The current policy of allocating the cost of the City’s stormwater management and water service costs is inequitable and unfair to all large water users,” wrote TIN president Craig McLuckie in a letter sent to city council.
McLuckie added that TIN has been consulting with the city for over 10 years to develop a stormwater charge based on lot size and the amount of impervious surface on a property.
The rain tax being discontinued has “sent a strong signal” to industry leaders in Toronto, McLuckie wrote, suggesting that some manufacturers may be looking to move operations outside the city.
“Toronto needs its manufacturing community for the direct and indirect jobs it provides, the high taxes it pays and the products it produces,” McLuckie wrote. “Competing with other jurisdictions to retain business in Toronto is paramount.”
Environmentalists also called on the city to reconsider abandoning the rain tax, arguing it puts an undue burden on small property owners to pay for flood mitigation.
“Why should residents subsidize costs of flooding that are caused by owners of large impermeable lots?” asked Lyn Adamson, co-chair of ClimateFast, in a letter to city council.
Adamson also questioned why the city is shelving a measure that would bring in revenue, a sentiment echoed by Emmay Mah, the executive director of the Toronto Environmental Alliance.
“Closing a door on a financial tool that you will need to fund basement flooding and green infrastructure projects in your wards is a very bad idea,” Mah said during a Jan. 28 meeting of city council’s executive committee.
“The recommendation to walk away from a stormwater charge means that your residents, including small property owners or condo residents, are going to keep paying more and more in their water rates to fix this, while big paved properties like malls will continue to pay little or nothing,” she said. “This is not fair or effective.”
Large properties like malls, which are over a hectare in size, make up about one per cent of properties in Toronto but account for 37 per cent of the total hard surface area in the city, according to a city report. The majority of these properties would have paid more for stormwater management under the rain tax.
