John Tory is proposing a new tax to pay for housing and transit that will cost taxpayers an additional 0.5 per cent per year on their property tax for five years beginning in 2017.

The mayor's City Building Fund proposal, which will charge Toronto taxpayers an additional 0.5 per cent per year for five years, would have to win council approval before going into effect.

If passed, Tory said the City Building Fund would take effect after the Scarborough Subway Levy expires in 2016. 

The new tax is expected to generate some $70 million per year, which Tory said would be invested in capital projects across the city.

"I think people have a choice, which is that we can continue with this grossly misleading approach that I think has been adopted in the past, which is to announce the approval of all these projects that we know we need, especially when it comes to transit and housing, but not making any provisions to how we're going to pay for them," Tory told reporters after his "State of the City" address to the Economic Club of Canada.

"Or, we can be honest about this and say that there's a way to pay for this in a designated fund so people know it's not going into a black hole."

The fund "won't solve the problem entirely, but it's a start,"  Tory told reporters, adding, that other sources of funding could be considered  in the future. The federal and provincial governments are expected to chip in for capital projects, as well.

In a news release, Tory said most households will pay an additional $13 per year.

Asked why homeowners are responsible for shouldering the burden, Tory responded because taxpayers have accepted a levy as a means to pay for a single transit project, the Scarborough subway, he felt a levy to support capital projects across the city would be an easy sell.

Coun. Denzil Minnan-Wong said he will support the levy when it goes before council as long as it's clear that the money won't be wasted and will go to transit, affordable housing, waterfront development and other necessary projects.

"The money has to come from somewhere," Minnan-Wong told reporters. "We can't just go to the money tree and harvest it. It doesn't exist."

Coun. John Campbell (Ward 4, Etobicoke Centre) said he, too, will support the levy because it's clear where the money is going.

"I think what frustrates taxpayers most is when they see taxes going up and they don't see any outcomes," Campbell said. "The roads are still in disrepair, things aren't happening as fast as they want them to."

Campbell also suggested that the city look at user fees as a way to fund capital projects, including highway tolls.

Meanwhile, Tory also discussed issues like traffic congestion and the city's cycling network during his address, which fell exactly one year after he was sworn in as mayor.