These dramatic increases have left many wondering what will happen to property taxes. Will those also go through the roof?
That depends on whether the value of your house rose more or less than the average. Here’s how it works.
Municipalities first set their budgets. Next, they calculate the amount of tax increase required, based on the average property value in their district. That means homes with an average value will be taxed at the average rate, regardless of how much their assessments have risen.
Let’s say your municipality wants to raise property taxes three per cent. And let’s also say the average home value in your district has risen 25 per cent.
Then residents whose appraisals grew by this amount will face a tax hike of only three per cent, even though their assessment rose much more.
But suppose your home value climbed 30 per cent. In that case, your tax bill will rise more than three per cent.
Now it makes sense that owners of more expensive properties should pay a higher levy. But buried in this principle are some serious issues.
An overheated housing market not only drives up prices for everyone. It also widens the gap between high-valued houses and more modestly priced homes. That can result in owners whose assessments rise well above average being punished with ruinously high tax bills.
And if the market stays hot for several years, as it has in Vancouver? The prospect arises of some owners being taxed out of their homes.
For ability to pay doesn’t necessarily rise because property assessments go up. Many owners are senior citizens living on pensions.
It’s one thing to buy an expensive house, knowing how much your property tax will be. It’s another matter if the house you lived in for several decades suddenly jumps in value. That could leave you facing a tax bill you never foresaw.
This is what happens when a formula designed for normal times is blindly enforced during an abnormal spell. It produces results that no one intended.
California dealt with this problem by giving existing owners a break. Their property appraisals were held back, meaning the owners paid less tax. When the home was sold, it reverted to the proper assessed value.
Municipal councils in B.C. (with the exception of Vancouver, which has its own charter) don’t have this option. Their hands are tied by law. The provincial government, however, does have the authority to step in.
Property taxes are meant to be progressive, but they should also reflect an owner’s ability to pay. As well, they ought to bear some relation to the cost of municipal services.
The provincial election in May provides an excellent opportunity to canvass these issues. Each of the parties should be asked if they support the status quo, or if they are willing to permit some leeway in property-tax math.
