It’s property tax time again. If you own a house, chances are, your taxes are going up…way up. Again.
The local politicians will tell you that this year’s average property tax hike in your community probably “only” amounts to another $100 or so. No worries, they say, it’s only an average increase of maybe two or three percent.
It is easy to breathe a sigh of relief when you hear that, at budget time.
Until you get your tax notice. Then you discover that, once again, you are being nailed for several times that amount if you live in even a modest detached home.
Your tax hike this year might be several hundred dollars more than the citywide average additional hit, on top of the thousands you already pay in property taxes each year.
The cumulative impact of those tax increases is enormous for many homeowners. You can check out here how much the various layers of property tax have gone up in any given municipality over the last decade.
The hard facts
The provincial government’s figures show that even before this year’s property tax increases take effect, annual taxes and charges on a so-called “representative house” in Vancouver have gone up by a whopping $2,446 over the past decade. From $4,092 in 2005, to $6,538 in 2015.
Try paying for that if you live on a lower income, on a fixed income, or if you are raising a family and living on a typical working wage.
That increased property tax burden alone would likely more than wipe out any raise that most people might have had over that period, if they had one at all.
Sorry about that, the politicians all say, as they try to suggest it is mostly an unfortunate consequence of rising property values.
True enough, the assessed value of that same “representative” home grew from $585,798 to $1,532,937 over that last decade.
That’s half the May 2016 benchmark price of $3,442,100 for a detached home in Vancouver West and a little more than the $1,456,700 benchmark price in the same month for a detached home in Vancouver East.
Increased equity is great if you are selling your home. But it is small comfort for families with hefty mortgages who are struggling to make ends meet.
They are increasingly paper rich and cash poor.
Those property taxes targeting asset wealth are utterly insensitive to homeowners’ income levels and ability to pay.
Moreover, the true cost of that increased property tax burden is actually much higher, since it is imposed on after-tax income. To pay for it, most people would have to earn at least $3,000 or more in gross income. Fat chance your wages went up by that much over the last 10 years.
Over that same period, Vancouver’s population grew by 12.6 percent. Yet the total amount collected from all of those property taxes and charges grew from just over $1 billion to almost $1.5 billion—an increase of 50 percent.
Only 46 percent of that total for Vancouver is actually attributable to the city, per se. The balance is for school taxes, regional district taxes, TransLink taxes, and various other taxes and user fees.
That general municipal tax cost alone grew from $860 per capita to $1,047 per capita over the last decade. That’s an increase of $187—or almost 22 percent—for every woman, man and child living in Vancouver.
The real per capita cost of that increase is more than twice that amount when the other 54 percent of overall property tax costs and charges are included.
It is simply not sustainable. And remember, that is before this year’s property tax hikes are factored in.
In Burnaby, it’s a similar story.
The province says that the value of a so-called “representative” house there grew from $478,006 in 2005, to $994,435 last year.
In today’s crazy housing market, that wouldn’t exactly buy you a mansion. After all, the latest benchmark price for a detached home in Burnaby ranges from $1.2 million in the east, to nearly $1.6 million in the north and south.
The people who own those houses are typically pressed to pay their monthly bills with their modest family incomes. Yet the annual property taxes and charges on their “representative” homes soared from $3,544 in 2005, to $5,699 in 2015.
That’s an increase of $2,155—or about 60 percent—not including this year’s additional tax increase.
What about Richmond?
There, the government’s “representative” home supposedly climbed in value from $433,954 to $1,008,269 over that same period. By contrast, the latest benchmark price of a detached home is $1,643,400. That’s a typical house, not at all a palace.
The taxes and charges on that representative home surged from $3,442 to $5,633—an increase of $2,191—or almost 64 percent!
In Surrey, the annual property taxes and charges on a representative house went up by “only” $1,257, from $3,137 to $4,394. If you live there, lucky you. The average “representative” additional property tax hit was “merely” 40 percent.
And it is not just Metro Vancouver that is feeling the pain.
In Victoria, the overall property tax burden increased by $1,508 over the last decade, from $3,341 to $4,849. That is a 45 percent tax hike on a representative home that theoretically grew in value from $352,309 to $566,834.
Again, all of those examples were before this year’s tax increases hit home.
The hardest fact is how the tax bite hurts
Regardless of where you live, all of those increased property tax costs could not have come at a worse time.
They were imposed following the worst recession in almost 80 years; one that wiped out so much of so many taxpayers’ life savings and investments. They were imposed at a time when income from interest earned on those hammered investments is at an all-time low, which has been especially hard on seniors living on fixed incomes.
Worse, if your home’s assessed value increased more quickly than the municipal average, your taxes likely went up way more than those “representative” examples suggest. By definition, they would have certainly increased more than the citywide averages that are cited in explaining municipal budgets.
Then again, if you own a condo, chances are your property tax burden did not escalate quite so quickly or dramatically. At least, to the extent that its assessed value did not rise in tandem with the usually higher assessed values of detached homes.
How the provincial government is making the problem worse
Either way, those increases in property taxes are for many families the single most expensive additional cost of living expense they have had to endure over the last decade—and that’s saying a lot.
It is only one of several significant cost drivers that governments have imposed that are adding thousands of dollars of increased expenses on families. You can thank the provincial government for most of them.
Medical Service Plan premiums have more than doubled over the last 15 years. B.C. Hydro rates are rising at two or three times the rate of inflation. Bridge tolls are a crippling new burden that have been added onto higher fuel taxes, higher parking rates, higher ICBC rates, higher B.C. Ferry fares, and higher public transit fares.
The list goes on and on. All of those costs obviously make it much harder for most people to buy and own a home. They tend to most punish people who can least afford them.
Specifically, families living on low and fixed incomes. Working folks who are often obliged to live the farthest away from their job sites, in the distant ’burbs, because they can’t afford to live where they work, downtown. Families with young children who also bear the added burden of crushing childcare costs.
All of those government-imposed costs are either a tax on wealth—a home or a vehicle—or a fee for service that bears no relation to their users’ income or ability to pay.
Higher property taxes, in particular, are not just driving people out of their own homes. They are also compounding the real affordability pressures that are driving many British Columbians’ out of the housing market and shattering their dreams of home ownership.
As you are looking at your tax bill, know this. The Clark government wants to further increase your property taxes. Big time.
Or more accurately, it is trying to force Metro Vancouver’s local governments to raise your property taxes to finance sorely needed TransLink investments that the provincial government has shortchanged and frustrated at every turn.
Unless the municipal governments bow to its will, the Clark government is refusing to fund its share of public transit investments that everyone acknowledges are the key to creating more affordable housing.
In essence, it is holding hostage the needed improvements in public transit that are the single most important catalyst for creating affordable housing—by dint of withholding provincial funding for transit until the local politicians commit to raising property taxes.
If you live in Metro Vancouver, the B.C. Liberals think you are somehow undertaxed. Why? Because unlike residents of every other community in B.C., you don’t pay property taxes for hospital improvements.
It was a deal struck back in the 1990s that was supposed to create “tax room” for TransLink. And indeed it did.
In Vancouver, about 8.4 percent of all revenue collected from property taxes and charges in 2015 went to TransLink, up from about 6.9 percent in 2005. I’d say that tax room has been more than exhausted.
A few weeks ago we learned that Metro Vancouver’s mayors have thrown in the towel.
They felt they had no choice but to surrender to the Clark government’s demands to impose higher property taxes for their transportation plan, as a precondition for provincial investments public transit.
Remember that when you are shelling out the thousands of dollars you will pay this year in property taxes.
Think about that if you are considering buying a home, or are frustrated because you cannot afford to buy and/or own a home.
Don’t forget that when the B.C. Liberals try to assail the New Democrats for wanting to raise property taxes. They only do for those who don’t actually live in their houses, or who don’t pay income taxes in Canada, mostly foreign investors.
Perversely, they are the ones that the Clark government does not want to penalize with a new tax on vacant homes. Or through higher property taxes for those who profit from tax avoidance. Or through a new surtax on luxury properties, or new capital gains taxes to discourage speculation and flipping.
Those are precisely the kinds of measures we should be taking to tax things that we don’t want and to reduce the revenue pressure on governments to raise most homeowners’ property taxes.
Indeed, the only provincial party that is now agitating for local governments to raise your property taxes is the one that is now in government. The one that won’t invest in public transit unless it is successful in pressuring your mayor and councillors to further increase your property taxes.
It’s time to take pressure off of rising property taxes
I am not suggesting that you should let those local politicians off the hook for the increases they have imposed. On the contrary, they should also be held accountable for their tax and spending decisions.
They certainly need to do a better job of eliminating waste and of controlling their spending, which is outpacing economic growth as it drives higher property taxes.
By the same token, our local governments also need new forms of revenue.
The provincial government has refused to share any of its multiple revenue sources with local governments, to help offset their inordinate cost pressures for increased services and infrastructure.
The total budgeted amount for local government services and transfer payments actually went down in recent years, from a high of $456 million in 2010 under the Campbell government, to a low of $117 million in 2013, under the Clark government. Those cuts were not fully reversed in this year’s provincial budget, which only allots $171.5 million for that purpose.
As unconditional transfer payments from the province have shrunk and been eliminated, local governments have had to offset those revenue losses with higher property taxes, user fees, parking fees, license fees, permit fees and other such regressive revenue streams to pay their bills.
We need to change that.
Job One is obviously to minimize avoidable property tax hikes by reducing unnecessary spending increases and by eliminating wasteful expenditures.
Job Two is to rethink and reform property taxation, to make property taxes, other revenue sources, and tax relief programs more sensitive to people’s incomes and ability to pay.
Job Three is to broaden the range of revenues that are available to local governments, through new forms of revenue sharing with senior governments.
In my next article in the Straight, I will suggest 10 specific measures in that regard to make home ownership more affordable for those who really need government’s help.