As­sess­ing tax hikes

Own­ers of mil­lion­dol­lar homes shouldn’t be com­plain­ing about prop­erty tax in­creases, Michael Pren­tice says.

Ottawa Business Journal - - Front Page -

Own­ers of Ot­tawa homes that in­creased in value by more than 3.6 per cent over the past four years should brace for an in­crease in prop­erty taxes next year.

New assess­ments on all homes in On­tario take ef­fect in Jan­uary and will be valid for four years. The assess­ments are set by the Mu­nic­i­pal Prop­erty As­sess­ment Cor­po­ra­tion, an agency cre­ated by the On­tario govern­ment.

Per­haps to the sur­prise of many, MPAC has de­cided that the av­er­age res­i­den­tial prop­erty in Ot­tawa in­creased in value by a mere 3.6 per cent be­tween 2011 and 2015.

If your home is deemed to have risen in value by 3.6 per cent or less over the past four years, you face no in­crease in prop­erty taxes for the next four years due to the new assess­ments. How­ever, there will prob­a­bly be in­fla­tion­ary in­creases for all home­own­ers levied by Mayor Jim Watson and city coun­cil.

MPAC’s es­ti­mate of an av­er­age in­crease of 3.6 per cent in Ot­tawa home val­ues over the past four years is a sur­prise be­cause it is well below the in­crease in re­sale prices as mea­sured by the Ot­tawa Real Es­tate Board. The board’s fig­ures show the av­er­age price of re­sale homes rose from $343,000 in 2011 to $368,000 last year – a jump of about seven per cent.

Ot­tawa lags way be­hind most of On­tario in the rate of in­crease in hous­ing prices. Ac­cord­ing to MPAC, hous­ing prices through­out the prov­ince rose by an av­er­age of 18 per cent over the past four years.

The new assess­ments will be phased in over four years, mean­ing the av­er­age as­sess­ment in Ot­tawa will rise by 0.9 per cent each year from 2017 to 2020.

A re­cent col­umn in the Ot­tawa Cit­i­zen sug­gested that prop­erty taxes on ex­pen­sive homes are al­ready “sky high” due to ris­ing assess­ments. It said this presents a chal­lenge for older peo­ple on fixed in­comes.

These peo­ple may have lived in the home for years, the colum­nist wrote, adding: “A mar­ket-value-based sys­tem has driven each fresh as­sess­ment – and the sub­se­quent taxes – sky high.”

I beg to dif­fer. Prop­erty taxes for many home­own­ers are ris­ing – but only in line with in­fla­tion.

The sys­tem of bas­ing prop­erty taxes on a home’s value is rev­enue-neu­tral. Thus, home­own­ers are only hit with an aboveav­er­age in­crease in their prop­erty tax if the home’s value rises by more than the city av­er­age.

Ac­cord­ing to the Cit­i­zen, there are now more than 2,700 homes in Ot­tawa each val­ued at $1 mil­lion or more.

At the city’s cur­rent level of taxation, the own­ers of homes es­ti­mated to be

worth $1 mil­lion now pay about $10,000 a year in prop­erty tax. That’s about one per cent of the home’s value. And this per­cent­age is de­clin­ing as prop­erty val­ues rise across the city.

It’s of­ten said that se­niors are hard hit by the high level of prop­erty taxes. It’s sneaky to ar­gue the case for se­niors if you are not a se­nior. I’m a se­nior, and I’m strongly in favour of prop­erty taxes.

Here’s a thought: the prop­erty tax is the fairest of all taxes. Peo­ple – es­pe­cially rich peo­ple – of­ten find ways to lower their in­come taxes. Any­one who trav­els out­side the coun­try avoids Canada’s high sales taxes while they are away. But no home­owner can es­cape prop­erty tax.

Surely peo­ple liv­ing in $1-mil­lion homes – se­niors or not – should be able to pay $10,000 a year in prop­erty tax. If they’re se­niors, they prob­a­bly paid off the mort­gage years ago. If they are short of cash, why not bor­row a lit­tle of the eq­uity in their home? Their chil­dren prob­a­bly won’t like it, but too bad if they even­tu­ally in­herit some­what less than a mil­lion dol­lars.

I dare­say that peo­ple liv­ing in the av­er­age-priced home – with a mort­gage to pay and kids to feed – have just as much dif­fi­culty finding the money to pay their prop­erty taxes as those se­niors and oth­ers liv­ing in their mil­lion-dol­lar homes.

The big­gest whin­ers about prop­erty taxes seem to be those liv­ing in trendy neigh­bour­hoods (which shall re­main name­less here) where house val­ues are ris­ing much faster than av­er­age. These peo­ple love liv­ing in a hot neigh­bour­hood. Pre­sum­ably they are de­lighted that their home’s value is ris­ing faster than the city av­er­age. Yet some seem to be­grudge any in­crease in their prop­erty tax that is due to the aboveav­er­age in­crease in the home’s value.

For three of the past four years, these peo­ple have had their prop­erty taxes sub­si­dized by those whose homes showed a smaller in­crease in value or ac­tu­ally de­clined in value. That’s be­cause of an in­her­ent un­fair­ness in the prop­er­ty­tax sys­tem.

Cur­rent assess­ments rep­re­sent each home’s value in 2012. But any in­crease in assess­ments was phased in over the last four years. It is only this year, 2016, that the home­owner paid taxes on the full as­sessed value. My guess is that the On­tario govern­ment de­fers full im­ple­men­ta­tion of the prop­erty tax in­crease to get the whin­ers off its back.

So, if you think your home has in­creased in value by more than 3.6 per cent in the past four years, get ready to whine about a real in­crease – not just an in­fla­tion­ary in­crease – in your prop­erty taxes over the next four years.

Surely peo­ple liv­ing in $1-mil­lion homes – se­niors or not – should be able to pay $10,000 a year in prop­erty tax. If they’re se­niors, they prob­a­bly paid off the mort­gage years ago. If they are short of cash, why not bor­row a lit­tle of the eq­uity in their home? Their chil­dren prob­a­bly won’t like it, but too bad if they even­tu­ally in­herit some­what less than

a mil­lion dol­lars

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