Property assessments, taxes and rights

property taxesIt’s property tax assessment time and retirees see red and more red as taxes are hiked while income is eroded. And your property rights? Not in Canada.

A concerned pensioner has questions about the workings of the property tax on provincial homeowners here, and publisher Dorothy Dobbie responds:

Dear Mrs. Dobbie:

We love reading your Lifestyles 55 and were wondering if you intended to have article on property and school taxes.

As you are well aware, the present system is highly discriminatory in that the taxes imposed by municipalities and school boards are based solely on the value of one’s property and do not take into account the number of income earners living on the property or the income level of each.

Consider two identical houses with one occupied by a widow retired for 30 years, while the other next door has four people each earning a high salary. Both properties are assessed the same. Who do you think is being subsidized? In addition, the four people are all driving vehicles with the consequent wear and tear on the roads while the widow has to make do with public transit.

In our particular situation, being retired for 12 years, we are fortunate in that I have a pension whereas my wife does not, except for Old Age Security and the Canadian Pension Plan. However, one year after moving into our house we received a 13 per cent property tax increase due to reassessment while our pensions did not have anywhere near a corresponding increase.

I would be pleased to receive your comments on the above including how Manitoba stands in relation to other provinces in the assessment of property and school taxes and whether in your opinion the Manitoba or Canadian Charters are being violated.

Michael Gale

Dorothy Dobbie replies:

Dear Michael:

The Winnipeg tax assessments seem to be following the pattern across the country as we continue in this “housing bubble” that has lasted for the past number of years. A housing bubble is a period when property values soar above the inflation rate for an extended period. Contributing to housing bubbles are a combination of low mortgage and interest rates, easily accessible credit, net immigration and the quantity of housing stock in the marketplace. The situation is made worse when only the paycheques at the top end of the scale are rising. The top earners flock to the desirable homes and locations, engaging in bidding wars that drive up the prices all around.

In 2010, the CIBC was predicting that a “correction” was due to happen in the market. The general opinion is that the market is now more unstable than it has been in a generation. The federal government tried to fend off a housing market “correction” by adjusting mortgage entry requirements to cool things down, but this may be just a way of putting off the inevitable. The correction is bound to come and when it does, watch out. This is what set off both the U.S. recession in 2008 and the crash in Ireland.

If you look back, you will see that in the 1980s the average cost of a house in Canada was $75,000. In 2010 it was almost $350,000 (these prices include the “hot” markets in Toronto, Calgary and Vancouver). In Winnipeg today, the average home assessment is $233,800, while the average cost for a home is $280,000. House prices have risen an average of 12 to 13 per cent over the past couple of years according to the Winnipeg Real Estate Board.

Property taxes and other levies
When it comes to property taxes, in 2009 the Winnipeg average was $1,342 (exclusive of other levies and assessments and school taxes, which is another matter entirely). In Montreal the same year, the average was $2,921, and a 14-city average across Canada was $1,849. Clearly, we were at the lower end of the scale.

That’s not the end of the story, however. In Winnipeg, we are also subject to a number of additional municipal taxes including a frontage levy, which, according to a sample statement on a typical modest $287,000 home (City of Winnipeg website), would add an additional $513 onto a $1,815 municipal tax bill, hiking the property tax to $2,385 on the home in the sample. You can see the sample for  yourself at http://www.winnipegassessment.com/AsmtTax/English/pdf_forms/property_tax_res_en.html#hlp_17.

If you live in an area that “has requested the city to do work” you could also be assessed a menu of local improvement levies including watermain, wastewater sewer, ornamental street lighting, land drainage sewer – laterals and concrete street pavement, which in the sample add up to an additional $1,235.51!

You are also affected, however, and not equally across the city, by school taxes which are collected by the city on behalf of the province and the eight city school divisions. The effect of school taxes on your aggregate property tax bill will depend on what school division you live in. In the sample above, the school taxes ($1,844.91) exceed the property taxes, less the ($700) tax allowance from the province that was credited to the property owner on their income tax bill.

The bottom line at the end of the day is that this homeowner is being asked to pay $4,709 (or almost $400 a month) on his modest home. Add to that the cost of services for water, sewage, light, heat and power which will probably add up to another $300 a month and the average retired person on a fixed income had better have more than just his Canada pension and supplements (maximum about $1,450 a month) to live on. A senior living in this typical home would be paying over half his before-tax income to keep a roof over his head.

Michael, you are correct in saying that the assessment went up 13 per cent last time and you can expect anywhere from a nine per cent to 18 per cent increase in your assessment this time (average: 13.5 per cent). Is it unconstitutional, against the Charter of Rights or illegal? This appears to be a hopeless cause. A test case in British Columbia that was taken all the way to the Supreme Court sided in principle with a company which was being assessed unfairly (the company was being taxed at 37 per cent of the total revenue for the town), but ruled that it was within the municipality’s right to do so.

The fact is that we don’t have property rights in Canada. A government at any level can pretty much do what they like to us whether we protest or not. They can impose or give away rights of way to utilities or others; they can impose heritage designation upon a property restricting its value and your right of use; and they can tax you into poverty and then take your property away if you refuse to pay.

Thanks for your letter.

dorothy'sSignature

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