THE SOURCE IS "Calgary Herald" Calgary homeowners could be facing a higher property tax bill in the coming years, and that’s not entirely a bad thing for property values, according to market analyst behind a recent report.
“I don’t think there is an appetite for drastic moves if that shift happens in Calgary,” says Kyle Fletcher,
executive vice-president of property tax Canada, Prairie region at Altus Group.
But he notes city council is considering the move to ease the burden on commercial rate-payers who have seen bills rise significantly in recent years because of the downturn in the economy.
Indeed Altus’s most recent 2019 Canadian Property Tax Rate Benchmark Report shows Calgary’s commercial-to-residential tax ratio saw the largest increase in Canada — at more than eight per cent. The ratio is 3.31, meaning the commercial rate is essentially three percentage points higher than the residential rate.
Altus Group’s also report notes Calgary already saw residential rates rise by 4.67 per cent in 2019, for the sixth consecutive year.
But commercial rates have jumped by more than 13 per cent in 2019 and about 55 per cent overall in the last four years.
What’s more Calgary’s residential property rate is among the lowest in the nation, whereas its commercial rate is much higher than other cities, Fletcher says.
“The average homeowner — based on the median price of a home in Calgary — pays about $3,100 a year in property taxes.”
Fletcher argues a small increase in residential rates to increase homeowners’ share of city revenues while reducing the burden on businesses may appear to be bad news for the real estate market. After all, it would likely add to the cost of homeownership.
“But small moves can make a big difference for commercial properties,” he says.
“If the city were to move an amount equal to $134 per year, or $11 a month, of annual tax to the average homeowners, that would have the effect of dropping the commercial tax rate by five per cent.”
And that could have a positive, knock-on effect for home prices, because easing the tax burden on businesses would likely have an economic benefit.
“That’s the hope,” he says, adding jobs ultimately drive real estate values because employment increases demand.
Calgary businesses have seen steep increases in taxes because of the downturn that has affected the downtown office space the most.
“The commercial assessment base has been dropping, which has the effect of increasing the rate when you keep the overall tax base level the same, if not grow it a little bit.”
Fletcher adds that so far businesses in the suburbs have had to make up the difference.
“Compared to Vancouver, Toronto and Montreal, the commercial to residential ratio may not be far out of whack, but closer to home, looking at Edmonton, Regina, Saskatoon and Winnipeg, it’s quite a bit higher,” he says.
In Edmonton, the ratio is about 2.4 per cent, but the capital city has similar commercial tax rates with Calgary. “But the residential tax rate is significantly higher in Edmonton.”
While a residential rate increase is not guaranteed, Fletcher believes it would be prudent.
“Maybe we will have fewer businesses closing, because that’s what’s going on right now with a lot of them suffering from the increased tax levy, so you might pay more tax on your house, but you also might still have a job.”