VANCOUVER (NEWS 1130) – Here’s an argument that homeowners in Vancouver probably don’t want to hear — they actually pay the lowest property tax rate on the continent and it wouldn’t be a bad thing to increase it even more.
Vancouver City Council got an earful from angry homeowners at a special budget meeting on Tuesday, speaking out against a proposed 8.2 per cent property tax hike next year.
But economist Alex Hemmingway, with the left-leaning Canadian Centre for Policy Alternatives, points out property values in Vancouver have skyrocketed over the years, and the rate of taxation has gone down to compensate for that.
“The rate of tax that applies to the value of properties in the city have really plummeted over the past couple of decades. We actually pay the lowest rate of property tax in North America in Vancouver,” Hemmingway tells NEWS 1130. “As a result, we are actually taxing a smaller and smaller portion of the really enormous levels of land wealth in the city.”
He calculates that Vancouver’s rate of property taxation is 0.25 per cent — less than half the rate in Toronto.
Regardless, Vancouver homeowners face the prospect of paying hundreds of dollars more in property tax and utility bills next year, but Hemmingway suggests they have it better than they might think.
“Well, again, it truly is the lowest rate in North America. It is the case where the dollar amount of property tax bills are increasing, but the point I’m making is that it is increasing much much more slowly than the levels of property wealth in the city and we need to take that into account. That extreme level of property wealth accounts for a huge amount of inequality,” he argues.
“It also fuels speculation. When we have these very low levels of property tax, it actually encourages the holding of residential real estate as an investment rather than simply as a home.”
Hemmingway also argues property owners have it good compared to renters in Vancouver.
“We are talking about an 8.2 per cent property tax increase. For a typical condo, that is $89. For a typical detached house, that’s $211 plus an increase in utility fees,” he explains. “Compare that situation to a renter paying $1800 per month in rent. Under the allowable rent increase for next year, you annual rent would be going up by $560 and you are not benefiting from any of those huge increases in property values.”
Hemmingway believes taxing a “reasonable portion” of those increases in land wealth could help increase Vancouver’s investment in affordable housing.
“We should be looking at increasing property taxes in the city over time. One of the fairest ways to do that would be to bring in a form of progressive property taxation where higher end properties actually pay a higher rate, just like we see in the income tax system.”
He says the provincial government has taken a step in that direction, implementing an additional school tax on properties over $3-million.
“There’s also an important function in the city’s empty homes tax and the provincial speculation tax to discourage leaving homes empty — that’s very important — but when you look at the broader city, what we have seen is just the land under detached houses has increased by a couple hundred billion dollars since the mid-2000s,” he adds.
“That wealth is being taxed extremely lightly. That’s value we all create together through public investment in infrastructure — our roads, our sewers — all the things that make a city work and thrive is where that land wealth comes from. Currently that is only flowing to those who own real estate in Vancouver.”
Hemmingway believes it makes sense to tax a larger portion of that wealth — share it — to increase investment in areas like housing and childcare.
Vancouver city council is expected to vote on the 2020 budget — including the property tax hike — before the end of the year.
-With files from Kurtis Doering and Ian Douglas