A modest tax proposal

Should house owners be taxed at a different rate than apartment and townhouse dwellers?

A modest tax proposal

Last year, a group of homeowners in the City of Langley saw their wealth increase, on average, by more than $180,000.

You can imagine what has happened since: that city, worried that a $100 tax increase puts too high a burden on such homeowners, has asked for the power to be able to hike the taxes of townhouse and apartment dwellers who saw less-dramatic jumps in their personal net value.

What’s that? You think that sounds… strange?

Well, there is a rationale for the idea. Whether it’s a rational rationale is another question.

Across the Lower Mainland, assessed home values spiked last year, but they went up, on average, far more for single-family houses than dwellings. However, a city’s residential tax rate applies to all homes. That means that a tiny across-the-board increase in taxes can turn into a large hike if your home value increased far above average. Meanwhile, if you saw an increase closer to 15 per cent, you might actually see your taxes actually decrease.

Here, one gets the sense that politicians are becoming increasingly worried that when tax notices go out, homeowners seeing large increases will react in fury and blame their local council.

Such reactions would fly in the face of reality: even if council were to take an axe to its budget, tax increases would still be the likely outcome for those whose property values increased 60 per cent (compared to the city-wide 33 per cent average).

Homeowners, though, don’t instinctively think about the intricacies of tax policy and municipal-provincial jurisdiction when receiving their tax bill.

The Langley proposal aims to provide a way for any council to minimize those tax-hike disparities. As a townhouse-dweller myself, this sounded less than fair. Due to some issues that I won’t bore you with, homes in my complex somehow managed to decrease last year. That has me looking at a pretty substantial tax decrease coming July. (It also has my fellow strata members and I facing a $20,000-per-unit bill for renovations.) I did not major in economics, but I’m pretty sure that I would be better off had my home’s value gone up $30,000 last year, even if that meant paying more at tax time.

Taxing single-family houses at a lower rate also does not quite square with those who believe we need to incentivize the creation of more affordable, denser types of housing.

But perhaps ironically, the proposal couldn’t come at a better time for townhouse dwellers – were it to be adopted immediately, at least. After all, that increase in home values has already taken place; the gap between houses and attached dwellings has rarely been as large as it is now and it seems likely that the attached market will catch up at some point. When it does, under the current system, the tax bills of attached home dwellers like me will go up, while those of house dwellers will decrease.

Again, I’ll take that home-value increase over paying slightly more taxes.

But the City of Langley system offers a possible alternative for the future: a way for my home value to finally increase AND to not have to pay much more in taxes. Who (aside from the single-family homeowners who would be stuck with yet another tax increase) wouldn’t take that option?