Vancouver homeowners owe $36.8 million in property taxes
Spike in homeowners across Metro Vancouver delaying payment of property taxes
The number of homeowners in the City of Vancouver who borrowed money from the provincial government to pay municipal property taxes has jumped 30 per cent since last year.
More than 6,300 households in the city delayed paying their property taxes in 2016, under a provincial tax deferment program. Although that is only about three per cent of total residential properties in the City of Vancouver, it amounts to a $36.8 million tax bill footed by the B.C. government for just the one municipality.
A spokesperson for the Ministry of Finance said the program exists to help homeowners struggling to keep up with rising property assessments. In some areas of the Lower Mainland, property taxes have tripled over the past year.
Under the deferment program, the B.C. government will pay the annual property taxes of homeowners who are 55 or older, widowed or living with a disability at a very low interest rate of 0.70 per cent. Families with children or students of any age living at home can also apply for the program but will face a higher interest rate.
Wayne Mah, a mortgage planner in Vancouver whose firm works with homeowners enrolled in the program, said it can be a way for people to avoid being forced out of their homes.
"It's a way of budgeting," Mah said. "If it means staying in a home that you are comfortable in, it's a great way to do that."
It's not just Vancouverites who are taking advantage of the program. In Surrey, homeowners taking advantage of the program increased by 43 per cent over last year. In Burnaby, the increase was 38 per cent more, and in Richmond, 22 per cent more homeowners pushed back paying their taxes.
'There's a trade-off'
Tsur Somerville, a professor with UBC's Sauder School of Business, said the intent of the program is noble but there are a couple of issues with how it plays out in practice in B.C.
"There's a trade-off between wanting people to stay in neighbourhoods where they've lived their whole lives versus encouraging people to [downsize]," Somerville said.
The bigger issue though, he said, is that the program does not consider the homeowner's income. This means that someone who could afford to pay the taxes can instead invest that money in something else, rather than paying taxes to the government and make a profit.
Tom Davidoff, another professor at the Sauder School of Business, described the program as a give-away because of the low 0.70 per cent interest rates.
"That's a stupidly low interest rate, they should double or triple that," said Davidoff. "That`s the problem. They're giving away money for no reason."
Last year, the B.C. government lent homeowners across the province $137.4 million to pay property taxes. A spokesperson for the Ministry of Finance said they could not readily provide a figure for how much of that has been paid back because it would need to be manually calculated to account for new deferrals and partially paid loans.
The tax loan does not need to be repaid until the property is sold or ownership is transferred, meaning homeowners can delay paying taxes for decades as long as their annual application is approved.