Edmonton considering property tax overhaul to encourage density
Edmonton is considering overhauling the structure of its property tax system that would levy more on owners of single-family homes in a bid to encourage density.
It would likely be a first in Canada and could be a tough sell in a city where two-thirds of residents live in low-density areas. But it would coordinate tax policy with the city’s development goals. And it would address the long-standing inequity of multi-unit tenants paying more than their fair share from municipal coffers.
This inequity is not unique to the Alberta capital. In many Canadian cities, multi-unit buildings are subject to a higher property tax rate, which is often passed on to tenants through their rent, than single-family homes. And because it often costs less to provide urban services to higher-density buildings, their residents effectively subsidize urban sprawl.
“How we tax should be at least somewhat commensurate with the cost these properties” represent to the city, said Anne Stevenson, the Edmonton councilor who is advocating for the tax change.
The city’s executive committee, a subgroup of council, recently backed Ms Stevenson’s motion asking staff to consider adjusting tax categories. Their report is expected later this year, and any recommendations will need to be approved by the board.
The first task of the municipal staff is to examine the possibility of lowering taxes on multi-unit buildings and increasing them on single-family homes, with the aim of harmonizing rates without affecting the City’s budget. . And, more radically, they seek to reverse the current situation and tax low-density properties at a higher rate than multi-unit buildings in an effort to incentivize the kind of development the city wants.
According to city assessor Cate Watt – director of the assessment and taxation division, density-based residential taxation would be a first in the country. She warned that such a change may not be enough to alter the behavior of developers or homebuyers, as property taxes are low relative to property prices. And she said its effect may be impossible to identify in broader market factors. She therefore remains skeptical, but she is also intrigued.
“I’m going to talk about it as a person, instead of wearing my civil servant hat,” she said in an interview considering the nuanced implications of such a change in policy.
“Sometimes the signage is worth it on its own. Whether or not we change a person’s mind about whether to build more densely or move into denser housing, the fact that we align what the city wants to do in terms of goals around the density with the way we tax is maybe a good reason to do it.
The city currently lists most multi-unit buildings in its “other residences” property tax subcategory, charging such buildings a 15% premium – explained as a way to account for the fact that these properties operate as residences. commercial enterprises. The rule applies when four or more units are on one deed, meaning condo and co-op owners are exempt.
Ms Stevenson said density-based property tax levels are just an idea. Other options, she says, could help, including lower taxes for buildings near public transit, structures built to higher environmental standards, or other criteria.
“What makes running a city expensive is when we keep building new infrastructure to serve low-density areas,” she said.
This is not a new achievement, but an achievement that has been slow to take root in town halls across the country. A number of municipalities have begun to recognize, however, that tax revenues collected in high-density areas are used to subsidize residents further afield, where homes are often more expensive.
A consultant’s report produced for the City of Ottawa revealed that it costs the municipality $465 per year per person to serve low-density suburban residences. But for homes in infill areas, the city collects $606 more each year per person than it costs to maintain them.
In Edmonton, a Consultant’s report 2020 found that the municipality’s long-term development strategy for more density would save money by keeping growth within current urban boundaries. This would reduce the need for new roads, fire stations and municipal amenities, although some of the savings would be absorbed by additional transportation costs.
Sprawl advocates note that cities often levy fees to build new infrastructure and that developers must finance certain public assets as part of their projects. But critics counter that the new owners are still not paying the true cost.
“Here’s the catch: whatever developers build in subdivisions at their own expense, as soon as it’s built, the municipality becomes responsible for [maintaining] it,” said Ray Tomalty, founder and principal of consultancy Smart Cities Research Services.
“Growth really doesn’t pay for growth. It’s a nice phrase, but that’s not really how it works. There is a big grant for growth.
However, resolving this issue is a political hot potato in Canada. In Edmonton, most residents live in single-family homes, so a tax change would compress many while saving money for a few.
But Ms Stevenson argues that by encouraging higher-density development, such a policy shift would ultimately lead to a more tax-efficient city.
“There is perhaps this perception of a proportional change, in terms of who pays what proportion of the tax bill,” she acknowledged. “But the idea is that the overall tax bill itself goes down over time or, you know, slows down [its] growth, because we will build in smarter ways that won’t create huge maintenance costs for us as a city in the long run.
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