April 17, 2003
First in a series:
Canada’s political leaders, appalled at the absence of affordable housing for low- and medium-income Canadians, met in Winnipeg this week to discuss how they can help.
Their agenda neglected a good place to start: They can stop gouging the tenants they’re claiming to protect.
Along with alcohol and tobacco, housing – and especially rental housing – are among the most heavily taxed products in Canada. All three levels of government in our country keep it that way, according to a recent study by the Canada Mortgage Housing Corporation that quantifies each government’s contribution to the cost of housing.
All told, the taxes embedded in a modest rental apartment built in Halifax in 2002 totaled $10,697, the taxes in a modest apartment in Vancouver totaled $12,186, and in Toronto they totaled $14,146. In the suburbs of major cities, where tenants are often unwanted, the taxes in apartments can soar higher. Vancouver suburbs Burnaby and Surrey logged taxes of $14,074 and $16,292 respectively while Toronto suburbs Vaughan and Mississauga topped the CMHC charts at $21,710 and $22,280 respectively. As a result of these taxes, which inflate building costs by more than 20%, Vaughan and Mississauga tenants in modest apartment buildings pay far higher rents than they otherwise would.
Most of the federal, provincial and municipal taxes on new rental units bear scant relationship to the services tenants will ultimately receive. The monies – pure profit, from the governments’ point of view – typically go straight to the governments’ bottom line, to spend as they wish.
But the tax take from tenants has only just begun. To the plethora of taxes loaded into the cost of building an apartment, some provinces add hidden property taxes specially designed to take advantage of renters. Picture two identical apartment buildings, side by side on the same block of the same municipality. Convert one of them to a condominium and most of the tax that the city had collected for each unit can disappear. In Toronto, renters pay almost three times as much in property tax as do condominium or house owners; in Windsor, renters pay more than twice as much; in New Brunswick, almost twice as much; in Saskatoon, 70% more. In other provinces, tenants and owners pay the same property tax rate, but the government then slips the owners rebates – $400 a year in Manitoba, $470 a year in B.C.
Our governments don’t discriminate on the basis of house type: Detached or semi-detached, bungalow or monster home, all are taxed at the same rate. The equality of taxation ends, and the discrimination begins, when governments judge different types of occupants rather than different types of homes. Owner-occupants get the red carpet treatment, tenants get the door.
Some commentators argue that home owners deserve special preferences – because they have an ownership stake in their communities, the theory goes, they make for better citizens. These theories doubtless influence some lawmakers: For this and other reasons, many governments explicitly provide subsidies in order to convince tenants to abandon their rental apartments for home ownership. Those who can’t afford to buy homes, even with the subsidies, or those who prefer to rent out of a lifestyle choice, are forced to pay for the privilege.
Current value assessment – a property tax system that many provinces are moving toward – provides another opportunity to overtax homeowners in general, and tenants in particular. Under CVA, taxes rise automatically when property values increase, which especially occurs in the tenant-rich downtowns of large cities. Politicians like automatic tax increases that come of CVA, which removes their need to face the taxpayers they represent. As a bonus for politicians, rental buildings are typically valued on the basis of the rents they fetch. Every rent increase on tenants thus gets boosted via a hidden tax that tenants blame on landlords.
Governments abuse tenants for good reason: Tenants are more vulnerable, more transient, less educated, less organized and less likely to vote than homeowners – in short, better prey. By overtaxing tenants relative to homeowners, politicians can keep homeowners at bay and increase their prospects of reelection. To salve their guilt and that of some homeowners, who know they’re benefitting at the expense of those less well off, governments return a pitifully small part of their take to tenants in the form of “affordable housing” programs of various kinds.
To the delight of politicians, organizations that espouse tenants’ rights don’t condemn the systemic discrimination that dooms tenants to be second-class residents. These organizations, instead, plead for larger pittances with which to fund more affordable housing.
The meeting in Winnipeg of politicos had everything to do with affordable housing programs, nothing to do with providing fair play to tenants. In former decades, before governments perfected the means of picking tenants’ pockets, tenants had much affordable housing and little in the way of affordable housing programs.
Lawrence Solomon is executive director of Urban Renaissance Institute and Consumer Policy Institute, divisions of Energy Probe Research Foundation. www.urban.probeinternational.org, E-mail: LawrenceSolomon@nextcity.com
Monday, April 28, 2003
I have been a property manager for more than 30 years in Ontario and in Alberta. There are other areas of “taxation” that also seriously affect the availability of affordable housing. Here are a few:
– Condominiums are entitled to rubbish collection in the same manner as a single-family homeowner; rental properties must provide commercial rubbish collection. In Calgary, only the cost of container rental is billed to a condominium – in a bare-bones townhome condominium, the cost of container rental equates to about 5% of operating costs. The cost of rubbish removal from comparable rental properties is dramatically more.
– When the government of Alberta offered the Natural Gas Rebate Program last year, rental properties received a $3-per-gigajoule rebate; condominium owners were given a total rebate of $600 per household. We manage three small condominiums which did not actually have to pay a natural gas bill for 12 months while comparable rental properties received only a short-term reduction.
– In Calgary, Calhome Properties (which is owned by the City of Calgary) has subsidized the rental market with low-cost, income-geared housing and in fact skims the best long-term tenants from the market by their selection process. Calhome offers below-market rents to tenants, is heavily subsidized and seeks to maximize revenue and income by selecting tenants who have the highest income qualifications permitted.
Over the past 12 to 15 years, a substantial portion of the residential rental inventory in Calgary has been eroded through condo conversions or the sale of formerly MURB’d (Multiple Unit Residential Building) residential condominium units. “Highest and best use” has determined that the investor owners can achieve their best return through the sale of rental properties to first-time home buyers.
The availability of affordable low-cost housing will continue to decline until all three levels of government commit to changing the model for rental housing with realistic incentives to encourage investors to build/buy and hold a rental housing inventory.
Brian Franks, president, Bowside Property Management Ltd., Calgary
Thursday, April 17, 2003
Very enlightening. Further proof that welfare programs, contrary to popular belief, are not for the benefit of the needy, but for the bureaucrats that administer them.
Warren D. Green, Claresholm, Alberta