The biggest worry for any municipal politician is increasing property taxes. Budget season is often the only time many voters will think about regional council; the most important voting bloc are homeowning seniors; and the pressure to limit property tax (which funds most of HRM’s budget) is intense.
In Nova Scotia, limits to property tax increases are not just political but legislative. While the province assesses the fair-market value of properties, it overrides those assessments with the Capped Assessment Program. The CAP mandates that taxable assessments increase by no more than Nova Scotia’s inflation rate for all one-to-four-unit properties owned by Nova Scotians. While the current policy dates back to 2008, it has gained importance in recent years since house prices have boomed (doubling since 2017).
The effect for HRM has been a growing wedge between the value of the properties it services and the value it can tax. In 2020, this totaled $3 billion (5% of HRM’s total assessed value). This year, the untaxed portion has surged to $23.5 billion (22% of HRM’s assessed value). At the 2024 tax rate of 0.77%, the city is effectively losing $181 million in tax revenue because it can’t tax that $23.5 billion worth of property. About a fifth of HRM’s budget is not being taxed due to the CAP.
That lost revenue includes the lucky owners of south end mansions—like the one pictured above. With its capped assessment $3.6 million below its assessed value, the owners are saving $28,000 per year on this property alone.
I mention “this property alone” because Nova Scotia’s CAP goes above and beyond protecting longtime householders from a superheated real estate market, by also protecting an unlimited number of investment properties. My own landlord pays taxes based on a value of $336,000 for a duplex valued at $683,000. Why do the super-rich and very profitable small-time landlords need such extreme and unlimited tax shields?
To be fair, HRM could try to offset the fiscal impacts of the CAP by increasing its tax rate. Instead, during the mayor Mike Savage years, it mostly cut the rate. Clearly, the political pressures against raising property taxes are dominant. And a world without a CAP might not be a world where HRM would raise taxes enough to fix roads, pay library staff adequately, or keep the ferry running without frequent cancellations. In Ontario, booming house prices and fear of tax hikes has prompted the government to simply not update assessments at all, leaving assessments pegged at 2016 prices.
But the CAP’s impacts now go far beyond the chambers of City Hall. The immense tax savings from capped assessments, and the fact that they roll-off upon sale, are causing huge pain for new homeowners.
Buyer beware
If you are lucky enough to be a first-time home buyer, congrats! It surely hasn’t been easy, saving up a downpayment despite high rents, while having to pay a sky-high price and finance it at higher mortgage rates. But you should brace for another hit, a mega-hike in your property tax bill. The median residential property has a taxable assessment that is only 60% of the assessed value. That means a “CAP reset” will push your tax bill up 67% in your first full year of homeownership. Some homebuyers have seen their tax bill double compared to the previous owners. It’s hard to overstate the generational unfairness of putting young families under such stress, especially when the vast majority of longtime homeowners have seen their tax bills rise by less than inflation (combining the CAP with tax rate cuts).
It also raises the absurdity of our politicians grumbling about tax hikes, often under the guise of looking out for seniors, who overwhelming will see a tax hike of just 1.5% plus or minus the change in the tax rate (which mayor Andy Fillmore has promised to freeze for two years). Seniors facing true financial hardship also have a range of options, including deferrals and a 50% rebate program run by the province. But the politics of the issue rarely allow any commonsense debate.
Meanwhile, if you are an existing homeowner with a low CAP’d assessment, you should do your best to hold on to it. It‘s the right financial choice.
But it further worsens the housing crisis, as aging homeowners get “locked in” to homes that may no longer fit their needs. Research on California’s infamous Prop 13, which operates similarly to the CAP, has found that the low property tax bills extended housing tenure significantly, sometimes for years in areas where Prop 13 mattered most. By contrast, research into high-property-tax Texas shows that higher property taxes get owners to shed housing much sooner in their lifecycle, freeing up homes at lower prices to young Texans.
To sum up: The property tax CAP makes it harder for Nova Scotia municipalities to raise revenue. It pushes all the tax savings into the pockets of the least needy, long-term property owners, according to how many properties they own, or how luxurious those properties are. Meanwhile, it pushes all the costs onto new buyers, young folks already struggling to afford housing, and encourages the rich to hoard housing in the process. Just making everything worse.
Deny Sullivan, an economist based in Halifax, provides chart-heavy analysis of housing and local economic issues on Deny’s Substack.
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This article appears in Feb 1-28, 2025.
Two axioms come to mind.
Regarding the introduction of the CAP: The road to hell is paved with good intentions.
Regarding the elimination of the CAP (which the author does not address): Sorry, you can’t get there from here…
You make very many good points in this articles.
But….
Removing the cap would be financially devastat8ng to some seniors living in a fixed incomw and force them out of their homes.
Why?
The “50% tax refund” you mention in your article does not exist. What does exist is an $800 refund, (or 50% of taxes, whichever is lower). I don’t know anyone paying $1,600 for taxes, so I’m effect, the refund is $800 for those of limited means, which is established through an income test based on their previous year’s income tax return.
If the cap on assessments is removed, so should the cap on the refund be removed, while maintaining the income test.
In your article, you say seniors can get
Beyond belief that the cap applies to investment properties. I don’t think most people are aware of or would agree with that. Seems opposite to the original intent of protecting ancestral property owners. Considering the state of municipal finances and infrastructure this needs to be changed ASAP.
Please please stop rocking this boat. Just stop it.
The city needs to diversify its revenue streams (for any business having 85+% of revenue from one source is super risky) not keep asking for more money from citizens who are already affected by inflation, corporate greed, stagnant wages, and economic uncertainty. AND we already paid an increase that was double the rate of inflation last year -when will it end?!
If they need to take off the cap from homes over $1M, fine but we need seniors to stay in their homes for as long as possible (there’s no space in the next stage for them!) and there’s no reason to punish homeowners who have no control over artificially inflated house values.
We bought our house (4 bedrooms in suburban Dartmouth, nothing fancy!) in Oct 2020 (to save paying Halifax peninsula rent) and in just over 4 short years the market dictates that we can sell our house for double what we paid. That’s insane and a product of different factors like supply/demand, poorly planned immigration, and fluctuating interest rates- all things typical citizens have 0 control over. Without the cap, we’d be forced to pay thousands of dollars we can’t afford and then where would we go?
Citizens aren’t holding on to all of this revenue people think an increase is going to generate. The money has to come from our budget somewhere like groceries, which are already over the top.
Please stop pushing this opinion, stop suggesting that citizens pay for the poor planning of government. Stop rocking our boat!
The property tax CAP is a poor piece of policy that creates a system of unfair taxation.
Each year municipal governments determine the amount of money they need to raise and set property tax rates accordingly. If the total value of property the government can levy taxes on increases less than spending needed to maintain services then the tax rates go up, this means even if your assessed valued stayed the same you would still pay more taxes. If the tax CAP were removed it doesn’t necessarily mean you are going to pay more taxes. Looking at the 2025 figures, removing the CAP would result in a 29% increase in the property tax base (106 billion / 82 billion) however since government spending would increase 3 -4% if means the tax rates would be set lower and offset the large increase in the assessed values.
The CAP unfairly burdens people who are least able to afford it. If a first time home buyer or a new family looking for a bigger place wants to move they are going to be paying more taxes than their neighbors. People that have been in their homes longer are likely older and making more money than new buyers. Why should a young family or a first time buyer be paying in some cases 50% more property tax than their neighbor who has a similar house and uses the same roads, sidewalks, and schools as them? This is hugely unfair. The CAP should be phased out over several years to address this inequality.