Property tax cap benefits the rich, costs cities

In this year’s budget, HRM's council reduced the proposed property tax increase for single-family homes to 5.8% from the 8% initially proposed by staff, and the city will bring in more money this year than last. The reason Halifax is able to bring in more money from a lower rate is because house prices have skyrocketed, and property taxes are based on the assessed value of people’s homes. Higher home prices mean more tax revenue for the city and the province, but not as much as it could be.

Rapidly increasing property values were also an issue during Darrel Dexter’s premiership in the early 2000s. People who had been living on the South Shore for generations were suddenly hit with massive property tax bills as the area got developed into the cottage destination it is today. In order to protect the Nova Scotians who live on the South Shore from paying rich cottager property taxes on their small family home, Dexter’s government brought in the property tax cap.

In the intervening years, as the real estate market has boomed, this property tax cap has helped people stay in their homes. As mayor Mike Savage pointed out early in the budget process, this is because people who bought earlier pay less than they would if they bought today. Since Savage bought his house years ago, he pays less property tax than he would if he bought his house today. This is because the property tax cap is anchored to the purchase price of the home.

And while this policy does help all homeowners in a limited capacity, it really benefits rich Nova Scotians who own multiple properties. They pay less in taxes than they should because, barring a few exceptions, their taxes are capped lower than they should be. Since some of the richest properties in Nova Scotia towns and cities are also owned by rich people, cities are getting less in property taxes than they should from their most lucrative properties. Which in turn hinders municipal service delivery, all to save some really rich people some extra millions.

This happens because for a property to qualify for the property tax cap, it has to meet the following criteria of eligibility:

• At least 50% owned by a Nova Scotia resident
• Residential property with less than four dwelling units or vacant resource property. For the CAP, residential properties include manufactured homes, manufactured home parks, cooperative housing and the residential or resource portions of a commercial farm
• Occupied by the owner, if the property is a condominium
• Owned for at least a year, or ownership remained within the family

For most people or families that own one house, this property tax cap saves some money and does some good in individual household budgets.

Who this policy really helps is very rich families. Take, for example, one historically monied Nova Scotia family, which in a 2016 had a whopping 73 properties listed in Property Online—some of which are houses, some of which are condos and some of which is land. In an assessment of those properties from 2011 to 2016, the assessment cap meant the family got to skip out on $3.5 million in property taxes across various municipalities in Nova Scotia. On the assumption someone in the family still owns all 73 of those properties, the total property tax subsidy today would be much, much higher. And that $3.5 million estimate is for just one of the historically monied families of Nova Scotia—and before the housing prices took off in 2020.

This policy could be changed to make the rich contribute to their cities as much (relatively) as their poorer peers. And the good news is, it would require a targeted approach which is, apparently, the approach favoured by the provincial government: Have the property tax cap only apply to a landowner’s primary residence, and put an upper limit on the assessed value the cap applies to.