B.C. Minister of Finance Brenda Bailey tables the provincial budget as Premier David Eby, right, looks on in the assembly at legislature in Victoria, on Feb. 17.CHAD HIPOLITO/The Canadian Press
Provincial tax hikes have left some British Columbia housing advocates and analysts wondering where the love is for seniors.
In its latest provincial budget, the government changed its decades-old property tax deferment program. Homeowners who can’t afford to pay their property taxes upfront will incur a higher interest rate for deferring them. Until now, disabled homeowners and people over the age of 55 have been allowed to defer their taxes each year until the home is sold or transferred, with a low-interest fee charged.
The change, which goes into effect this year, means seniors who choose to defer their property taxes are looking at an interest increase of four percentage points. The previous charge was a generous two points below prime. The new charge is two points above prime. As well, the new rate is compounded monthly, so homeowners pay interest on interest.
The prime rate and annual taxes will always fluctuate, but regardless, the new rules guarantee higher costs.
Seniors can defer as long as they maintain 25 per cent equity in their homes. The higher rate means a more rapid reduction of their equity. Advocates are concerned that seniors who planned to use their home equity towards the costs of future long-term care will have fewer funds once they sell and repay their tax debt.
B.C. to raise taxes, cut jobs as budget projects record deficit
Real estate consultant Michael Geller had been lobbying the government to make the change for years, and he said he advised Finance Minister Brenda Bailey on how to do it. He used his own situation as evidence that the program was being misused. Mr. Geller had for years deferred taxes on his west side home because of the ultralow interest. He said he no longer plans to use the program now that it’s been changed.
Deferred tax money will remain at the old interest rate. Only new deferments will get charged compounded interest at the extra four per cent.
Mr. Geller said increasing the rate was the easiest way to weed out those who didn’t need the program, and for those who do need it, it’s still a good deal.
“Hopefully, those who can truly benefit from the program will continue to borrow because prime plus two is a reasonable rate. That’s actually a lower rate than you would be paying on a reverse mortgage,” he said.
Additionally, said Mr. Geller, the value of their home will increase, offsetting the higher interest.
“As someone who supports this tax change, I would note that over the past 20 years, house prices in Metro Vancouver have increased 200 to 215 per cent. Assuming prices increase only half this amount over the next 20 years, the $3.2-million property, which equates to $10,000 in property taxes in 2026, will likely double in value to $6.4 million.”
Brenda Bailey has delivered a budget that raises the base income tax rate but fails to rein in the deficit, which is predicted to hit $13.3-billion next fiscal year. The finance minister says the budget protects critical services, including health care and education, while taking action to cut spending and boost revenue.
The Canadian Press
The province also removed tax exemptions from telephone landlines, which are more often used by seniors than younger people. And basic cable TV, a budget-friendly option for fixed incomes, will now get hit with the 7 per cent provincial sales tax, as will clothing alterations.
There’s even a tax hit on knitters.
“This is not a seniors-friendly budget,” said Dan Levitt, who heads the Office of the Seniors Advocate for the B.C. government, but operates independently. “When you think about the property tax interest cost being higher, when you think about the PST tax exemptions being removed from landlines, from cable, and even yarn for knitters now. There’s a charge there.”
Although young families qualify as well, the program is best suited to homeowners with substantial equity, such as seniors who’ve owned houses for many years. It was created by the NDP government in the 1970s to help seniors and disabled people stay in their homes, at a time when mortgage rates were high.
According to 2021 census numbers, 38 per cent of owner households over 55 in B.C. still hold a mortgage, said Andy Yan, urban studies associate professor at Simon Fraser University.
“The provincial government needs to be careful that, in solving its fiscal problems, it does not trigger a deeper seniors’ housing crisis,” said Mr. Yan.
Seven highlights from B.C.’s budget, including a rising deficit and tax increases
Mr. Levitt is worried that seniors – house rich but cash poor – will no longer take advantage of the program that allows them to put their fixed incomes towards more immediate costs, such as maintenance. The average province-wide deferment is around $5,500, he says, which translates into significant freed-up cash for expenses. About one-quarter of seniors in B.C. are living on $2,000 a month, and roughly half are living on slightly more than $3,000 a month, said Mr. Levitt. Many seniors fear running out of money, he said, and few are able to use their income to pay for a private care home.
“Many seniors do have to sell their primary residence in order to pay for it, because, as government hasn’t invested enough in long-term care, seniors are going into those private pay spaces,” said Mr. Levitt.
“So, there’s a market there, and how are seniors going to afford to go in there when some of their equity has already been eaten up by interest costs related to property tax deferment?”
Seniors are falling behind in social supports and cost breaks, said Mr. Levitt.
“That being said, there’s no way out of this without investing in seniors. We know there’s going to be 400,000 more seniors in British Columbia. One in four British Columbians will be a senior in the next decade.”
How B.C.’s debt is eating away at provincial revenues
Kevin Layden, president and chief executive officer of Wesbild development company, said the budget “is all about taxation and spending,” rather than “driving the economy forward.” Developers face new PST charges on services such as engineering and consulting, design and project management fees. Those will only add to all types of housing costs, said Mr. Layden, a long-time businessman and former CEO of Future Shop.
He called the budget “out of touch” when it comes to housing.
“Candidly, if you look at the budget, it targets certain categories of British Columbians,” he said, referring to homeowners.
“It’s really upsetting a lot of people, and [government leaders] are not listening, and maybe they just don’t care. I’m not quite sure which it is.”
Mr. Layden said the claim that home values will make up for increased interest on tax deferment isn’t a given. Home values and rents have declined, and demand has fallen off due to decreased immigration.
“This isn’t just complaining. It’s a call to acknowledge that the economics of housing delivery in B.C. are broken and policy decisions are actively making it worse.”