Homeownership for the average Canadian is a lifelong commitment, and lives up to the meaning of mortgage (Latin for “death pledge”). A part of this commitment is paying property taxes on your home, regardless if you owe a mortgage or not. A growing number of Canadian homeowners aged 65+ require property tax deferrals, which is a cause for concern.
The vast majority of Canadians amortize their homes for 25 years and pay off their mortgages within that time. However, as consumers near retirement age and pension premium rules change, an influx of property tax deferral application submissions is a rising trend.
In Vancouver, 6,316 senior citizen homeowners received a 2016 property tax deferral. Six years ago, only 2,866 people made applications to the program and ten years ago, barely 1,250. Toronto-area and Ontario numbers aren’t publicly accessible.
On the other hand, nationally, 38,000 people sought property tax deferrals with an average deferral amount of $3,000.
The growing increase of mortgage-free people requiring deferrals speaks volumes about declining housing affordability.
Near-retirement or retired homeowners risk unfavourable options and strict eligibility requirements. New buyers and current homeowners foot the bill indirectly though sporadic annual property tax increases.
Property tax deferrals are an emblem of social good, yet how bad can the process of apply for one get?
Social assistance schemes are well-meaning and complicated. Both provincial and municipal bodies can and do enforce questionably incongruous rules. These rules can have a ripple effect on how generations understand each other’s difficulties.
Like advocacy activists and researchers representing Vancouver-based Generation Squeeze note, “[All] Canadians [should] have the chance to live up to their potential, enough time and money to enjoy life […]”.
The following scenario illustrates why expanding property tax deferral requirements to cover a wider range of senior citizens can help realize Gen Squeeze’s mission.
For example, imagine yourself as a married pensioner living in Toronto. You’ve applied for both property tax deferral programs offered by the City of Toronto and Ontario.
- Your mortgage was paid off about 10 years ago. The house holds a market value of $830,000, yet property tax bill valued at $5,710.18* for 2016. You and your spouse plan to use equity built on your home as a future trust for your children. In 2016, you rent out a couple rooms and dip into your emergency savings. You can’t afford to sacrifice savings in 2017.
- You and your spouse are eligible for Old Age Security pensions with a combined salary of $45,150 a year. Considering this, you feel confident about approval for the Ontario program[i].
- According the provincial rules of eligibility, you’d have to meet the GIS (Guaranteed Income Supplement) maximum income of $23,184 to qualify for Ontario’s program[ii]. Clearly your income exceeds that.
- Since you don’t qualify for the provincial program, you potentially face a refused application from the City of Toronto. Refusals typically happen when an individual or couple earns too much for subsidized programs. (The maximum income to be granted a property tax deferral in Toronto is $50,000).[iii]
This fictional scenario is very much a real life nightmare for pensioners who are “house rich” but struggle socioeconomically. These Canadian consumers have homes worth high values yet remain stuck paying off debts past retirement.
House-rich couples and individuals usually have sizable annual pension salaries that can’t adequately support them. Additionally, house-rich Canadians also face exclusion from public assistance programs. Some homeowners can’t afford to sell and downsize either, contributing to the lack of housing supply.
While housing affordability is determinant on where you live in the country, many Canadians are living longer lives. Minimum retirement ages could be well into the 70s by 2050.
Guaranteeing a framework of housing stability for all Canadians is not only helpful now, but in the near and distant future.
* This amount is calculated courtesy of City of Toronto’s property tax calculator.
Property Tax Deferrals: The Good, The Bad, and The Ugly!