Property Assessment vs Property Tax Amount – common misconceptions

Disclaimer: All info there are to the best of my knowledge. I am not responsible for any errors or omissions.

Not sure about you guys, the last few days from the moment I roll off my bed until I go to sleep, I have been over hearing people saying things like…

  • “omg, my assessment went up 35%, how can I afford another huge increase to my property taxes”
  • “this is another cash grab by the City”

Words from the street is that no one is happy about their assess value being increased period.

Here is the link to search your BC assessment value:

https://evaluebc.bcassessment.ca/

bcaa

I am here to clarify the most common misconception between the relationship of property assessments & property tax amount.

Your % increase in assessed value will NOT equal to your % increase in property tax year over year.

If I can provide some comfort for recent first time home owners, this is it.

The only two factors that will affect/determines the amount of your property tax are:

  1. The budget that each City determines annually on how much they need, usually slightly more than inflation, unless you live in City of Vancouver where they decided to increase budget to save lives.
  2. The RELATIVE changes of your assessed value between your home and all your neighbours in the City.

Let me give you a simplified example on how this works. Say you live in City of Colinville with 9 other neighbours. In Year 2016 Colin the Mayer decided the budget to run Colinville is $100. And Colin assessment all 10 homes equally at $100,000 each. Each home owners pay 1/10th of the budget, or $10, since all assessed value are same.

In 2017, Colin the Mayer use his sole discretion and decided this year budget will be $200 (a krazy 100% increase!). The past year Colinville experienced a huge housing boom and Michelle Wu sold all 9 of your neighbour houses to foreign buyers and they teared all 9 homes down and build 9 monster homes. Because of the new construction these 9 homes now have assessed value at $500,000 (from $100,000). Any you average Joe still live in that old heritage home that are now assessed at $150,000 (from $100,000) due to the overall market increase.

Now you are thinking, oh crap, Colin the evil Mayer unfairly increase my assessed value increased by 50% year over year so he can charge me 50% more tax in 2017. But when you check you tax bill expecting to pay 50% more in tax and noticed Colin only billed you for $6 (a 40% decrease from last year at $10!!!!) What happened?

Your tax rate in 2017 = City’s budget of $200 * (Assessed value of your home $150,000) /  (total assessed value of all 10 homes in Colinville $4,650,000) = $6.

Here are the findings:

  • The City has zero incentive to over inflat any assessed value (both on an individually basis or on a combined basis). Since everyone is pissed off with high assessed values, I should just call Robbie to reduce everyone assessed value by 50% to make everyone happy, until June 2017 when they found out they still have to pay same amount of tax to cover the full budget. LOL.
  • It is the relative changes in assessed values to your neighbours’ that determines changes to your tax bill
  • (I like this one I’ll put them in bold) Whenever you hear your friends in the same City tell you how they felt their assessed values are too high and want to fight the City to get a lower assessed values (I am guessing is in an attempt to pay lower tax?), if successful, it will be AT THE EXPENSES OF EVERY OTHER HOMEOWNERS IN THE SAME CITY). This is a zero sum game, your City is not going to collect a penny less in tax, as a whole, if they lowered anyone’s assessed value, your tax bill is just a pro-rata share of the budget.

I hope this provide some clarifications out there.

Until next time!

***Added in May 2017***

One more factor that will affect your property tax due: the changes in numbers of households in your city. This is because the more new residential developments happening in your city, that will mean more people will be there to share some of the costs such as road maintenances, recreation spaces, admin services etc.

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