Policy Forum: Who Needs Property Tax Deferral?

There are good reasons to impose property taxes on owner-occupied housing. Yet population aging and declining rates of home ownership among younger Canadians mean that an increasing number of homes are owned by older Canadians, many of whom have modest incomes. This raises the question "How do these seniors get the wherewithal to pay their property taxes?" British Columbia, Alberta, and some other jurisdictions have addressed this issue through property tax deferral programs. These allow property taxes to be deferred until the home is sold, with the interest charged on the deferred amount generally being below market rates. The province or local municipality ensures that the deferred taxes will be repaid by taking a lien on the property. Property tax deferral would be expected to be attractive for seniors, because it usually allows them to tap into their home equity at a low cost and maintain their standard of living as they age. Yet the (scant) evidence available suggests that the takeup rates for property tax deferral programs are "extremely low." This article sets out the rationale for property tax deferral and describes current Canadian property tax deferral programs. The author discusses policy options, arguing that there is a rationale for having property tax deferrals in place, and substantial scope for redesigning property tax deferral programs so that their benefits reach those who need them.