With property values in Vancouver on an ever-increasing upward trajectory, a large number of seniors living on fixed incomes are finding itâs a real fight to keep up with their property tax bills. Assessments follow sale prices up and property taxes follow. Are there any solutions to this dilemma?
In the City of Vancouver, the West Side has seen real estate prices head into the stratosphere. Depending on street, lot location, school catchment, view, etc., a 33-foot lot in Kerrisdale, Quilchena, Mackenzie Heights or Dunbar can cost in the neighbourhood of $2 million and a 50-foot lot can approach $3 million, or even more. And thatâs just for the dirt.
Itâs wonderful if youâre selling and banking the money, but what if youâre like many seniors these days who donât wish to either downsize or âinstitutionalizeâ, but would rather âage in placeâ? As escalating prices push assessments up, the resulting tax bills can be financially crippling.
Based on the cityâs residential tax rate of $3.67 for every $1,000 in value, the annual tax bill on a $3 million house is $11,101.
This is especially true if the homeowner has to also spend hard-to-find funds making their home âsenior-friendlyâ or accessible (for example, changing door handles, or adding handrails, ramps or walk-in bathtubs).
There are a number of different scenarios in which residents of BC can apply for property tax relief, and many of them apply specifically to seniors. Here are a few:
General relief: The general grant is applied to the amount of tax payable over $350 and the maximum reduction is $570 in the Capital, Greater Vancouver and Fraser Valley Regions. If a principal residence in those areas has an assessed value of $1.1 million or less you can receive the full grant. Itâs reduced as that value rises so that once you reach just over $1.2 million the grant dwindles to $0. If you or your spouse is over 65, are a veteran of certain wars or are permanently disabled there is an additional grant of $275.
Deferments: Qualifying homeowners over 55 (or their surviving spouse), those with defined disabilities or that can demonstrate financial hardship (plus those financially supporting children under 18) can be eligible to defer their property taxes. Deferment can be indefinite as long as the applicant continues to live in the home; however they must be repaid with all fees and interest if you sell your home or upon the death of the homeowner(s) who made the agreement. Some seniors shun deferments out of fear that the inheritance value of the home will be reduced. However, the BC Property Tax Deferment Program charges only 1 per cent in interest (the rate is set quarterly, usually two points below prime) and the interest on the total is not compounded. For example, if the annual tax bill is $10,000, the interest payment is $100, which is a relatively low cost loan.
Home Adaptations for Independence (HAFI): This jointly funded federal-provincial program provides up to $20,000 to assist low-income seniors and disabled homeowners (and landlords) to finance modifications to their homes to make them more accessible and safer to live and get around in.
Most seniors who have lived in their current homes for 30 or 40 years (and thereâs more of them that you might think) have long since paid off their mortgages. So if they are not cash-rich, they are at least land-rich, and that situation can be their saviour. There are financing alternatives that can allow homeowners to draw equity from their properties, however they have to be approached with caution and sound, trustworthy financial advice. Here are some:
Lines of Credit (LOC) or Home Equity Lines of Credit (HELOC): A homeowner can borrow against up to approximately 65 per cent of the equity they have in their principal residence via a HELOC. Used judiciously this equity can be drawn upon to live on. However as stated above, this move should be made with the help of knowledgeable and trustworthy financial professionals and often with the knowledge and participation of family members (sons/daughters, etc.). Depending on the situation there may be cause to involve a Real Estate Agent, a financial planner and even a lawyer. Issues such as mental competency and allowing the principals in question to act independently (i.e. run their own lives) are at either end of the spectrum here. It is also important to keep in mind that monthly payments must be maintained on a line of credit.
Reverse mortgages: A reverse mortgage is a mechanism that allows homeowners over 55 years of age to borrow against the value of their home and remain living in it. Under this program the homeowner can receive up to 50 per cent of the value of their property in cash. The funds can be taken as a lump sum, in monthly payments or a combination of the two and can be used in any way the homeowner wishes. And unlike a line of credit there are no payments that have to be made as long as the homeowner(s) continues to reside in the home. The principal and interest however become due when the property is sold or when the homeowner(s) move.
Seniors, even those living in so-called affluent areas, can find it daunting to make ends meet these days. Itâs heartening to see that there are various government and private programs out there for them to use. However given the various avenues that can be explored to seek relief, they should all be explored prudently and with the assistance of family and/or trusted advisors so that the appropriate alternatives are chosen.
Neil Hamilton is a senior property advisor with Macdonald Realty Ltd. of Vancouver, with expertise in the buying, selling and leasing of both residential and commercial properties throughout Greater Vancouver. He can be reached at 604-569-1940 or firstname.lastname@example.org.