Apartment owners in Red Deer will be taxed at a higher rate in a phased-in system that’s designed to create more equity.
The majority of city councillors opted to ramp up the tax ratio for multi-family properties (those with more than two dwellings on a single lot) by about 15 per cent over the next five years — despite concerns about what impact this could have on rents.
Joanne Parkin, the city’s revenue and assessment services manager, told council that the current taxation rate creates some inequities since multi-family properties seem to be retaining their value better than residential detached properties.
According to a study of other provincial municipalities, Red Deer residential owners are paying about three per cent more tax than average — while multi-family property owners are paying about 34 per cent less taxes than the Alberta average.
Local commercial and business properties are about 18 per cent below the provincial average.
Parkin recommended that a sub-class of multi-family property tax be created. Owners of apartment buildings, tri-plexes etc. would require to pay more than residential properties.
This would be phased in at about three per cent a year until 2025.
Some of Parkin’s reasoning is that Red Deer’s detached property owners are, in effect, subsidizing local multi-family properties that pay far less in taxes than their counterparts in other Alberta municipalities.
Since these properties are operated as a revenue-generating business, the owners can use their expenses to get a break on federal taxes, noted Parkin.
Coun. Ken Johnston, along with Dianne Wyntjes and Buck Buchanan opposed this, largely out of concern about the higher costs being downloaded on renters.
Wyntjes didn’t like the optics of making this change at this time of COVID-19 and a rough economy.
Johnston feared it would be felt by struggling seniors, young people, new families, and other vulnerable renters. He also noted the tax increase over five years would be more like 19 per cent rather than 15 per cent, with the compounding factored in.
But Parkin noted that the market sets rental rates, which are already comparatively low in Red Deer.
While the additional taxes would provide the city with more than a million dollars of additional revenue a year, it would amount to only a small monthly difference to the property owners, she added.
Most councillors felt that the change was needed to re-establish equity and fairness in local property taxation.
“It’s never a good time to do this,” said Coun. Lawrence Lee, “but it’s prudent and responsible to do this modest increase…. we are taking about, literally, cents on the dollar…. ”
He noted multi-family rents in Red Deer would still be below the provincial average, but would be more on par.
This does not apply to condo owners or owners of mobile homes.