My wife and I moved from the City of North Van to the District in 2013 when we bought a townhouse here. At that time, the Lynnmour area still had some housing big enough for us and our 2 children that was within financial reach of a family with an income near the Canadian average. Of course, that’s no longer the case; and had we waited a year or two to buy, we would have priced off the north shore.
As the assessed value of our property has risen since then, so have our taxes, by about 80%. In this part of the world, we’ve come to see real estate as an investment vehicle, and so as regular people become “millionaires” in terms of property value, they don’t complain too much about rising property taxes.
But let’s imagine for a moment, as difficult as it may be to do so, that we are not living in a perpetually inflating real estate bubble. Let’s imagine that due to a major change in circumstances, the outside demand for north shore property disappears, and prices begin to fall.
First, let’s look at the 2013-2022 (in my case) rise with property taxes up 80%. Did I receive a commensurate increase in services from the District during that time? Of the services I use, I can note some improvements. Bike lanes, for example, have come a long way in the last 9 years. I’ve also seen improvements to several of the local hiking trails. No doubt, the libraries and rec centers have expanded their offerings to some degree. And in the last couple years, the lower Lynn interchange has, if nothing else, improved the safety of getting on and off Highway #1. I may be forgetting a few things, but all told I’d be hard-pressed to say I’ve received anywhere near an 80% increase/improvement in services.
Now, let’s imagine that the assessed values of properties in the District shrinks by 50%. In this scenario, the population of the District doesn’t change, so there are still the same number of residents to provide services for. What would happen to property taxes? The rates would go through the roof, and property owners would be charged in dollar terms the same amount as before, or more.
It could only be otherwise if the District were to make massive cuts, which they would not be willing to do, given that the roads still need to be repaired and the grass at the parks still needs to be mowed.
All this is fairly obvious to anyone who looks at the math of how property taxes are set in the District. If expenses stay the same (or increase ~3% annually, as the District states), and assessed property values go down, then tax rates must go up. So why do I bring this up?
I raise this issue because I sense complacency among taxpayers. This is never a good thing, because in the face of complacent taxpayers, governments tend to increase their spending to levels that are not sustainable. I believe that the DNV has been more fiscally responsible than many other municipalities in the region, so I’m not pointing any fingers. However, the growth of government budgets has an inertia of its own, regardless of how fiscally prudent those in charge of it may be. Staff costs, which make up the bulk of any public sector entity’s budget these days, tend to grow faster than the economy does, even if there’s no net growth in headcount. Cutting public sector wages and benefits during recessions is a thing of the past, and the growth in liabilities for the indexed pensions that many public sector workers have continues along with rising inflation. So, without hard limits on spending, DNV budgets will continue to grow, even if population doesn’t.
Population, however, has grown, if only modestly compared to other metro Vancouver municipalities. And certainly, much new real estate has been added to the tax pool with the high density developments in town centers in recent years. One would think that this growth in the number of assessable properties would mitigate tax increases for existing land owners, and perhaps it has. But here’s an interesting thing about the DNV, which I must thank my fellow candidate for Council, Peter Teevan, for alerting me to. Among the 24 reserve funds the District has, one is called the Tax Growth reserve fund, which is meant to “accumulate growth in property tax revenue to smooth future impacts on services, including ongoing costs related to new assets and increased demand on services.” Property taxes on new developments go into this reserve fund, apparently indefinitely. Does this mean that the assessments of these new developments don’t go into the same tax pool as that of existing properties? That seems to be the case but the info available online regarding the DNV’s reserve funds is pretty limited; the 2022 budget has a section for Reserve Funds, but not a line item per fund.
It’s worth noting that less than half the DNV’s revenue comes from taxation; the remainder is made up mostly of charges to developers and builders. In the 50% drop in real estate prices scenario I outlined above, it’s safe to assume that virtually no developers would be starting new projects in such a market. This would result in a huge hole in the District’s revenue, which would need to be filled by raising taxes or borrowing (likely both). This would mean that each residential property owner would end up paying more property taxes in dollar terms, even though their homes were worth half as much.
I hope my fellow citizens can see the magnitude of this risk. “But a real estate crash isn’t going to happen, North Vancouver is one of the most desirable places in the world to live,” you may argue. I certainly agree with the second part of that statement, but there are many events that could trigger a crash. For instance, what if the federal government decided to severely restrict immigration? Instead of around half a million newcomers to Canada (the vast majority of whom settle in Vancouver, Toronto, and Montreal), they let in only 10,000? Or what if the feds put restrictions on land ownership by foreigners, like some other countries have? What if interest rates went to double digits, effectively preventing the majority of would-be home buyers from qualifying for a mortgage?
Good times can’t last forever, and we should not get too comfortable with rising property values as the main pillar holding up our local economy and municipal tax system. What are the implications of this? Certainly, the DNV should preserve industrial land, and do what it can to expand at least light industrial zoning, given the high demand for such space, and the tax base that comes with it. The DNV should also address the concerns of local business owners, to make the District a good home for entrepreneurs and the revenue and jobs they provide. And of course, the DNV needs to control its expenses. I know this is easier said than done; residents demand a lot, and the District covers a large area. I think the key here is for the DNV to refocus on core services: utilities, roads, parks & rec. Certainly, money could be saved by streamlining permitting processes, and many cultural and sustainability initiatives that District has taken on are better handled by civil society (as outlined in this post). Greater reliance on pay-per-use fees for public goods like the roads, popular destinations (like Quarry Rock), parking, and even drinking water could also be wise in terms of diversifying revenue sources.
Reforms like these will put taxpayers in a better position if a crash comes; the time to start working on them is now.
2022 Candidate for DNV Council
Clayton ran for District of North Vancouver Council in 2022. He holds a BA in International Development from Trent University, and works as a project manager in the construction industry.