Let U.S. Seniors Defer Real Estate Property Taxes Like Canadians

Published by Guest Post November 24th, 2008 in PSA. Comments

This Guest Post by Larry Yatkowsky, a realtor (and blogger) from Vancouver, British Columbia, Canada, aye. Seems our neighbors to the north have a property tax deferment program to help senior citizens deal with their property taxes. Someone tell our Uncle Sam. Larry sent me this after reading this post on senior foreclosures caused by property tax liens. Thank you, my friend.

Community

Joe has many raison d’etres. Most recently, his sense of community is evidenced within his blog’s power to publicize efforts made by lawyers assisting seniors to keep their homes.

Being Civil

Taxes and laws are a necessary part of civilization. Application of those taxes and laws in a fair and compassionate manner is the challenge of all law makers. It is a duty of all vested parties to be diligent and mandate change when either or both are unreasonable.

Brutal

Reflecting on the implications Joe outlined while considering that this results from laws established by an enlightened society brought realization that the law(s), is an inordinately brutal solution to an ever growing problem.

Choices

As an alternative, the British Columbia provincial government offers this solution. It’s called the Property Tax Deferment plan. Simply, it is a low interest loan offered by the province (state) to the homeowner. The province, on behalf of the homeowner, then pays those property taxes owed to the civic authorities.

Highlights:The British Columbia Property Tax Deferment Program is a loan program that allows home owners to defer their annual property taxes on their homes subject to eligibility criteria.

you must be at least 55 years old
you must be a Canadian citizen or be a permanent resident who has lived in British Columbia for at least one year prior to applying for the program
it applies only to your principal residence
deferment applies to all or some of your tax owed
taxes can be deferred as long as you own and live in your home and continue to qualify for the program
the deferred taxes must be fully repaid, with interest when either of these occur (a) before your home can be legally transferred to a new owner, other than directly to your surviving spouse, (b)upon the death of the agreement holder(s)
you may repay all or part of the deferred taxes, fees and interest at any time without penalty
simple interest is charged on deferment accounts at a rate not greater than 2% below the prime rate of the Province’s principal banker

Free

The solution to this problem is here, it works and to my knowledge the idea and format is not copyrighted.

Interested?

For those interested you will find all details here:

British Columbia Property Tax Deferment Plan

Brochure

Larry Yatkowsky

amex broadway west realty

201 – 1055 broadway west

vancouver, b.c. | canada | v6h 1e2

tel 604.657.6236 | fx 604.733.8588

email: LMY@yattermatters.com

listings: http://www.yatters.com

blog: http://www.yattermatters.com

Maureen Francis

I don't know anything about property taxes outside of Michigan. Here, the longer you have lived in a house, typically the less you will pay. This is the help seniors not get taxed out of their homes. In the case of a rental home I own, I pay taxes of about $6,000 a year and the owners of an identical home across the street pay $1,500.

Yes, they do still have to pay the taxes.

Debra Sinick

Thanks for this post. With our population aging, we have to consider ways to help people stay in their homes. Not only can the cost of paying Uncle Sam be an issue, but the design of most of our homes can be a detriment as people age. "Simple" things such as a two story home located on a hill with a steep drive can become barriers to seniors. Mos home design does not allow people to "age in place" and stay in their homes safely.

Rob Hahn

Blogfather -

Forgive my impertinence, but... this has to be one of the worst ideas I've ever seen posted on Sellsius, even by a guest blogger.

So we're going to import socialism from Canada?

Has there been any studies on impact of these tax deferments on market transactions, or market prices? When the taxpayers (aka, the "province" -- it isn't their own money the "province" is spending, but the taxpayers who live there) subsidize the homeownership of elderly people who apparently should have been moving out years ago, what is the effect on the local real estate market?

Restricting supply necessarily means higher prices if demand stays constant. So not only are the working families of British Columbia paying higher taxes so that old people can stay in homes they can not afford otherwise, but they end up paying higher home prices because the supply is restricted.

What a fantastic idea! NOT.

The free market works when it is allowed to work. These policies may be well-intended, but you know what they say about the road to hell....

-rsh

jf

I'm not sure deferring real estate property taxes to seniors (or others) is the road to socialism. Deferment does not operate to excuse the payment, it merely delays it, and at some cost, due to interest.

Since homes are taxed based on their value, and not age or employment of the owner (value of the owner?), I disagree the working owners are paying higher taxes by virtue of the program. In addition, we cannot conclude seniors who must defer taxes are unemployed-- many of them may still be among the working class of British Columbia.

Consider that "school taxes" are often a part of the real estate tax package. Since seniors have already put their children through the school system (and paid their taxes w/o deferment), their continued payment of those taxes puts them in the position of subsidizing the younger families currently putting their children through school. In such case, the idea is indeed a bad one-- seniors taxes should be justly LOWERED to the extent of any school taxes in the mix.

If studies have been made relating to the program's effect, I am unaware of them. Perhaps the author may shed some light on the consequences and the imagined road to hell may be paved in yellow bricks.

Rob Hahn

Deferment of taxes is a clear subsidy mechanism. Otherwise, what's the point of doing it in the first place? Just like having your income taxes deferred on your IRA or 401(k) is a major benefit, creating a real incentive to invest in retirement accounts, deferring property taxes would create a real incentive for seniors to hold on to housing they otherwise would have sold.

Working owners are in fact paying higher taxes, if we assume that the government does not cut spending to take account of the lost current revenues from the Senior Tax Deferment program. Someone has to pay for it.

School taxes are a whole other can o' worms, frankly, as that raises the whole question of whether property taxes are the appropriate way to finance government schools. For that matter, it raises the question of whether government schools should exist in the first place -- and if they should, then whether there should be price-based competition for such schools (via vouchers and the like).

So I consider that a red herring in this particular discussion.

At the same time, if property taxes are too high in order to support government schools, then a senior can justly decide to sell the house to a young family with children (who would gladly pay those taxes) and move to an area with lower school taxes (or none, as some seniors-only developments have). Deferment of taxes would defeat precisely this motivation to sell and move, resulting in lower supply in the market, which in turn drives up the price of housing.

-rsh

jfsellsius

As I understand subsidies, they are payments or credits, not loans. To the extent the government is extending interest below market, at worst, you have a subsidized loan--- a tad more tasty than an outright subsidy, no?--- like the ones given to students to attend colleges they would otherwise not be able to afford. I am not against subsidized loans for seniors in this case, absent some proven disadvantage to some more deserving segment of the population. I would await some facts and figures before I am ready to denounce the program as a bad idea.

"Working owners are in fact paying higher taxes, if we assume that the government does not cut spending to take account of the lost current revenues from the Senior Tax Deferment program. Someone has to pay for it."

Yes, that would be an assumption. But even if the gov't were operating at a deficit or would require the raising of taxes to cover the shortfall from senior tax deferments, one group would not bear that burden over another-- as far as I know, the property taxes are uniformly assessed based on home value, not age or employment of the owner. So, in fact, any increased taxes would affect the entire tax paying group and not just working owners (we already covered the case that seniors may, in fact, be working owners)

"...deferring property taxes would create a real incentive for seniors to hold on to housing they otherwise would have sold."

I agree, but it that a bad outcome? I don't know, but I don't think so. As I see it, if they would otherwise not have sold, the result is a "forced" sale by these seniors. Forced sales lead to sales below market value. That seems to me an unfair deal to these folks who have built up equity in their homes and contributed to the community over the years-- at least w/ the deferment, a sale could be made at FMV. And would not the lower sales prices, in turn, drive down the values of other homes in the area?

And if the seniors sold, where would they go? To a rental? Would they then be raising the demand for rental housing, leading to higher rents, given current supply, thereby adversely affecting not only other seniors but young families who must rent. In the end, someone always pays. The question is perhaps seniors may have earned the right to get the break.

PS: School taxes are a part of my property taxes here in PA. If they are a part of BC property taxes, the herring is pickled and seniors maybe ought not be subsidizing (paying, not loaning) the taxes of homeowners with children.

As always, a delight to discuss with you, rsh.

Debra Sinick

Thanks, Jf, for your response to Rob. Affordable and accessible housing is a serious problem, which will only get worse as the boomers age. As someone who has been an advocate for seniors, I am quite surprised, and appalled, by someone who is not willing to help those who have contributed mightily to our society. These seniors fought in wars, raised families, had jobs, and contributed in many ways to keep the society we currently have in the US, something which all of us are able to benefit from, including Rob.

Jf-you are correct in asking where "these people" aka seniors will go. This is a serious concern for our society today. If a senior can stay in their home because their tax burden is deferred, more power to them and to our society.

Rob, I wonder how old you are and if you have parents or relatives who are confronting the crisis of where to live as they age. I have countless friends, family, and clients who are dealing with seniors and their living arrangements in different municipalities all over the country. It ain't easy and it is not a simple problem. But come on, give seniors a break!

jfsellsius

Apparently the program has been around for some time (1974?) and has been adopted by other municipalities in Canada. One would hope they have the benefit of time tested research. The plan may be comparable to a reverse mortgage, except the seniors get a better shake borrowing against their equity. It also keeps seniors who, not wanting to sell, might be influenced to borrow the money from a entity more dangerous than the government, a predatory lender.

As you realize, one of the reasons for the program is to allow seniors to stay in the neighborhoods where they have formed strong attachments. I'm not a psychologist or doctor but I would venture a guess the uprooting of seniors from their long established homes might be detrimental to their mental and/or physical health-- which renders a cost to society.

Also, the money saved in deferred taxes is likely used in the local economy, where the benefits of a free market system are more apt to be realized than in those tax dollars otherwise paid to government. In the end, for me, it just feels right.

A test of a people is how it behaves toward the old. It is easy to love children. Even tyrants and dictators make a point of being fond of children. But the affection and care for the old, the incurable, the helpless are the true gold mines of a culture. Abraham Heschel

Teri L

>A test of a people is how it behaves toward the old. It is easy to love children. Even tyrants and dictators make a point of being fond of children. But the affection and care for the old, the incurable, the helpless are the true gold mines of a culture. Abraham Heschel

Now I'm all warm and fuzzy.

Except. Let's not confuse "a people" or "a culture" with a government. Let's just not do that. Oh yes, sure, we can do it, and we do, but it's never a good idea to look at the government, or a governing body- in the case of pro bono suggestions- and say to ourselves "Hey! That defines me. That's how I roll." We should help out folks who need help, but to have the government regulate is a different animal entirely.

Kindness, compassion, when regulated by law, removes both the responsibility and the personal benefits of the warm fuzziness that comes to us from just doing the right thing because it's the right thing to do, as opposed to having to the right thing because it's the law... blah blah blah... Howdy Larry! :-)

jfsellsius

I'm happy to bring you the warm and fuzzies :)

The senior tax deferment program is not a pro bono charity-- it is a deferment option akin to a reverse mortgage, but at much better rates. As I commented earlier, absent some proof the program is illegal, immoral or fattening to some more deserving group, I have no objection. As a pragmatist, I prefer to look at the results, as opposed to economic theory or political philosophy. Does the program work? Are there adverse effects? Do you know? If so, please share with us. Heck, if it's a senior scam run by a shady government, we can hop the bus tomorrow and protest at the Minister's office (you bring the posters, I'll bring the markers).

While I agree the inefficiencies of government make for poor management of virtually everything it touches, and private business normally does a better job, the fact is, if there is no private source for this relief (people/culture), the government program is better than nothing, or, worse than nothing, some predatory lender looking to make a vintage buck.

"Kindness, compassion, when regulated by law, removes both the responsibility and the personal benefits of the warm fuzziness that comes to us from just doing the right thing because it's the right thing to do, as opposed to having to the right thing because it's the law..."

I know of no law that regulates kindness, unless you so interpret the criminal statutes against assault and battery, burglary, murder, mayhem, and curbing your dog.

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Let U.S. Seniors Defer Real Estate Property Taxes Like Canadians