ASR Media Release - Oct 26, 2011

The following media release was distributed on Oct 26th:

Next Government Must Roll Back Property Tax  

Saskatchewan’s next government must complete the property tax reform begun in 2009, rolling back municipal property taxes just as the school property tax was cut.  
 
REALTORS® are calling on the political parties to stop the steady rise in municipal taxes, which are eating away the savings made in 2009 when education property taxes were shifted to the provincial level.
 
Bill Madder of the Association of Saskatchewan REALTORS® said the gains from education tax changes will soon be lost unless the other half of the property tax equation is balanced.
  
“We are looking for a political party that will replace the property tax as the main source of money for local government,” Mr. Madder said. “The answer is revenue sharing, where municipalities receive an assured share of provincial revenue and the property tax is capped.”
 
He said property tax remains the second largest tax levied in the province, after personal income tax. It is trending sharply up. He cited several reasons the tax needs to be capped:  

·         Affordability: Property tax increases make housing less affordable. Every dollar taken in tax is a dollar less the buyer cannot put toward principal payments.

 

·         Upgrading: Taxable assessments rise when older buildings are upgraded, penalizing the improvement and making harder to keep older and more affordable housing stock at a high level of quality.

 

·         Investment: Businesses are used as a property tax cash cow, paying higher rates than other property. The present tiered business rates are discriminatory and increases make them worse.

 

·         Equity: Property tax has no relation to income the property earns. It amounts to a straight deduction from the asset’s value – a capital tax. Capital taxes are a negative for investment and have been reduced or eliminated on other forms of capital.

 

·         Unsustainable: Urban centres cannot support needed infrastructure using property tax. Relying on it means lower quality of life, making Saskatchewan communities uncompetitive in attracting growth.

INFORMATION:  Bill Madder, 220-9570

Property Taxes Must be Addressed

This letter appeared in the Saskatoon Star Phoenix yesterday - (thanks to Post media)

The total property taxes collected in Saskatchewan in 2010-11 was estimated to be $1.6 billion.
This represents 2.83 per cent of provincial GDP - higher than either the provincial sales tax or the various corporate taxes combined.

The overreliance on property tax is undermining Saskatchewan's competitive position, and it is time for reform.

The province has made progress on property taxes over the last few years, and I applaud its efforts. However, the recent recommendations found in the Canada West Foundation's tax framework warrant implementation.

The higher rate of property tax levied on non-residential properties can be 3.5 times that of residential properties in some areas of the province. A calculation for 2010 shows that the gap is 1.75 times in Saskatoon and 1.95 times in Regina.

Capping this differential at 1.43 times for both the education and municipal portion of property tax, as the framework recommends, would enhance the competitiveness and attractiveness of Saskatchewan's cities. It would also bring an improved level of fairness to the property tax system.

The complexity of property taxation in Saskatchewan, particularly as it relates to non-residential classifications, is characterized by a lack of transparency, accountability, public acceptance and legitimacy.

Let's start addressing these issues today.

A Tax Framework for Saskatchewan's Continuing Prosperity provides a clear, tangible place to start. You can read it here: A Change Today for Your Tomorrow

Don't forget to ask your candidates if they have a plan to help reduce the property tax burden. It is an issue that needs to be addressed.

Saskatchewan REALTORS® Media Release - October 19, 2011

   Innovation Urged in Municipal Finances

Saskatchewan’s REALTORS® say Saskatchewan people are open to new ideas to pay for municipal services, and they’re asking political parties to come on side.
 
Citing a recent province-wide survey, REALTOR® spokesperson Bill Madder said 79.3% of respondents are ready to consider concepts that would reduce reliance on property tax such as putting water and sewer services on a self-funding basis like electricity and natural gas.

Source: Praxis Analytics Inc. September 2011

Mr. Madder said the property tax can no longer be the major funding source and backstop for municipal government and the many services it provides.
 
Innovation in services funding would introduce more transparency and accountability into local finances, and begin to move costs away from the general tax base. 
 
He said it is important to explore ways to reduce reliance on property taxes and begin to roll them back just as other capital taxes have been reduced.
 
“Property taxes reduce the amount of monthly payments that can go toward principal, making housing less affordable.”
 
Mr. Madder also noted that 72.2% of Saskatchewan people are ready to consider changing property taxes so improvement to property would not bring a rise in taxes.

Source: Praxis Analytics Inc. September 2011

 
Upgrades to existing housing could help meet the demand for affordable rental units, but the property tax penalizes improvements and eventually forces lower-cost housing off the market.
 
REALTORS® say their survey shows Saskatchewan people are moving past old ideas and are ready to welcome changes more in tune with the new environment in this province. They want the government that will be elected on November 7 to realize the province is ready for innovation and come into office prepared to respond.
  
INFORMATION:  Bill Madder, 220-9570

                                  Survey report details are available online at ASR Housing Matters Survey2011

We Say No! to Rent Control

As expected, the NDP have proposed rent control as part of their "Housing Platform" which they released today. While I haven't had a chance to review the platform in detail there appear to be some reasonable ideas in the platform such as a grant for first time buyers and incentives for development of rental units. However, rent control is a non-starter which can actually end up hurting those it is intended to help. There are numerous studies available which show that rent controls deter development of new units and can lead to reduced maintenance of existing units. The Frontier Center for Public Policy recently released this report: Rent Control and its Applicability to Saskatchewan and the Saskatchewan Chamber of Commerce released this report earlier this Summer: Rent Control No Solution to Housing Crisis. This is just two of a host of studies out there but they are the most relevant as they deal directly with Saskatchewan.

To quote from the Frontier Centre study: "From analyses in all financial, theoretic,
and empirical approaches, one can conclude that rent control is not a good idea and government cannot  manage housing better than the private sector." and "..OECD data demonstrate that the European countries with the highest numbers of price-rent ratios are those with rent control. Rents in Canadian cities where they were controlled can even be much higher than those in cities without rent control, proving the point that “rent control does not do what most people think it does.”
The notion of exempting certain new construction for a period of time does not address the issue of discouraging investment or of deterioration of existing units. Saskatchewan  REALTORS® position on this is very clear - when demand is the problem, supply is the answer. This article outlining our position recenty appeared in the Regina Leader Post and the Saskatoon Star-Phoenix : Rent Control Op-Ed. And here is a recap of an interview I did recently on this topic on the Richard Brown show: Richard Brown Show interview. Here is our position paper which stresses the importance of increasing supply: More Houses at Reasonable Prices.

We encourage our next government to encourage the construction of new rental units by offering incentives not by controlling their rents: Media Release - Oct 12, 2011.

Saskatchewan REALTORS® Media Release - October 12, 2011

Support Tax Incentive for More Rental Units

Saskatchewan’s real estate industry wants the next provincial government to offer a special short-term tax incentive to increase the number of apartments and other rental units.

REALTORS® say people looking for a place to rent are finding very few choices because supply is limited in today’s market.  Saskatchewan has the country’s highest rate of growth but the second lowest supply of rental units on a per-person basis.

 Source: Statistics Canada  (Click on chart to enlarge)

The Association of Saskatchewan REALTORS® say today’s rental shortage is the result of decades of neglect and poor policy that made investing in apartments unattractive.

Speaking for the real estate industry, Bill Madder said a tax incentive for people to invest in a rental property development fund could draw new funds to badly-needed rental units. He said the fund would be similar to Labour-sponsored Venture Capital Funds.

“The tax credit concept is well-known and much more efficient than direct government funding. For each dollar of incentive, many times more dollars would flow to provide rental units.”

Mr. Madder said a tax incentive is better than rent controls.

“Rent controls hurt the people they are supposed to help. They scare away investment. We need more supply and more choices, not more bureaucracy.”

Mr. Madder added that research conducted for the Association of Saskatchewan REALTORS® shows people believe it is hard to find new rental housing and support government efforts to create more.

The chart below shows how the shortage of new investment in apartments affects Saskatchewan renters. Over six in ten believe it would be challenging to find an acceptable replacement for their current accommodation.

Source: Praxis Analytics September 2011

This chart shows strong support for the government to encourage more rental units to come onto the market.  Two thirds of Saskatchewan people believe it is important for the next government to take steps in this direction.

    Source: Praxis Analytics September 2011

 INFORMATION:  Bill Madder, 220-9570

                                  Survey report details are available online at ASR Housing Matters Survey 2011

Election issues

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Well, the campaign is underway and as mentioned, Saskatchewan's REALTORS® will be raising awareness of important housing issues during the election. The two major issues we will be raising are: Housing Supply and Tax Competitiveness. Housing supply because in the current market, especially for rentals, we have a serious shortage of available units and greater supply is the best form of rent control. Tax competitiveness was selected because lower property taxes make homes more affordable.

With regard to housing supply here is a link to a recent op-ed article that was published last week in the Regina Leader Post and the Saskatoon Star-Phoenix: Rent Control Op-Ed and here is a link to a summary of my interview on this topic on The Richard Brown Show: Richard Brown interview.

Watch for more on these issues as the campaign progresses.

Welcome to "Housing Matters"

"Housing Matters" is the theme chosen by the Association of Saskatchewan REALTORS® to raise awareness of housing issues during the upcoming provincial election. With the expected election call next week we will be posting media releases, position papers, etc. on issues of importance to not only the real estate industry but to the entire province. Real estate is a major indicator of the health of our economy so policies and programs that have an impact on the real estate market impact everyone.
Because ......