The most interesting part describes how rent controls have devastated the assessment value of Winnipeg apartment buildings, thereby transferring a large portion of their property tax load onto the owner-occupied homes. In other words, it observes that homeowners are subsidizing the damage caused rent control with higher than necessary property taxes. As high property taxes correlate to some degree with lower property values one might draw the conclusion that rent control in Winnipeg is one reason the city has the lowest property values in Canada.
Robert Hanson left this short, but interesting insight into the modern day scourge of rent controls before passing away in early 1997.
Market Values of Houses:
It is argued that the housing market is largely influenced by supply
and demand. However, when rent controls artificially reduce rental
rates below even the cost to operate such premises, this interference coupled
with demand, reduces the market forces that affect house prices.
Reducing rental housing prices erodes savings as well as increases property
taxes.
Market Value of Rental Property:
Over the years, as operating costs gradually increased due to the legal
inability to recover from tenants and as maintenance costs rose with age,
the market value of many buildings dropped sharply. This accumulation
builds until owners realize that the assessed value has advanced
beyond the market value to such an extent as to warrant an appeal.
The evidence of the extraordinary number of successful appeals is
further proof of the damage that rent controls have had on
municipal revenues. The impact of Rent controls on residential
rental property values can be shown in the drop in market value compared
to replacement cost from 1976 to 1993. (see Table 1)
If the average value of the 102,575 units is $30,000.00 today, but market
value remained the same, percentage of replacement cost as houses
or the 1976 percentage, the market value would be about double what
it is today. This increase in market value would be $3,077,250,000.00
and after a 57% portioning, the taxable portion of this increase in assessment
would be $1,754,032,500.00 or approximately $15,000,000.00 increase in
revenue. If this were applied to the 156,350 Winnipeg homeowners,
it would amount to an average reduction in 1996 taxes of $673.00
per homeowner. Since 1976, the accumulated property taxes paid by
each homeowner would have amounted to an average of approximately $13,000.00
per homeowner.
Who is Not Paying Property Taxes?
The portioning rules have changed. (Portioning is the practice of taking
some portion of the assessed value of a property towards which the rate
of taxation is applied). This portion was 48% for residences and 72% for
rental property. However after a court decision, the city was forced
to equalize these rates so that by 2001, the portioning rate for these
two property classes will be 48% of the assessed value. This means
that the homeowner will be paying a larger share of the total tax bill
while tenants will be paying less. The principle of both
tenants and homeowners paying according to market value and at the same
rate is equitable and fair as long as government does not manipulate the
market value of property to artificially favour one group.
It is a political question as to why a homeowner is expected to pay their
operating costs while a landlord is not able to pass on the costs associated
with operating a rental property to a tenant.
At least homeowners and businesses should be clearly aware that they
are subsidizing tenants, have been for many years and whether it is the
intention of the government to continue this practice.
|
|
||||||
| Year | Market Value | Cost | % | |||
| 1976 | $ 12, 600.00 | $ 14, 800.00 | 85% | |||
| 1993 | $ 37, 000.00 | $ 85, 500.00 | 43% | |||