Residential property tax increases caused by skyrocketing assessed values, shifting tax share, says city assessor
Property owners in Calgary can once again expect their municipal taxes to go up, as the assessed values of residential and commercial properties continue to skyrocket, according to a recent report to city council’s executive committee.
City assessor and director of assessment and tax Eddie Lee presented the preliminary assessment roll earlier this month, outlining to councillors the factors that will contribute to next year’s municipal property taxes.
Driving the higher increase is that assessed values for Calgary’s residential properties were slated to soar 17 per cent this year, according to Lee, while non-residential property values were expected to go up by six per cent.
Last year, Calgary’s residential property values climbed 10 per cent on average, along with three per cent for commercial property values.
Sustained year-over-year property value increases are the result of Calgary’s population boom, which has steadily brought more buyers into the city’s housing market, Lee said.
“The residential market continues to be in high demand driven by high net migration as a result of Calgary being a destination of choice,” he said, while noting the city’s relative affordability compared with larger markets such as Vancouver and Toronto.
Lee noted the assessed value for a single-family detached home in Calgary is forecasted to jump 16 per cent, pushing the average cost of a house in Calgary from $610,000 to $700,000. The estimated municipal taxes on such a home would be $2,687 in 2025, according to Lee, up from $2,564 — or $10.25 more each month.
As demand for more affordable housing options pushes up prices in the condo market, assessed apartment and condominium values will see an average forecasted increase of 23 per cent. Meanwhile, multi-residential buildings are slated to be assessed at values 15 per cent higher than last year.
In terms of non-residential properties, Lee said the assessed value of industrial buildings is forecasted to climb seven per cent, while retail property values will increase by two per cent and office building values by seven per cent, after years of stagnation.
He noted these are preliminary figures and subject to change.
Tax rate ratio still hovering near provincially legislated maximum
It means non-residential properties (which account for 15 per cent of all properties in Calgary) will shoulder 46 per cent of the property tax burden in 2025, while residential properties take on 54 per cent.
A one per cent shift will result in a forecasted tax rate ratio of 4.61 to one next year, according to Lee, which keeps the city close to the provincially legislated maximum ratio of five to one.
If Calgary surpasses the five-to-one ratio, Lee warned the province would intervene in the city’s financial affairs by forcing council to increase the residential property tax distribution.
As Calgary creeps closer to that five-to-one ratio, he said shifting more of the tax burden onto residences may be required in the future.
“If we reach that five-to-one ratio, council’s policy choice for tax rates becomes much more constrained and the non-residential property tax rate will be limited to five times the residential rate,” he said.
Calgary’s high ratio is because residential property values are climbing at a much higher rate than commercial property values. If council didn’t approve the one per cent tax shift last year, Lee claimed the ratio would be 4.96 to one in 2025.
Compared to Canada’s other big cities, Calgary’s commercial property owners pay disproportionately more tax than residences, Lee claimed. In Vancouver, businesses assume 42 per cent of the city’s tax responsibility, while in Toronto it’s 31 per cent and in Winnipeg it’s 32 per cent. Those cities’ respective tax rate ratios are roughly 3.3 to one in Vancouver, 2.4 to one in Toronto and 2.1 to one in Winnipeg.
The situation is similar in Edmonton, where Lee noted non-residential properties pay 44 per cent of the city’s property tax, compared to 47 per cent in Calgary. But Edmonton’s tax rate ratio is only around 2.96 to one.
Tax rates vs. mill rates
Homeowners’ property tax amounts are calculated by multiplying their property’s assessed value by the applicable tax rate.
To determine the city’s residential and non-residential tax rates, Lee said the revenue required from all properties to balance the city’s budget (a requirement under provincial law) is divided by the total taxable assessed value.
This formula generates a tiny decimal number, which Lee notes is often multiplied by 1,000 to be referred to as a mill rate, or a rate per $1,000 of assessed value of a property.
Just because a property’s assessed value rises by a certain percentage, doesn’t mean that’s how much the property owner’s taxes are going to increase, according to Lee. He said since assessments are revenue-neutral, an assessment does not generate any more or less revenue for the city. Instead, it changes the distribution of tax responsibility.
So if a single detached homeowner’s assessed value is 17 per cent higher this year, Lee reasoned that they should actually pay a similar amount of property tax as last year. If their property value went up by 20 per cent, they should expect to pay three per cent more, and if it went up by 14 per cent, they should expect to pay three per cent less.
Executive committee members approved receiving Lee’s report for the corporate record. Council will receive the full preliminary 2025 budget adjustments from administration on Nov. 5, before voting on it later in the month.