The low-rise apartment building on Burnaby Street in Vancouver’s West End was assessed at $15.1 million in 2016, but BC Assessment valued it at $25.4 million for 2017, a 68% lift in value.
In Burnaby, a 45-unit apartment building on Kingsway Avenue is now assessed at $8.1 million, also up 68% from a year ago.
These are representative of the higher assessments – and property taxes – Metro’s multi-family landlords are facing this year.
Each $1 million increase in assessed value equates to a $3,400 property tax increase, provided there is no change this year in the average mill rate across 13 Metro municipalities surveyed.
Rental apartment buildings are classified as Class 1 residential, the same as a detached house, but none qualify for the B.C. homeowner grant. Multi-family apartment buildings have seen higher assessment increases than in the overall residential market, which also means most landlords will not see any relief in property taxes under a ratio being used in most municipalities to level out the tax bite.
However, as the only income-producing properties classified as residential, apartment buildings have a lower mill rate than neighbouring commercial properties.
Still, some landlords are squeezed between the rising taxes and provincial rent regulations.
“For some, this [higher assessments] will be the last straw,” said appraiser Jeremy Bramwell, principal of Bramwell & Associates Realty Advisors.
He noted that fixed costs for landlords, such as taxes, utilities and insurance, keep increasing but annual rental increases are capped in 2017 at 2.9%.
Phil Gertsman, executive vice-president of Altus Group, which has provided appraisals on hundreds of Metro apartment buildings, said most of the assessment increase is due to rising land values, often based on an expectation of higher-density development, not on rental income.
“When assessments shoot up because of land values, you are basically forcing owners to redevelop the property,” Gertsman said, cautioning that this will mean the end of some older, affordable rentals.
Phil Gertsman, executive vice-president of Altus Group: “when assessments shoot up because of land values, you are basically forcing owners to redevelop the property” | Submitted
The higher assessments could also mean sharp rent increases when an apartment turns over, said David Hutniak, CEO of LandlordBC, which represents 3,300 landlords in the province. “That’s the only opportunity they have.”
But the real trend may be the exit of many local landlords who have owned apartment buildings for years, he said.
Many of these owners will simply cash out into today’s “crazy prices,” Hutniak said, selling to deep-pocket foreign investors, real estate investment trusts and other institutional buyers.
“We have already seen a lot of that over the past two years,” he said. •
