In face of record house prices, municipalities asked to consider lowering tax rates

The New Brunswick government is calling on municipalities to consider cutting their tax rates for 2023 in the face of large assessment increase notices being mailed out to provincial property owners this week.

"Local governments will need to take these assessment increases into consideration when setting their property tax rates for next year," said Service New Brunswick Minister Mary Wilson in a statement alerting property owners that assessment increases are in the mail.

Property values have been rising rapidly in New Brunswick for the last two years, mostly on houses. That is affecting the taxable value of homes everywhere, even those that have had the same owner for years.

Wilson credited the escalation in values to a "strong real estate market" driven by "a growing population" in the province.  New Brunswick added more than 21,000 people in the last year, the most in a single year since at least Confederation, in 1867.

Assessment notices arriving this week detail what the New Brunswick government has determined each property in the province will be worth as of Jan. 1, 2023. 

If the amount goes unchallenged by the property owner, a municipal tax rate and, in some cases, a secondary provincial property tax rate is applied to the assessment to generate a tax bill.   

Assessments up $1.47 billion

Last year, about half of New Brunswick's 34 cities and towns lowered their property tax rates, to some extent, as a first wave of assessment increases washed over property owners. But this year increases are higher and more widespread.

In Moncton, assessments on all properties are up $1.47 billion on the city's nearly 30,000 properties. It's $500 million more than last year's increase, and most of it is related to escalating house prices in the city.

Al Meloche, 69, lives on Moncton's Lonsdale Drive. Several properties in his neighbourhood have sold for record prices since 2021. That has caused the value on his own home to jump $101,300 in two years. It is now assessed for taxes to be worth $280,700.  Meloche doesn't disagree that his home is probably worth at least that much.

"Years ago I remember the tax estimate was always way lower than the value of the house. Now it's getting pretty close," he said.

So far the assessment jumps haven't caused a significant tax increase for Meloche.

In New Brunswick, large assessment increases on residential properties that have not been sold or renovated have to be phased in gradually by 10 per cent per year. In addition, Moncton lowered its tax rate by 6.2 per cent last year. 

For Meloche, the combination of those two policies kept his 2022 property tax bill down to a 3.2 per cent increase, despite a 27 per cent hike in his assessment.

"It worked out all right for me," said Meloche about the $96.55 extra he ultimately had to pay in increased property taxes on his home in 2022, and he is hoping for a similar outcome in 2023.

However, few communities lowered their tax rates as dramatically as Moncton last year. 

Saint John cut its tax rate 4.2 per cent and Fredericton 1.6 per cent.  

Others left them unchanged, and thousands of homeowners with large assessment increases faced tax hikes at or near the 10 per cent limit.    

New Brunswick municipalities will be preparing budgets and deciding on tax rates in the next few weeks.

Saint John Mayor Donna Reardon said she believes another tax cut will be "under consideration" this year given assessments in her city are up more than $680 million. 

In addition, the province is granting municipalities some flexibility to target tax cuts at residential properties alone for the first time. 

"I think it would be in our best interest to continue in that vein," she said.