New Brunswick real estate group hopes for new assessment model

As the backlash continues over soaring assessments and the miscalculation of at least 2,400 property tax bills by the government, the New Brunswick Real Estate Association is hoping the province will adopt an assessment model similar to Ontario's.

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Under the association's proposal, which was also presented to earlier governments, property tax would be based on what a house sold for, whether in the previous year or many years earlier. The market value of a property that exchanged hands years earlier would also reflect inflation during the time that had elapsed since the sale.

The association is expected to meet with provincial officials in April.

Rose McLean, the chief operating officer for the Municipal Property Assessment Corporation in Ontario, said there are several different players within that province's assessment program, while in New Brunswick only Service New Brunswick is involved in assessments.

What's different about Ontario?

In Ontario, the province sets assessment legislation and regulations. Then the assessments are done by McLean's group, a non-profit corporation funded by Ontario municipalities.   

The corporation's role is to value all properties at current value, which is done every four years. Those assessments are then provided to local municipalities, which set tax rates and collect property taxes.

And when properties are assessed every four years, they're based on the real estate market.

"We investigate sales on an ongoing basis so we understand what the market's doing," said McLean.

Everybody knows if it's right or wrong.-Rose McLean

"We use those sales to determine the value of properties and it really depends on the property type and how we approach that."

For residential properties, the corporation uses a direct comparison approach, where it looks at the sales happening within a neighbourhood and determines factors that drive up values.

This can include the location, size, age, quality of construction of the home, making up 85 per cent of the value. 

"We use those sales to determine what properties that did not sell, would sell for," she said.

"If you're left in that neighbourhood in your original home the values are increasing …  because someone will pay a lot for that property even though you haven't done anything," she said. "We see that here too."

Before 1970, property assessments were done by local municipalities in Ontario.

"What was happening was there was a lot of inconsistencies across municipalities with respect to how frequently they were updating their assessments and with respect to accuracy," she said.

It wasn't until 1998 the province separated the assessment function into a stand-alone corporation.

"People are more familiar with the property tax system now that we've done it at market value for 18 years," she said.

No cap on assessment increases

McLean said there isn't a cap system for assessment increases, which was recently recommended by the Canadian Taxpayers Federation. Instead, there's a system of phasing in, which was put in place in 2008.

For example, if a property's value goes up $100,000, the change would be phased in over four years for property-tax purposes, going up $25,000 every year until it reached full value. This approach provides predictability and stability for homeowners, McLean said.

Since the system was adopted, there's been a steady decrease in the number of property owners asking for a review of their assessments after an update, she said. 

"Although people don't like it, it is …  a very fair tax in that regard," she said. "Everybody knows if it's right or wrong."