Plan to defer property taxes divides experts

The provincial government's plan to allow families with children under the age of 18 to defer property taxes could lead to a snowball of debt for those who aren't careful with their money, say some financial experts.

The government said Tuesday in its throne speech that a new "family with children property tax deferral option" could be the break some need to get into the housing market or move up.

The deferral program is similar to an existing program for senior citizens and low-income residents, the speech said. Those programs allow people to defer their taxes for as long as they live and own their home. Eventually, the deferred taxes must be fully repaid with interest before the home is sold.

That makes sense for seniors, said Saanich Mayor Frank Leonard, but not so much for young homeowners. Seniors see their home's value increase more than the taxes deferred, so they lose little. With escalating house prices, the cost of the home when it sells easily covers the deferred taxes, so all it means is that inheritors get a little less. But it's a different situation for younger homeowners.

Taxes eventually have to be paid, and it may be putting off the inevitable until it becomes insurmountable for new homeowners, he said.

Government will pay the deferred taxes to municipalities, ensuring local governments don't lose much-needed property tax revenue, said Finance Minister Colin Hansen.

Families can choose to not pay the tax until they die or decide to resell the home, at which point the back taxes are owed in addition to accumulated interest.

"It's certainly not going to be for everybody," Hansen said. "But particularly for families that are feeling the financial pinch of raising children ... this is one more option for them."

John Pankratz, president of the Certified General Accountants of B.C., likes the fact that it provides an option for homeowners.

The flexibility is good for new homeowners and for those for whom a few hundred dollars a month in property taxes can make or break a family budget, he said. "We do have younger clients who will take advantage of this."

But interest will accrue on the deferred taxes and if a person isn't careful, they could end up in a situation where the debt has been deferred so long, they can't get out from under it.

Randi Masters, president of the Victoria Real Estate Board, said the key word in the program is "defer."

"Deferring means that at one point you have to pay it back, so that's the point to look toward. What are the repayment terms? Anything to help [make] home ownership more affordable is great, but we need more details."

(prepared by Kim Westad & Rob Shaw/Vancouver Sun)