Mapping the CAP

I wrote about Nova Scotia’s Capped Assessment Program (CAP) for municipal property taxes at some length back in 2017, drawing heavily on a report on the subject commissioned by the Nova Scotia Federation of Municipalities (NSFM) which would dearly love to throw the CAP high in the air, like Mary Tyler Moore at the beginning of her eponymous ’70s TV show. (Google it, kids.)

Now the NSFM has partnered with a large chunk of the alphabet, but which I mean the Nova Scotia Association of REALTORS (NSAR), the Investment Property Owners Association of Nova Scotia (IPOANS), and the Association of Municipal Administrators of Nova Scotia (AMANS) to create “a visual tool” to aid in the understanding of CAP — the “CAP map” of the headline.

NS Capped Assessment Program Map

Not very good representation of the map which is actually quite pretty. (NS CAP Map)

The federation held a virtual AGM this morning, during which newly-elected president Emily Lutz (deputy mayor and councilor in Kings County) said of the map:

Every Nova Scotian is now able to access an online interactive map that will let them see what kind of effect the CAP has on them. The CAP is a regressive tax policy that systematically favours higher-income households. Structural inequalities call for structural remedies, and with the NSFM’s CAP proposal it’s time to let the CAP fade away and replace it with an improved structure that actually helps those who are struggling the most.

The map was created by calculating the tax bill for each property in Nova Scotia with the current CAP system in place and without it and is, according to the accompanying NSFM press release:

…designed to illustrate the disparity in taxable value between homeowners resulting from the CAP program. Users can search their individual properties, to see who is benefitting and who is paying more than their fair share under the CAP.



The map is accompanied by a report by Jens von Bergmann of Vancouver-based MountainMath Software and Analytics, which provides additional analysis of the effects of the CAP — including its effect on renters.

The renter angle is interesting because although they don’t pay property taxes directly, tenants pay them indirectly — landlords incorporate property taxes into the rents they charge.

And “rental apartments,” like “rented or vacant residences in condos,” are excluded from the CAP. Therefore, Bergmann argues, renters fall into the category of people who pay higher property taxes — along with recent homeowners. Bergmann takes the analysis a step further, though, arguing that the higher taxes on new properties make investment in new rental properties less attractive, which puts a “downward pressure on overall rental supply.”

To add to the problem, renter households “tend to have incomes that are substantially lower than that of similar households.”


Seniors & New Owners

Bergmann looks at two arguments often heard in support of the CAP — that seniors would be most hurt by its removal and that new home owners tend to have higher incomes, so can handle the higher property taxes.

Bergmann said he found “little indication” that Nova Scotia seniors households are “more stressed to pay their shelter costs” than are other households, noting that many are mortgage free as well as being recipients of government transfers.

Nor did he find evidence that new buyers have higher incomes than people who have lived in the same homes for a long period of time.



On the other hand, Bergmann says that despite anecdotal evidence that Nova Scotia’s CAP is affecting people’s housing and property investment decisions, he couldn’t find conclusive evidence to either prove or disprove this.

But he noted that Nova Scotia CAP is relatively recent (introduced in 2005, set to inflation in 2007) and suggested it would be worth looking at the effects of similar legislation in place longer, like California’s Prop 13.

Proposition 13 (officially, the People’s Initiative to Limit Property Taxation) passed in 1978:

…decreased property taxes by assessing values at their 1976 value and restricted annual increases of assessed value to an inflation factor, not to exceed 2% per year. It prohibits reassessment of a new base year value except in cases of (a) change in ownership, or (b) completion of new construction. These rules apply equally to all real estate, residential and commercial—whether owned by individuals or corporations.

Bergmann says studies have shown that Prop 13 “reduced residential mobility of owners, which may negatively impact labour mobility.” But the flip side of this was that when it came to “involuntary moves” — as when gentrification increases property taxes — research has found no evidence that “property tax limitation protects long-term homeowners” from involuntary moves.

Says Bergmann:

While individual implementations of property assessment caps differ across jurisdictions, the experience from places with longer-running property assessment caps are a point of caution that the Nova Scotia assessment cap may face increasing negative consequences on residential mobility in the future without meaningfully reducing involuntary moves.

The report concludes that removing the CAP will:

…likely increase overall equity and enhance residential mobility.



That said, there will be “winners and losers” in this phasing out of the CAP — even, possibly, involuntary moves by people now benefiting from a capped taxable assessment. As Lutz stated in the press release, though, the NSFM’s proposal for phasing out the CAP includes a number of protections for “those who are struggling the most”:

iv. Municipal units will be required by legislation to have a property tax assistance program for low-income homeowners. [The CBRM actually has one.]

v. Municipal units will be required by legislation to have a spike protection mechanism for increases in taxable assessment of 10% or greater in a single year, due to market factors. The spike protection will be administered by municipal governments throughout Nova Scotia.

vi. Municipal units will be required by legislation to extend the phase-out period for homeowners with a substantial difference between capped and market assessment. This assistance will be means tested, with the details to be confirmed through negotiation and set in regulation.

The proposal also calls on municipalities to commit to lowering their residential and resource property tax rates as their taxable assessment base rises with the phase out of the CAP.

The map and report released today are intended to inform discussion on the CAP — discussion the NSFM seems determined to have:

Removing the CAP has been a priority of the NSFM going back many years. The work of an all-party committee looking into the CAP was put on hold earlier this year when COVID struck. NSFM is working to reconvene the committee early in 2021.

(I really recommend you test drive the map and read the report — I haven’t really had time to touch on the effects of the CAP in Cape Breton in particular, and the figures are interesting.)