What if the tax breaks designed to protect vulnerable seniors are actually subsidizing multi-millionaires at the expense of young renters?
In this episode of DemograFix, Cara Stern and Mike Moffatt break down whether property tax deferral programs are genuinely compassionate anti-poverty tools or reverse Robin Hood schemes that subsidize wealthy retirees at the expense of younger generations. They unpack the municipal political incentives that favour senior voting blocks, why seniors facing poverty are disproportionately renters who see none of these perks, how British Columbia turned deferrals into a lucrative investment trick for multimillion-dollar homeowners, and how municipal subsidies encouraging seniors to stay in large family homes lock young buyers out while driving community schools toward closure.
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Below is an AI-generated transcript of the Missing Middle podcast, lightly edited.
Cara Stern: Property taxes need to rise over time to keep up with a growing city's needs. But sometimes you see retired homeowners who are cash poor, despite having substantial home equity, say that rising property taxes is making life unaffordable for them. Enter property tax deferrals.
Mike Moffatt: Supporters argue they help seniors age in place, but critics say they function primarily as a political perk that subsidizes wealthy homeowners at the expense of younger generations.
Cara Stern: Today on Demographics, we discuss why deferrals are often defended as anti-poverty measures, while in reality making the housing market worse for young people trying to break in. So let’s start at the beginning. Why do tax deferral programs exist in the first place?
Mike Moffatt: It’s simple: because older people vote in municipal elections and younger people generally don’t. Plain and simple. These programs are framed as an anti-poverty or aging in place initiative. But let’s be honest, politics is the primary driver behind these programs. Seniors are the demographic most likely to show up at the ballot box, particularly in a municipal election where turnout is low. So governments are incentivized to give them benefits, often at the expense of non-voters.
Cara Stern: Not to go totally off-brand here and start defending boomers, but I grew up hearing about seniors in poverty. And I know that nowadays they’re the group least likely to be in poverty. And in fact, according to Stats Canada, poverty rates for seniors are half of what they are for non-seniors. But they’re also the most vulnerable group in the sense that if they do fall into poverty, they can’t just go back to work. Very few people are going to hire someone in their 80s, even if they have the capability to work. And so it’s very hard for them to get out of it in a way that doesn’t apply to younger people.
Mike Moffatt: That is true, but that largely overstates it because they own a house that they can draw the equity from.
There are seniors in poverty, but those seniors in poverty are disproportionately renters, not homeowners. And these programs don’t help them at all.
Because if you have someone who bought their home in the 70s or 80s or 90s, they’ve accumulated massive amounts of tax-free capital gains that they can use to finance whatever they need to finance. And even if those seniors are cash-constrained, there are ways to convert that real estate equity into cash without selling their homes. They can borrow against that massive home equity through a home equity line of credit or HELOC. They can use a reverse mortgage. There are lots of commercial products available for them to draw down on that equity. They don’t need a government-subsidized loan program.
Cara Stern: I do feel like there’s a legitimate problem with seniors being incentivized to stay, especially in suburban homes that require them to drive everywhere, because that’s really isolating when they have to stop driving. You think you have to move out of your community to where you don’t have the support, or you just end up getting stuck in your home—and maybe in a home that you can’t take care of. But we’ve had many conversations about how few options there are for seniors to downsize. Right now, it seems like the only choice is moving out of their community, perhaps into a condo, but that’s not what people want to do typically. And so I think it’s a difficult thing to say they have other options when sometimes they don’t really.
Mike Moffatt: Well, they do have other options. They could draw down against that equity. They don’t have to move out. Again, I haven’t seen evidence that seniors have no options other than to move—either move into other property types or move into another city—because they can borrow against that equity.
Cara Stern: I want to assume good intentions for those who are arguing that these programs are designed to help seniors age in place. So let’s look at it and assume that whoever came up with this idea actually did have good intentions, and they were worried about rising property taxes taxing little old ladies out of their homes. And I can imagine a politician saying, “What’s the harm in letting her defer the taxes? The municipality is going to get the money in the end and there’s interest charged on that.”
Mike Moffatt: Well, these programs aren’t free. The municipality has to finance them with interest, and the municipality pays those interest costs, which they make up for by either cutting services or, more likely, raising property taxes on everyone else.
You have this situation where you have seniors who have a low poverty rate that we’re now subsidizing by raising property taxes on everyone else when everybody else has a higher poverty rate. It’s inherently regressive.
And it leads to some pretty incoherent policies at the municipal level. Municipalities, on the one hand, do things like restrict urban growth boundaries and impose other restrictions that limit the growth of family-sized homes because they say seniors are going to downsize, but then they create subsidy programs that encourage seniors not to downsize. There’s just a level of incoherence here that doesn’t make any sense until you look at it through a political lens and go, politicians put these policies into place because they’re very popular with the people who are most likely to vote.
Cara Stern: Fair. And I do think there is an incentive here for seniors to hold on to their family-sized homes long after they need the space. We know that there is a real shortage of family-friendly housing. It also contributes to distorting the demographics.
You end up with areas that have family-friendly housing and family-friendly amenities like local schools, and those schools are closing because young families can’t afford to move in, so no kids go there.
I get worried when I see legislation that Doug Ford, for example, put forward that said that they may sell off schools that they considered underused. I see the solution as increasing the number of family-friendly homes in neighborhoods that already have those amenities. Instead, it looks like what we’re going to do is make this set in stone: these are areas kids don’t get to live. That’s a real problem. I get very worried about how you can ever fix it once you take away those amenities.
Mike Moffatt: Yeah, absolutely. Build family-friendly housing in neighborhoods with underused infrastructure rather than having to build new infrastructure, which, again, raises the property taxes of everyone else. We create this cycle where municipalities are making decisions that inadvertently raise property tax rates on renters and young homebuyers who are already financially squeezed.
Cara Stern: Systems work differently in different parts of the country, and I was completely outraged when I learned about BC’s system. What I had seen was they fixed some of it this year, and we’ll explain what they did. But before this year, it could apply to anyone who’s 55 and older with home equity—which, actually, that’s still the rule.
There’s no income test. There’s no wealth test. The average home price for someone enrolled in B.C.’s property tax deferral program was $3.4 million before the recent rule where they changed how much it would cost to defer it.
But they haven’t actually changed the qualification rules; it just became this big way of borrowing money at very cheap rates.
Mike Moffatt: Yeah, that’s exactly what it is. It became this investment trick where wealthy homeowners are essentially borrowing from the province at the prime rate minus 2%, which is way cheaper than they could get any bank loan, and then able to take that money and pump it into capital investments, stocks, and bonds. B.C. has addressed this somewhat: they bumped the rate to prime plus two rather than prime minus two, which does take away some of the benefits of this investment trick.
Cara Stern: And the newly elected BC conservative government. They are promising to bring it back.
Mike Moffatt: Let’s think about this for a minute. If you’re a young homeowner, you’re struggling to pay the bills. In much of the country, your property tax rates are going up faster than inflation.
You’re getting squeezed here. Meanwhile, cities and provinces are using that money coming out of your property tax bill to give seniors a property tax deferral, which is basically just a low-interest loan. It’s a loan where you’ll get much lower rates than at a bank.
Let’s say you’ve got a senior in Vancouver who bought their home decades ago for $100,000. It’s now worth $5 million. That allows them to defer around $20,000 in annual property taxes in perpetuity, which compounds over time.
Cara Stern: It’s wild that they can take the entire property tax amount. In some places, it’s a matter of taking the amount owed and looking at the increased amount and just being able to defer that increase. But in B.C., and I think in Alberta too, you can defer the entire amount. And the fact that there’s no wealth test, no income test, and you don’t have to pay anything tells me this isn’t about seniors in poverty having trouble keeping up on fixed incomes.
Mike Moffatt: No, you’ve got people who could be earning a lot of money, have $5, $10, or $15 million homes, and are able to use this. As an example, let’s say a family has $250,000 in deferred property taxes, which they could easily build up over ten, 15 years. And the city is offering an interest rate on the deferral. That’s 2% less than what it costs the city to borrow at.
Well, you do the math there. It costs the city – and really taxpayers – $5,000 a year in interest costs for the spread between what the city is lending to older people versus their own borrowing rate. The irony here is that the homeowner can use that deferred property tax rate loan to buy the very debt that the city is issuing to finance these programs and pocket the $5,000 spread for themselves. When you have a program like this, it’s basically a straight wealth transfer from municipal taxpayers to the owners of a multimillion-dollar home. It’s completely regressive.
Cara Stern: I want to assume good intentions, but when you spell it out like that, how can they possibly think that this is the way to do an anti-poverty initiative? It doesn’t make sense.
In Ontario, it is much tighter. In Toronto—it differs depending on municipalities in Ontario—Toronto defers tax increases, and they do use income thresholds. It does feel like maybe there should be an outright home value ceiling, like what happens in Manitoba. Does someone in a $3 million home need to be eligible for tax deferrals? I don’t know what the number is, but there’s a number where it doesn’t make sense at that point to be doing it.
Mike Moffatt: In my mind, the number is zero. I don’t see why anybody should get this at any home price.
Why should renters, who can’t afford a home in the first place, pay higher property taxes through their rents because their landlords are paying higher rates to subsidize wealthier homeowners?
If a city wants to run a deferral program that runs a profit or breaks even, I think that’s fine. I have nothing against that. It’s the subsidy that’s the issue.
The other thing is, if we for some reason want to subsidize homeowners, why just seniors? There are lots of young homeowners who are struggling to pay the bills. What if a family has another child and all of a sudden has extra expenses? Why can’t they defer their property tax bill? Instead, we offer these programs to one specific group under one specific scenario.
But there are lots of other people who are financially stressed, looking at their monthly bills and thinking, “I might have to downsize here.” And a lot of those individuals don’t have the option of using a HELOC or a reverse mortgage because they haven’t built up that equity in the first place.
Cara Stern: I wonder if there’s an issue where the policy was originally pitched much higher, and now it’s doing something very different from what its supporters claim.
Mike Moffatt: They certainly were pitched that way. But these policies are actually working as designed.
There’s a big difference between how a program is sold and what the program is designed to do. Those aren’t always the same thing. These programs were designed to protect homeowning voters and senior voters and preserve their wealth. That’s precisely what they do.
The political incentive here is to keep them intact because any attempt to tighten the rules gets attacked as taking away money from grandmas on fixed incomes and trying to foreclose on grandma’s home—even though grandma’s home is worth $4 or $5 million, and if grandma wanted to, she could easily take out a reverse mortgage or HELOC, but she’s just choosing not to.
Cara Stern: I’m definitely on board with taking away wealth transfers that go from young people to older people. Economically, I can see the argument to get rid of it. But politically, this feels like something that has no possibility of going away.
We could just look at Mississauga’s new mayor, Alvin Tedjo, who made a property tax deferral a key part of his platform. He won what might be the biggest upset in the province in these municipal elections. It’s a really popular policy, especially among homeowners. It’s a losing political initiative to then try to take it away from seniors; it’ll be framed as taxing old ladies out of their homes instead of a way to help seniors age in place.
I understand why politically it’s a very good idea, and seniors supported it. I wonder whether Alvin Tedjo would have won anyway, but it’s very possible that a lot of people came out to support that because it was a key plank in his platform. What do you think?
Mike Moffatt: It’s tough to say. It shows that good politics is not always good policy and vice versa—having policies that make sense are not necessarily political winners, and you can be a political winner on policies that don’t make economic sense, but they’re quite popular.
Cara Stern: At least with Alvin Tedjo, he has plans to build more multiplexes, so hopefully that’ll balance it out. But not a great idea to introduce another wealth transfer that didn’t exist before.
Ideally, this wouldn’t exist at all, but I wonder if there’s a way we can design a version that actually helps people in a terrible situation without making it too widespread. How could you make this program viable so that it isn’t just a wealth transfer?
Maybe the way to do it is strict income and asset means testing, reserving subsidized government deferrals for low-income, low-asset households—not multimillionaire homeowners trying to save money so they can pass it on to their kids. For example, in Manitoba, you can’t defer taxes on a property worth more than $300,000. You said the number should be zero, but is there a version that is more acceptable in your mind?
Mike Moffatt: Some of those things can be improvements, but I worry about the unintended consequences.
You’re basically incentivizing seniors to stay illiquid. You’re looking at their portfolio and saying, “We’re encouraging you to have 95% of your net worth tied up in a single illiquid asset.” That’s a bad idea.
We should encourage people to have a diversified financial portfolio because there’s risk here. If that senior has all of their net worth tied up in housing and the housing market goes south and homes become more affordable, they’ve lost 20% to 30% of their net worth overnight. If anything, we should be encouraging people to have a diversified portfolio, not saying, “All of your net worth is tied up in one asset, and as government, we’re going to help you keep it that way.”
Cara Stern: Anything that increases home prices will then make sure that younger generations also have all their money in that asset. When you said that, I realized all of my money is in my house; there’s no extra money to put anywhere else. That’s the case for a lot of younger people who had to buy in after home prices rose.
You definitely have to eliminate interest rate discounts so taxpayers aren’t extending cheap loans to wealthy estates. If people have to defer, could you do it in a way where the city makes enough money that it isn’t such a great deal—people who need it get it, but it’s not an investment trick?
Mike Moffatt: That one I’m good with. Instead of having seniors take out a HELOC or reverse mortgage, the city is the lender. I don’t have a problem with that in theory, so long as the interest rates the city is charging cover the cost. If the rate is one where the city is turning a profit or at worst breaking even, I’m on board. Again, the only thing I would say is: could we extend it to everyone, not just seniors? There are a lot of people who could use the support, particularly cash-strapped young people.
Cara Stern: And it doesn’t help people who are renters. You’re right that the seniors most likely to be in poverty are more likely to be renters—or at least the most vulnerable people—because they don’t have as many options.
The last thing we could do is make sure you’re enabling downsizing. Build more missing middle housing, ideally in the community, so seniors don’t have to move farther away and have an option to downsize.
Although I don’t know how much that saves them on property taxes really, at least they might get some money out of it.
Mike Moffatt: Seniors could sell a more expensive home, buy a less expensive home, and take the equity out that way. But again, they have other options like reverse mortgages. I actually worry about tying the downsizing conversation to the property deferral conversation because it presupposes the argument that the only way to deal with affordability issues is to downsize.
If we’re saying we’re going to create missing middle housing as a way to help you avoid property taxes, it concedes the argument. It politically strengthens the argument for deferral programs if you’re tying these things together.
As somebody who is all for liberalizing zoning and making it easier to build all kinds of homes, I don’t think it’s helpful to put the stench of “these are homes for victims of property tax increases” on them. It’s just not a helpful conversation.
Cara Stern: We know that good economics doesn’t always make good politics. If you weren’t an economist looking at this through that lens, but you were a politician trying to get out of the situation, how would you do it? How would you sell it to voters?
Mike Moffatt: I’d start by being transparent about the costs. It’s hard to find out from a city how much these deferral programs are costing; they bury these costs. Letting voters know how much these programs are costing and what effect that has on their property taxes would help.
If voters—particularly non-senior voters—had access to that information and knew exactly how much these programs were costing them, there’s a fighting chance they’d say, “This doesn’t make any sense,” and be willing to support reforms.
Those reforms could be abolition, or they could simply be raising the rates so it’s not as much of a subsidy. It’s still an uphill battle given that seniors disproportionately vote in municipal elections, but it’s a start to give voters the information they need to make informed choices. Right now they’re not getting it, and it’s easy to assume that these programs have zero costs when they don’t.
Cara Stern: To wrap up: deferrals are frequently framed as a compassionate anti-poverty tool, but for high-income households and when priced below market rates—especially in those situations, and probably in all situations—they just shift the financial burden onto younger homeowning generations.
Mike Moffatt: They really do, because ultimately they’re not an anti-poverty tool at all. They’re a wealth preservation tool and subsidies for older, wealthier homeowners.
Governments and politicians need to ask themselves whether these policies are serving the public interest or if they’re just politically expedient. Right now, the answer is clear.
Cara Stern: Thanks, everyone, for watching and listening. Our producer is Meredith Martin, and this episode was edited by Canadian Civil.
Mike Moffatt: And if you have any thoughts or questions about Happy Gilmore or other movies where grandma is taxed out of her home, please leave a comment on YouTube.
Cara Stern: And we’ll see you next time.
Additional Reading/Listening that Helped Inform the Episode:
How B.C.’s Property Tax System Benefits Millionaires
How a Tax Break for Struggling Seniors Became a Billionaire Subsidy in B.C. with Phil Webb
Low income statistics by age, gender and economic family type
Ontario to Introduce Legislation to Refocus Education System