Introduction

Municipalities now have the authority to offer residential tax incentives in Alberta, similar to the incentives introduced in 2019, which granted the same authority to municipalities for non-residential property and machinery and equipment. The Municipal Affairs Statutes Amendment Act, 2024 (formerly Bill 20) (the “Act”) was proclaimed on October 31, 2024 introducing a number of changes to the Municipal Government Act (the “MGA”), as well as impacting other municipal legislation. 

As noted, the Province (of Alberta) introduced similar incentives for non-residential property and machinery and equipment in 2019. The amendments introduced this year by the Act largely bring residential development incentives into alignment with non-residential and machinery and equipment incentives. You can read more about these prior amendments from 2019 regarding non-residential property here and regarding machinery and equipment here.

Councils can now pass bylaws that defer property tax payment until a later date or altogether exempt residential properties from municipal property taxes for a period of time (collectively described as “the incentives”).

Purpose of Residential Property Tax Incentives

Just as with other tax incentives, there are limits on council’s authority to grant incentives for residential property. Specifically, incentives for residential property can only be created for residential property for the purpose of encouraging residential development and the provision of housing in the residential property assessment class for the general benefit of the municipality (s. 364.2(1.1)).

As such, as a starting point, council must ensure that any incentives developed by bylaw are created with this purpose in mind, and be for the general benefit of the municipality (i.e. not specific taxpayers).

Requirements for Residential Property Tax Incentive Bylaws

Th MGA sets out an array of requirements for how a municipality can create a property taxation incentive for residential property in the amended s. 364.2. 

Some of the key requirements for councils to be aware of include:

• the incentive must be introduced by way of bylaw (s. 364.2(1.1));
• the bylaw must set criteria to be met for residential property to qualify for an exemption or deferral (s. 364.2(3)(a));
• the bylaw must establish a process for the submission and consideration of applications for incentives (s. 364.2(3)(b));
• the incentive cannot last for more than 15 consecutive taxation years – however, council may provide for subsequent exemptions or deferrals of 15 consecutive taxation years or less to be applied for and granted (s. 364.2(3)(c));
• where the bylaw provides for any person other than council to cancel or refuse to grant an incentive, the bylaw must establish an appeal process (s. 364.2(3)(d)). 

In addition to the bylaw requirements, an incentive must be granted in written form (s. 364.2(5). That written approval must specify:

• the years that incentive will apply; 
• the extent of the exemption (if the incentive is only a partial exemption); and 
• any conditions the breach of which will result in cancellation (s. 364.2(5)).

If an application is refused or cancelled, the municipality must send written notice to the applicant providing reasons for the cancellation (s. 364.2(7)). The municipality must also outline the time period an appeal needs to be made within, if someone other than council made the decision (s. 364.2(7)).

Once an incentive is granted, a municipality can cancel the incentive if the property did not meet or has ceased to meet a criterion established by bylaw (s. 364.2(6)). For example, if a development ceases to be classed as “residential property” for purposes of assessment, then the municipality could cancel the incentive because the development no longer meets the incentive’s criteria.

Considerations for municipalities

Similar to the incentives introduced for non-residential property and machinery and equipment, municipalities must ensure that any incentives created by bylaw do not offend provisions of the New West Partnership Trade Agreement (NWPTA). While the incentives are in relation to residential property, such properties and any applicable incentives may ultimately benefit businesses. If an incentive is fashioned in a way where it is only available to one taxpayer, then it may be considered an “improper business subsidy” under the NWPTA. 

Additionally, criteria need to be thoughtfully considered especially given the possibility that land use may evolve over time. What if the property is vacant for extended periods? Does adding a commercial activity, like a vacation property or AirBnb, mean the property is no longer eligible? Municipalities can cancel incentives where the land use no longer reflects the criteria set, so defining the criteria requires careful considerations to ensure the municipality’s objectives are met in the long term.

Finally, providing financial incentives also creates budgetary impacts for the municipality. Deferring property tax revenue or foregoing it altogether could have massive impacts on municipal budgets based on how broadly and how long these incentives are offered. As such, special consideration must be had to the potential financial impact of an incentive, before it is made available to the public.

Communities across Alberta face different challenges when it comes to providing housing. Some places in Alberta face booming populations that can make providing enough housing for their growing populations challenging. Other communities may be interested in spurring further residential development in order to attract new residents. Others may be looking to target specific communities within their boundaries for development. Municipal councils need to carefully consider how they use the new residential property tax incentive tools offered by these amendments. There are potentially significant legal, financial, and development implications should these incentives be employed.

Should you have any questions with respect to this article, or if you have other questions related to residential property tax incentives, please contact Greg Plester or Rebecca Kos with the Brownlee LLP Taxation and Assessment Team:

For other municipal questions or concerns, please feel free to contact us on our Municipal Helpline at 1-800-661-9069 (Edmonton) or 1-877-232-8303 (Calgary).