Under-assessment makes holding development land cheap

Vacant land holders are getting a huge tax break because of under-assessments. The holding cost of vacant land seems to be pretty cheap in Saint John because of these under-assessments. A few examples:

A large piece of development land on Woodward Avenue in Millidgeville is assessed for $108,500. The recent purchaser disagreed that the property was worth so little, and paid $950,000 in 2023. This assessment is 11.4% of the purchase price. The property tax cost of owning this land is $2,901 per year. If the property were assessed for the purchase price, the tax bill would be over $25,000 per year.

A developer bought some land on Forbes Drive for $198,000 in 2021. The assessment is $13,000 - just 6.6% of the purchase price. The property tax cost of owning the property is $348 per year. If the property were assessed for the purchase price, the tax bill would be over $5,000 per year.

A piece of land on Mountain View Road in east Saint John sold in 2022 for $1.8 million. It is assessed for $26,400. That assessment is 1.5% of the recorded sale price. The property tax cost of holding this $1.8 million piece of land is $706 per year. If the property were assessed for the purchase price, the tax bill would be over $48,000 per year.

This is not unique to Saint John. There is a case in Rothesay, where development land is assessed at less than 3% of its 2021 sale price. 

With the cost of holding development land so low, it is cheap for owners to do nothing. If these properties were assessed for amounts equal to their recorded purchase prices, the property tax cost of sitting on the land would be $1,000s to $10,000s greater. This might lead to the owners deciding they need to develop the land sooner, or sell the land to developers who would build on the land and unleash the revenue potential from the land.