Court of Appeal Upholds Canmore’s Livability Tax

In a significant legal victory for the Town of Canmore, the Alberta Court of Appeal has dismissed a challenge to the municipality’s Livability Tax Program, affirming the town’s authority to tax homes differently depending on whether they are used as a primary residence.

The ruling, released Thursday in Ross v. Canmore (Town), upholds a lower court decision from April 2025 and clears the way for the controversial housing policy to move forward in the 2026 tax year.

“The appeal is dismissed,” the court wrote in its decision, concluding that the bylaw establishing a new “Primary Residential” tax subclass is a reasonable use of the municipality’s powers under Alberta’s Municipal Government Act.

For Canmore officials, the decision provides long-awaited legal certainty for a policy designed to address one of the Bow Valley’s most pressing challenges: the shortage of homes available for people who live and work in the community.

“I was confident that the Alberta Court of King’s Bench decision with respect to our Livability Tax Program would withstand further judicial scrutiny,” Mayor Sean Krausert said in a statement. “The Town of Canmore’s Livability Tax Program … has been and continues to be on solid legal ground.”

A tax aimed at second homes

Canmore introduced the Livability Tax Program in 2024 as part of a broader housing strategy aimed at increasing full-time residency and generating funding for affordable housing projects.

The program creates a new category of residential property taxes that applies a higher rate to homes not used as a primary residence.

Under the policy, homeowners qualify for the lower tax rate if they live in their home or rent it out for at least 183 days each year, including a continuous 60-day period. Properties that do not meet that threshold fall into the higher tax class.

Town estimates previously suggested the program could generate about $10.3 million per year, money that would be directed toward housing initiatives such as land acquisition, infrastructure, and the construction of below-market homes (homes sold or rented at prices below the market).

The tax itself is relatively modest compared with similar programs elsewhere. Canmore’s additional rate is expected to add roughly 0.4 percent of a property’s assessed value, or about $4,000 annually on a $1-million home.

Court sides with municipality

The case was brought by several property owners and development companies, including Three Sisters Mountain Village Properties Ltd., who argued that the town exceeded its legal authority by creating a tax distinction based on how a home is used rather than on the physical characteristics of the property.

But the Court of Appeal rejected that argument.

The judges found the Municipal Government Act gives municipalities broad authority to divide residential properties into subclasses for taxation purposes.

The statute allows councils to create subclasses “on any basis it considers appropriate,” language the court said confers a wide scope of discretion on municipalities.

In its analysis, the court concluded Canmore’s bylaw was consistent with the purpose of the provincial legislation and addressed a legitimate municipal concern.

“The record supports the view that the Town created the bylaw to address what it viewed as a genuine municipal concern,” the judges wrote, adding that it was reasonable for the town to conclude provincial law allowed it to create the tax subclass.

The court also rejected arguments that the bylaw improperly delegated powers away from municipal assessors or created an unfair taxation system.

Second court victory

Thursday’s ruling marks the second time Alberta courts have upheld the policy.

In April 2025, the Alberta Court of King’s Bench ruled that Canmore had the authority to establish residential tax subclasses and implement the Livability Tax Program, though it delayed the program’s rollout until the 2026 tax year to give property owners time to adjust.

Opponents appealed that decision, bringing the dispute to the province’s highest court.

With the Court of Appeal now siding with the town, the legal challenge appears effectively resolved unless opponents seek leave to appeal to the Supreme Court of Canada.

A compromise in the works

Even with the legal battle largely settled, the policy remains politically sensitive.

Last fall, Premier Danielle Smith directed Alberta’s municipal affairs minister to develop a strategy to “protect Albertans from specialized municipal taxes directed at homes that are not a primary residence,” a mandate widely interpreted as targeting Canmore’s approach.

In response to that pressure, Canmore officials have already begun exploring changes that would limit the higher tax rate to non-Albertan property owners.

The proposal, which council discussed earlier this year, would exempt Alberta residents who own second homes in the community while still applying the higher rate to out-of-province owners.

Mayor Krausert said the town continues to work with the province on potential adjustments to ensure the policy aligns with provincial legislation while preserving funding for housing.

Housing pressures driving policy

The Livability Tax Program was developed following recommendations from a municipal task force examining ways to address Canmore’s escalating housing shortage.

A regional housing study has estimated the Bow Valley will need nearly 3,000 additional homes by 2031 to meet demand, many of them non-market units aimed at local workers.

Town officials have argued that the prevalence of second homes and investor-owned properties reduces the number of homes available for permanent residents and drives up prices.

The Livability Tax is intended to both encourage full-time occupancy and create a dedicated funding stream for housing solutions.

“This is one tool within our broader strategy to address housing affordability and improve livability in Canmore,” Krausert said.

With the Court of Appeal’s decision now in place, the town can proceed with the program’s implementation while continuing negotiations with the province over how the policy may evolve in the coming months.