Business group calls for 2% shift of Vancouver property taxes to residents
A group representing the 22 business improvement associations (BIAs) within Vancouver is calling on the municipal government to lower the “inequitable and unfair” property tax burden on businesses.
While Vancouver City Council approved a 10.7% average property tax hike for 2023 in late February, it has yet to decide how the increase will be distributed between residents and businesses (non-residential).
Ahead of the upcoming April 25 public meeting on deciding how to distribute the tax burden, the Vancouver BIA Partnership is making it known it will ask City Council during its presentation in the meeting to approve a 2% shift in the tax ratio from businesses to residents.
It should be emphasized that this is not a shift of the 2023 tax hike, but rather the overall property tax amount.
It means the residential share of the City of Vancouver’s portion of the property tax would increase to 59%, while the business share would drop to 41%. This would be an adjustment from the 2022 ratios of 57% for residential and 43% for businesses.
In April 2022, the previous makeup of City Council ended the years-long trend of shifting more of the property tax burden from businesses to residents by approving a 0.1% shift from residential to businesses for the 2022 tax year.
The trend of shifting more of the property tax burden from residential to businesses has been a decades-long process to address Vancouver’s once hostile property tax environment for businesses. Between 1994 and 2011, the business tax share was lowered from 60% to 48%, while the residential tax share over the same period was increased from 40% to 52%.
Here are the property tax ratios in recent history:
- 2022: 57% for residential and 43% for business
- 2021: 57.1% for residential and 42.9% for business
- 2020: 56.8% for residential and 43.2% for business
- 2019: 54.9% for residential and 45.1% for business
- 2018: 54.7% for residential and 45.3% for business
- 2017: 54.2% for residential and 45.8% for business
- 2016: 53.8% for residential and 46.2% for business
According to the Vancouver BIA Partnership, commercial properties contribute 41% of the city’s property taxes, but on average they pay 3.4 times more in property taxes than residents, and only occupy 7% of the land. They also pay more to receive water connections and garbage collection services, and are increasingly impacted by property crime and vandalism.
Of course, some retail districts are far more impacted by public safety issues, crime, and vandalism, particularly the areas in and around the Downtown Eastside, including Chinatown, Gastown, and increasingly the Central Business District.
Small businesses, which account for 98% of all businesses in Vancouver, are particularly being hammered. And without meaningful financial relief, more cafes, restaurants, shops, and services could close amidst the challenging economic conditions.
Data from the municipal government shows the overall storefront business vacancy rate on Vancouver’s high streets reached 11.9% in 2022 — equivalent to more than one-in-10 commercial retail units on high streets.
A healthy vacancy range for retail is considered to between 5% and 7%, but currently only one BIA district is under 7%.
Out of 22 BIAs across the entire city, the lowest storefront vacancies are in the Kerrisdale BIA (3%), West Broadway BIA (7.4%), Yaletown BIA (8.4%), Commercial Drive BIA (8.6%), and West End BIA (8.9%). The highest storefront vacancy rates are Hastings Crossing (28%), Dunbar Village BIA (17.8%), Point Grey Village BIA (17.5%), Strathcona BIA (16.9%), Chinatown BIA (16.8%), and Robson Street BIA (15.5%).
Triple net lease arrangements — where businesses cover property taxes, insurance, and maintenance and utilities costs — are putting a strain on businesses, especially when property tax increases are based on overinflated land values based on the “highest and best use” of a property. For example, a single-storey commercial building with a family-owned restaurant could be paying the property tax of imaginary floors above the building — perhaps even the volume of an entire tower — based on approved area plans that enable densification, and adjacent rezonings that set precedent for the scale of the potential future redevelopment.
“We recognize that the prospect of changing the ratio is never an easy discussion,” said Neil Wyles, Executive Director of the Mount Pleasant Business Improvement Association, commenting on behalf of the Vancouver BIA Partnership.
“We understand that for every business lost there is a unique reason. While there may be more than one contributing factor, business taxation and its impact, is the one common thread. Equitable property taxation policy is critical in shifting small businesses from surviving to thriving.”
In early March 2023, City Council approved the Development Potential Relief Program (DPRP) as a pilot project to provide a 2023 business property tax rate relief of 50% of the blended light industry/business tax rate.
The DPRP is intended to benefit restaurants, shops, and services that are independently owned, as well as non-profit and arts/culture-based organizations. City staff estimate about 1,360 properties qualify for the relief, but it remains to be seen whether there will be significant uptake given the tight timeline of the end of last month to notify property owners and business owners, and to determine eligibility.