Vancouver City Council to consider property tax break for new rental housing | Daily Hive

Vancouver City Council to consider property tax break to boost lagging new rental housing construction

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In an effort to kickstart stalled rental housing development during the current challenging economic conditions, which may remain in place for an extended period of time, independent Vancouver city councillor Rebecca Bligh is proposing various new financial incentives aimed at making new secured purpose-built rental housing building projects more viable.

Bligh has submitted a member motion that will be deliberated in a Vancouver City Council public meeting next week, calling on City of Vancouver staff to explore creating a “tax abatement” program — a reduction or an exemption on the level of property taxes paid by property owners and developers — for new rental housing properties.

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The program would temporarily defer increases in property taxes that typically occur for a new rental housing building project, such as allowing the tax rate to remain based on the pre-redevelopment assessed value for a set period of time.

The move is intended to help offset at least some of the rising financial pressures faced by rental housing developers, including sustained high borrowing costs due to elevated interest rates, soaring construction materials, labour, and equipment costs, and tightening access to conventional financing sources to cover land acquisition and construction costs — all of which are putting the brakes on new rental construction, even for approved projects.

“The economic viability of new rental housing in Vancouver has been significantly undermined,” the motion states, calling for “bold action” to address the issue.

Under her motion, City staff would be tasked with reporting back on options for designing such a program, including its legal feasibility under provincial and municipal tax rules, financial implications for the municipal government, and criteria to ensure the incentive supports affordability and long-term rental tenure.

The report from City staff would also explore best practices from other jurisdictions that have implemented similar measures, and seek input from stakeholders such as housing providers, non-profit organizations, developers, and the provincial government.

Bligh’s motion asserts that property tax increases triggered by higher post-redevelopment land assessments can deter investment in new rental housing. A temporary deferral of these tax hikes, she suggests, could help mitigate financial pressures during the critical construction and stabilization phases of rental housing projects.

Encouraging more purpose-built rental aligns with Vancouver’s housing strategy as well as broader regional and provincial goals to improve housing affordability.

Over the decades, strata market ownership condominiums — despite being primarily intended for ownership — have accounted for a significant portion of Vancouver’s rental housing supply through investor-owned units offered as unsecured market rentals. However, with the current economic climate stalling pre-sale activity and new condominium project starts, this flow of secondary rental supply has sharply declined.

As a result, there is growing urgency to accelerate construction of secured purpose-built rental housing to help meet overall housing demand and offset the shortfall from the condominium market.

While the City has approved a large number of rental housing projects in recent years, including many projects approved by the ABC Vancouver-led City Council, a growing proportion of these approved developments are now at serious risk of not moving forward.

Developers and industry stakeholders point to the mounting economic and financial headwinds that have made it difficult to secure financing or achieve construction viability. Without additional supportive measures such as the proposed tax deferral program, many of these planned projects could remain indefinitely stalled — exacerbating the region’s already acute housing shortage.

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