COMMERCIAL TAX ADVOCACY
A SHIFT IN TAX RATIO IS CRITICAL TO THE FUTURE OF VIBRANT SMALL BUSINESS COMMUNITIES IN VANCOUVER
Vancouver’s small businesses, the places that give our neighbourhoods their unique character, identity and vibrancy are at risk of being lost due to a myriad of compounding issues, with inequitable and unfair property taxation policy being front and centre.
Without the ability to vote municipally, a previously held right that was taken away by the province in 1993, the commercial class has had to endure its unfair share of property taxation for years, both municipally and provincially.
From valuing property at its highest and best use, which results in small businesses paying taxes on development potential at the much-higher commercial rate (essentially the air above the property until developed, if ever) to businesses subsidizing the ever-growing residential Vancouver tax base, we have witnessed so many small businesses close and be replaced by chains.
THESE NUMBERS ARE ALARMING
Today, commercial properties contribute 43% of the city’s property taxes but pay on average, 3.4 times more in property taxes than residents, and only occupy 6% of the land base.
As outlined in the Business Tax Alliance report prepared by Paul Sullivan, there are 205,871 residential properties and 15,161 commercial properties in the City, and in the last 5 years there was a growth of 12,557 residential properties versus 68 commercial properties - that is 184 to 1. The disproportionate tax burden shouldered by businesses is not sustainable.
Furthermore, shifting Vancouver's property tax revenue distribution by two per cent over four years — so half a percent yearly — would return substantial savings to businesses. The average commercial property in Vancouver would save more than $4,600 over four years, and in stark contrast, it would only cost the average residential property an extra $334.
According to the City of Vancouver’s annual Storefronts Inventory Report, the overall storefront vacancy rate on high streets was recorded at 11.9% in 2022, which is equivalent to about one in every 10 commercial retail units. A range of 5-7% vacancy is considered to be the target healthy range; however, currently only one out of the 22 BIA commercials districts is under 7% vacancy.
SURVIVAL OF THE BARELY HANGING ON
In addition to increasingly inequatiable taxes, businesses also face many compounding pressures which impact their bottom line, not the least of which are property crime and vandalism. They also pay a premium for services like water and garbage collection, which are not covered in their taxes, unlike residential property owners.
If we want to maintain healthy and vital commercial high streets and walkable neighbourhoods throughout Vancouver, there must be a shift in the level of taxation facing neighbourhood cafes, restaurants, retailers and small businesses. They are the social, cultural and economic fabric of our communities; the places we gather to connect with friends and loved ones, they are the people that know us by name and support our local fundraisers, events and sports teams.
"We are losing businesses all across the city and we cannot take on anymore of the tax burden”, states Alyssa Sager of Leis de Buds, a flower shop on West 4thAvenue. “There are already so many additional costs and obstacles currently for businesses, and the idea of more property tax will absolutely devastate and close the doors of more small businesses in every neighbourhood."
EVERY SHIFT COUNTS FOR A SMALL BUSINESS OWNER AND STAFF
The Vancouver BIA Partnership, which represents 22 business improvement associations across the city, has made presentations to Vancouver Council to seek a shift in the commercial and residential tax distribution ratio.
The Vancouver BIA Partnership's advocacy in 2019 resulted in a nominal tax shift in relation to the extremely inequitable tax ratio. Click here for the Council hearing and BIA speakers, and click here for a presentation provided to the City about the tax issues and proposed solutions.
Unfortunately in 2023 and 2024, a tax shift was voted down by Council - however, we continue to advocate for additional measures of support, including lowering business fees, and reducing 'red tape' and wait times for permitting and licensing.
“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. “However, a shift is necessary to help reflect the reality facing small businesses which make up a resounding 98% of all businesses in the city.”
In a city facing an affordability crisis, asking Vancouver residents to pay more is a difficult task, however, it may be the difference between a small business remaining open to welcome you or having to close. These closures affect the livelihood of business owners and their staff. The BIA partnership is urging Vancouver residents to show support for their local commercial neighbourhoods and businesses by sharing public support on social media using hashtag #savesmallbusinessinvancouver.
“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.” concluded Wyles.
DEVELOPMENT POTENTIAL RELIEF PROGRAM
A major issue for local businesses and the properties that house them are high taxes due to development potential.
BC Assessment assess the value of the property based on its development potential and not its current use. For example, a one-storey building, is taxed as if it were a three-storey building if the area's zoning allows for a four-storey building. Therefore, a commercial property pays "air tax" if it is not built to its full potential. These properties are known as "hot" properties.
To make matters worse, the tax rate that is applied for the development potential of the existing property, is the higher commercial tax rate rather than the residential tax rate, even though a future development would likely be residential (eg. a mixed-use building with retail on the ground floor and residential units above).
As a result of the Vancouver BIA Partnership's advocacy and the City of Vancouver's initiatives - including the dilgent work of the City's finance team - some properties impacted by development potential taxation policies, have been eligible for a reduction in property taxes.
The Development Potential Relief Program (DPRP), enabled by provincial legislation, is aimed at supporting independent, small businesses and community partners, who are paying disproportionately high taxes due to development potential.
Please click here for details, including a list of eligible properties selected by the City based on factors outlined in the staff report.
About the Vancouver BIA Partnership:
The Vancouver BIA Partnership is the network of all 22 business improvement associations across the City of Vancouver, and together represents more than 25,000 businesses and commercial property owners, accounting for $39 billion in assessed property value and $457,327,096 in annual property taxes.