Owners of detached residences have been told to brace for a shock when property assessments arrive this week, but spare a thought for commercial property owners, too.
“It’s the third year in a row where there’s a shift in taxation from major properties, such as shopping centres, office towers and industrial parks, to community retail properties,” said Paul Sullivan, a senior partner with appraisal firm Burgess Cawley Sullivan & Associates Ltd. in Vancouver.
Similar to detached residences, the low-rise commercial premises that characterize some of Vancouver’s favourite shopping villages have been slapped with rising property taxes for several years, thanks to a rapid appreciation in land values.
The small community retail premises that draw shoppers to Kitsilano, Dunbar and Commercial Drive are neither the highest nor the best use of the properties in the current scheme of things. Moreover, as land values increase in anticipation of redevelopment, they bear a greater share of the tax burden.
There’s good news as 2017 starts, however.
Vancouver councillors Raymond Louie and Geoff Meggs are working with the Urban Development Institute to rewrite legislation determining how small businesses are taxed.
By 2018, Sullivan said small businesses could see additional development potential exempt from taxes, or taxes based on the class at which they’re valued as opposed to current use. This would save businesses from paying non-residential tax rates on additional, unbuilt residential density attributed to the site.
“We’re going to impose new legislation in 2018 to save small business from skyrocketing land values in the city of Vancouver as a result of residential redevelopment pressure.”
In the meantime, Sullivan points out that property owners can appeal – a process his firm handles. BC Assessment notes that just 1% of property owners appeal each year.
Quartered and dollared
Rising property taxes have some real-world impacts on the face of neighbourhoods, however, and how we frequent them. Several increases over the course of 18 months in the price of goods at one west-side café this writer frequented prompted him to go elsewhere, to no surprise of Paul Sullivan.
With a 5% margin, a typical retailer might have to sell an additional $525,000 worth of goods or services a year to meet the kinds of annual increases he or she is seeing in property taxes, he said – tough to do if you’re a coffee shop, let alone any other kind of retailer.
“Retailers are having to sell hundreds of thousands of more coffees in order to cover their increase in property taxes,” Sullivan said.
Throw in a new community plan, as the Grandview-Woodlands area saw this past year, and the nickel-and-diming becomes a matter of quarters and dollars.
“The market immediately jumps on that, and up go those values,” Sullivan said.
The knock-on effect on affordability takes its toll in a city where housing is already expensive, pushing workers to lower-priced neighbourhoods and leaving businesses scrambling for help.
Tim Grant, vice-president of investments with PCI Group, said as much to the Urban Land Institute in November.
“You walk around town and see a number of storefronts with ‘help wanted’ signs. I think that’s all a product – at a different level – of that affordability question,” Grant said.
Slap those same businesses with huge tax increases, and there comes a breaking point.
According to Metro Vancouver statistics, business licences in Vancouver dropped 3.5% between 2010 and 2015, the biggest drop of any major municipality in the region.
“It’s becoming increasingly hard to be an independent small-business operator in our town,” Sullivan said, mincing no words when it comes to the straw breaking the camel’s back. “Taxes are going to be the death of these guys.” •