Prop­erty de­vel­op­ers have made Van­cou­ver greener by con­vert­ing empty lots into com­mu­nity gar­dens, but they're also reap­ing a gen­er­ous tax break

BC Business Magazine - - Front Page - By Kerry Gold

At the cor­ner of Alma Street and West 10th Av­enue in Van­cou­ver, a long-stand­ing va­cant lot that was once a gas sta­tion has re­cently be­come a 24,000-square-foot gar­den brim­ming with veg­eta­bles, fruit and flow­ers.

Neigh­bour­hood gar­den­ers who make use of its 100 plots, for a nom­i­nal fee of $15 a year, have a real es­tate de­vel­oper to thank for their fu­ture bounty. Landa Global Prop­er­ties hired a non-profit gar­den­ing group to trans­form the lot—de­com­mis­sioned by Shell Canada Ltd. when it sold the prop­erty in 2008—into a se­ries of raised gar­den beds, with seat­ing, public art and fruit trees, as well as a wa­ter sup­ply. Gar­den­ers can only be as­sured of a crop from sea­son to sea­son, though, be­cause the land is a fu­ture condo de­vel­op­ment.

Tem­po­rary gar­dens, and some­times parks, have popped up through­out Van­cou­ver, usu­ally in places un­der­go­ing den­si­fi­ca­tion, around Olympic Vil­lage or the down­town core. The Davie Vil­lage Com­mu­nity Gar­den at Bur­rard and Davie streets is owned by Prima Prop­er­ties, which plans to build a mixed-use tower on the site. Lon­don Drugs Ltd. has a com­mu­nity gar­den next to its store on East Hast­ings Street while the com­pany holds the land for a mixed-use res­i­den­tial de­vel­op­ment. A spokesper­son said Lon­don

“Hey, this thing I love, gam­ing, now can fit within the things I'm look­ing for in a busi­ness model” –p.21

Drugs will sub­mit a pro­posal to the city later this year.

A big in­cen­tive for de­vel­op­ers and landown­ers to con­vert empty commercial space into a com­mu­nity gar­den is the sub­stan­tial tax break. “Prop­er­ties just aren't ready for de­vel­op­ment, and de­vel­op­ers are see­ing this as a way to lower cost,” says tax con­sul­tant Paul Sul­li­van, a prin­ci­pal at Van­cou­ver-based commercial real es­tate ap­praisal firm Burgess Caw­ley Sul­li­van & As­so­ciates Ltd.

The non-profit that cre­ated the Alma and 10th gar­den, Shift­ing Growth, man­ages seven tem­po­rary com­mu­nity gar­dens in the Lower Main­land, in­clud­ing one on Co­quit­lam's Burke Moun­tain. Each con­tract in­cludes a re­moval clause so the gar­den can be cleared out within 30 days. No de­vel­oper has had to take ad­van­tage of that clause, says ex­ec­u­tive di­rec­tor Chris Reid. More of­ten there are de­lays as de­vel­op­ers wait for per­mits, fi­nanc­ing, con­struc­tion or just ideal mar­ket tim­ing.

It's been a ban­ner year for con­ver­sions to gar­dens and parks, ac­cord­ing to City of Van­cou­ver data. For the 2017 tax roll, 15 prop­er­ties were con­verted from class 6, or commercial, to class 8—com­mu­nity gar­den or public park use.

In a town that of­ten blames de­vel­op­ers for es­ca­lat­ing prop­erty costs, a com­mu­nity gar­den is good public re­la­tions, Sul­li­van says. Rather than force the neigh­bours to en­dure a scrubby lot for years on end, the owner can make nice by of­fer­ing them some­thing at­trac­tive—and use­ful.

It also of­ten takes two to three years, or longer, to ob­tain de­vel­op­ment and build­ing per­mits, es­pe­cially if re­zon­ing is re­quired. In the mean­time, car­ry­ing costs, es­pe­cially taxes, can be a strain for a smaller de­vel­oper.

But big­ger play­ers en­joy the tax break, too, notes Sul­li­van, who of­ten rec­om­mends the land-use change to un­named de­vel­oper clients. He's fight­ing to change tax leg­is­la­tion so empty prop­er­ties slated for fu­ture res­i­den­tial den­sity are taxed at the even lower res­i­den­tial rate.

It isn't just de­vel­op­ers us­ing the tax break; so do prop­erty own­ers who can't get per­mits to build or can't af­ford the taxes or re­de­vel­op­ment costs. If a Van­cou­ver prop­erty changes use from class 6 to class 8, the de­vel­oper pays about one third of the taxes they'd oth­er­wise owe, Sul­li­van ex­plains.

En­vi­ron­men­tal con­sult­ing firm Hem­mera, which helped cre­ate the Davie Vil­lage Com­mu­nity Gar­den, told the Globe and Mail in 2011 that it saved the de­vel­oper Prima Prop­er­ties 70 per cent in taxes, amount­ing to $240,000 a year.

Sul­li­van con­tends that with­out the tem­po­rary change of land use, home­buy­ers would have to ab­sorb the hefty car­ry­ing costs of a higher tax rate. “When you tax den­sity that's to be built as res­i­den­tial at commercial tax rates, and it takes two to five years to get a per­mit to build, you add $10,000 per unit to the cost, which then gets passed on to con­sumers,” he says. “So this prac­tice of tax­ing res­i­den­tial den­sity at a commercial rate is not do­ing any­body any favours.”

Ur­ban plan­ner Andy Yan, di­rec­tor of the City Pro­gram at SFU, is one real es­tate ex­pert who doesn't buy Sul­li­van's ar­gu­ment, es­pe­cially in a city where peo­ple pay $1,500 a square foot with­out blink­ing. “We are re­ward­ing land hoard­ing and sub­si­diz­ing it through th­ese com­mu­nity gar­dens,” Yan says. “We are los­ing tax money to sub­si­dize this thing that looks good—and all we're getting in re­turn are re­ally ex­pen­sive tax­payer-sub­si­dized toma­toes. They are the most ex­pen­sive toma­toes in North Amer­ica.”

Those 15 Van­cou­ver prop­er­ties con­verted from class 6 to class 8 in 2017 had an as­sessed value of $191.7 mil­lion, which meant $1.5 mil­lion in over­all tax losses, ac­cord­ing to the city's “Dis­tri­bu­tion of Prop­erty Tax Levy” re­port.

Sul­li­van shrugs off the naysay­ers. “Sure [de­vel­op­ers] make money,” he says. “But they also take a lot of risk.”

BAT­TLE GROUND Tax con­sul­tant Paul Sul­li­van is push­ing to lower tax rates on empty land slated for res­i­den­tial de­vel­op­ment

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