GREEN ACRES DEVELOPERS HARVEST TAX BREAKS FROM COMMUNITY GARDENS
Property developers have made Vancouver greener by converting empty lots into community gardens, but they're also reaping a generous tax break
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