Fix `imminent' on air tax, but no details
Some local businesses on the hook for thousands of extra dollars this year because of the levy
B.C.'s finance minister says she will soon bring forward a solution to the issue of the speculation and vacancy tax hitting the airspace over some small businesses — but the details of the solution remain a workin-progress.
Finance Minister Selina Robinson pledged a quick resolution of the problem, in response to questioning from the Opposition Liberals in the legislature Tuesday, after Postmedia News reported last week that some local businesses were on the hook for thousands of extra dollars this year because of the tax, which was intended to target empty homes but was being applied to the development potential over their heads — a so-called “air tax.”
“We're developing a fix,” Robinson said in the legislature. “It will be imminent, and making sure that those businesses do not have to pay that property tax.”
Robinson didn't immediately provide details of this imminent fix. In an emailed statement Tuesday, she said she has instructed her staff to “find a way to provide temporary relief for the small number” of commercial properties affected by the SVT.
“I will be recommending a temporary fix to my cabinet colleagues in the coming days,” Robinson said. “The changes are currently being drafted and I look forward to sharing further details soon.
“This change will help commercial tenants that are unfairly having the cost of this passed on by landlords.”
The B.C. NDP government introduced the speculation and vacancy tax, or SVT, in 2018, with the stated aim of “turning empty homes into good housing.” The tax is popular with most British Columbians, polling has shown, and the government has credited the measure with helping turn underutilized residences into long-term rental homes.
But as Postmedia first reported in May 2019, the design of the SVT meant it would apply not only to empty condos and vacant residential land, but also to the undeveloped residential airspace above certain commercial properties. A temporary exemption meant that airspace wasn't subject to the SVT for its first two years, but that exemption expired this year. Because most commercial tenants are on the hook for property taxes as well as rent, the end of the exemption means some mom-and-pop businesses, such as longtime Kitsilano eatery Las Margaritas, are being hit with the tax this year.
Most B.C. businesses won't have to pay the SVT. The affected properties are ones with what's known as a “split assessment,” meaning the unbuilt development potential in the air above the existing business is taxed at the residential rate, instead of the far-higher commercial rate, as it previously was. Commercial property owners obtained this reclassification years ago through the courts, to reduce property tax burdens, which are typically borne by tenants. But with the SVT applying to that airspace starting this year, it means higher bills now for those commercial tenants.
In 2019, when Postmedia first reported that the SVT would likely start hitting businesses operating on split-assessment sites, the province declined to provide an estimate for the number of potentially affected properties. A ministry representative also said earlier this month that they couldn't provide an estimate on the number. But after Postmedia's story last week on the subject generated controversy, the government provided an update estimating about 65 properties in the province would be affected.
Todd Stone, B.C. Liberal critic for jobs, economic recovery and innovation, has been trying to advance a solution he says could provide relief for those businesses on split-assessment properties now subject to the SVT, as well as the larger number of commercial tenants facing soaring property tax bills in several B.C. municipalities.
Stone has tried, unsuccessfully, three times in three years to introduce a private member's bill that would allow municipalities to create a commercial property “subclass” for unused airspace, so a local government could tax that development potential at whatever rate it chooses. Because the subclass wouldn't treat the airspace as “residential land,” it would also be exempt from the SVT.
The subclass solution has the support of the Union of B.C. Municipalities and several Metro Vancouver mayors. But the B.C. NDP government has, so far, avoided this option. Instead, the NDP offered its own interim solution in January 2020 that would allow municipalities to exempt a portion of the value of commercial properties. Many local government officials, however, called that interim solution unworkable, and not one B.C. municipality has tried to implement it.
Stone said he wasn't sure why the B.C. NDP has been hesitant to pursue the subclass solution, but he plans to try, once again, to introduce his bill in the coming weeks.
“Maybe fourth time will be lucky,” he said.