Vancouver’s empty stores tax doesn’t get to the root of the problem, say opponents

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An advocacy group representing commercial landlords slammed Vancouver’s proposed empty stores tax aimed at reducing shuttered businesses and revitalizing commercial streets, but which critics say could backfire.

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Paul Sullivan, a property tax agent, said commercial landlords are already struggling with a challenging retail environment, increasing crime in some neighborhoods, skyrocketing property taxes, and red tape, yet are being scapegoated for rising vacancy rates.

“You can’t blame property owners for an unattractive environment for retail,” said Sullivan, who is also co-chair of the Business Tax Alliance, a partnership of property tax agent company Ryan ULC and business improvement groups across the province. “It’s divisive politics.”

On Tuesday, Vancouver city council approved an amendment tacked on by Mayor Kennedy Stewart to explore an empty storefront tax.

Kennedy is concerned by “atrocious” vacancy rates, which has surpassed 20 per cent in some neighborhoods.

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He said the tax will not penalize the majority of property owners, but will target speculators who sit on vacant properties while land values ​​rise. He argued the tax could also force more supply on the market and possibly end up lowering rental rates.

But Sullivan said he’s talked to major leasing agents in Vancouver and “they don’t have anybody they know that’s purposefully keeping their properties vacant. People don’t do that. People have mortgages … and need rent.”

The city’s plan to explore an empty storefront tax drew an outcry from business groups and a lukewarm reaction from the provincial government, which needs to approve a change to legislation before Vancouver can impose the tax.

On Thursday, Finance Minister Selina Robinson said while the ministry wants to work with local governments to address issues facing their community, “in this case I think Vancouver still needs to do some more homework to determine what is at the root of this particular challenge, including working with local businesses.”

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Neil Wyles, executive director of the Mount Pleasant Business Improvement Association, has seen vacancy rates creep up in his commercial district to about 14 per cent. But he believes an empty store tax is not the solution.

There’s many reasons why a commercial property might be empty, he said. Some could be held up by city permits, while others in troubled neighborhoods might have difficulty attracting tenants.

Wyles knows of a property that has been sitting vacant for years because the owner died and the property is in probate with the family haggling over who owns it, while another property — a commercial building in Kitsilano on West 4th Avenue across from the Safeway — has sat empty because it’s been looked at in soil remediation issues.

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“It’s not just a one-size if it’s vacant, let’s slap it with a tax,” Wyles said. “That’s not a solution. There’s always a story behind it.”

Wyles said the city should work on shortening waiting times for business permits or licenses.

A 2020 report from LOCO BC found that the average wait time for a permit or license is 8.2 months, and pegged the cost of that delay at $721,000, factoring in broader economic losses like revenue loss and losses in employment and supplier sales.

“If those issues are solved, then we can certainly look at a commercial vacancy tax discussion,” Wyles said.

Sullivan’s group is recommending other ways to reduce the burden on business owners, such as a split assessment policy, which would tax air space on commercial properties at a lower residential rate, or reducing the tax rate for properties valued for their development potential if they are tenanted and have an existing business license.

Penalizing property owners by increasing their costs could backfire, warned Sullivan.

“That landlord would have to recover that penalty through future leases, and tenants will have to pass on costs to consumers.”

— With files from Katie DeRosa

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