In June 2014, I wrote my very first Vancouver Courier column. I recall it well since it upset many of my neighbours. That's because I live in Vancouver's Southlands neighbourhood where many residents live in very expensive homes on large acreage lots. I'm not one of them. I live in what my next door neighbour once described as the poor part of Southlands.
The column, which you will find below, addressed a provision in the property assessment system which allows some homeowners to significantly reduce their property taxes by growing and selling vegetables on a small portion of their lot and then applying for Farm Classification.
While it is perfectly legal, it seemed wrong to me ten years ago that by selling $2500 worth of vegetables grown on a portion of the property, such dramatic tax savings could be achieved. And I still think it is wrong, which is why I mentioned it to the Globe and Mail's Kerry Gold when we were discussing another concern I have with BC Assessment's classifications; namely, there is only one residential classification (other than Supportive Housing) and so all housing types are subject to the same mill rate. As a result a $2.5 million suburban house pays the same taxes as a $2.5 million downtown highrise apartment, even though one requires far more infrastructure, or uses far few services (eg: garbage collection) than the other.
My proposal? For BC Assessment to create two residential classifications - one for single-family properties and one for multi-family. This isn't perfect, I know. But it could be more equitable, especially at a time when we are trying to encourage more multi-family sustainable living.
Below is Ms. Gold's story from today's Globe and Mail followed by my Courier (now Vancouver is Awesome) column from June 2014) I must add I agree with the comments by Hanni Lammam and Derek Holliday. It is difficult to believe there will be adequate servicing in many low density neighbourhoods soon to be upzoned to four and five FSR which equates to a five or sixfold increase the the amount of development on each property. I also agree with Mr. Holloway that it wasn't necessary to apply Vancouver's multiplex zoning to every neighbourhood in the city, except for the one that could easily accommodate more density, namely Shaughnessy. But that's another story for another day.
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Metro Vancouver presented a staff report to its
regional planning committee this month that cited several concerns about the
province’s new legislation. DARRYL
DYCK/THE CANADIAN PRESS |
Experts say B.C.’s upzoning results are highly uncertain KERRY GOLD SPECIAL TO THE GLOBE AND MAIL
One of the biggest questions going into 2024 is how the B.C. government’s new
legislation to significantly boost density will play out, and it’s a question
on a lot of minds.
Metro Vancouver presented a staff report to its regional planning
committee this month that cited several concerns about the province’s new
legislation, which will “result in significant and historic changes to the
planning framework for British Columbia.”
Municipalities are now required to allow multiunit homes on
single-family lots. The province has also set new height and density minimums
around transit hubs. The report was authored by deputy chief administrative
officer for policy and planning Heather McNeil and deputy general manager for
regional planning and housing development Jonathan Coté.
It includes concerns about sidelining carefully crafted local area plans for
measured growth in areas that do not yet have transit or the infrastructure to
accommodate significant density.
The “blanket approach,” the report says, “could result in a greater
density of housing in parts of the region that are more car dependent.”
In other words, the result could be more sprawl. The report also cites
the challenge of needing to fast-track upgrades to schools, emergency services,
and transportation.
Development industry members are also concerned about the blanket requirement
for minimum tower heights of up to 20 storeys around rapid transit stations and
12 storeys around bus exchanges, many of which are surrounded by detached
houses. It’s not just a question of height, but floor space ratio, which is the
entire floor area allowed in relation to the size of the lot. A Vancouver
detached house with basement suite and laneway house typically had an FSR of
0.86, which meant the total floor space could be 86 per cent of the lot size.
The new multiplex zoning allows an FSR of 1.0, or a building as big as the lot
size. With the new transit-oriented development legislation, a building within
200 metres of a bus loop, for example, can be 12 storeys high with a floor
space ratio of 4, or four times the size of the lot. In other words, the
buildings are going to be a lot bigger, which could have implications for
setbacks and green space. It remains to be seen.
Developer Hani Lammam, executive vice-president of the Cressey
Development Group, says he’s seen his own house, a 1905 heritage home near the
King Edward SkyTrain station, greatly upzoned. He wonders how that will play
out in terms of heritage house protections and the need for new infrastructure
and associated costs. As well, the new legislation removes minimum parking
requirements. He applauds any policies that add density, but he said it also
seems like “all gloves are off,” in terms of pushing density into areas not
equipped for it.
“At my house, you have an outright 4 FSR right now. Is that what it is?
Because that’s how it reads. I don’t think it’s right. If it is, then
fantastic. I won the lottery. But I don’t think that’s going to be the case.
“Let’s talk about this transit-oriented development regulation,” says
Mr. Lammam. “Guess what, the house that I live in is now 4 FSR and 20 storeys
or something … maybe 12? Okay, that’s nonsense, because I don’t think that’s
going to be allowed. I just can’t imagine. … What happens to the heritage and
character, all that stuff? Do we just throw that out the window? I don’t
understand. I think it’s crazy. And what comes with that? Where are the
strings, because there will be strings attached, I suspect. We will have to pay
for more infrastructure now, water and sewer capacity. And all this is without
parking, apparently.
“There are a lot of implications on these neighbourhoods that are
supposed to accommodate all this density that are not designed to accommodate
this density. So, nobody knows. I think there will be a bit of a stalemate
again while we see how these municipalities react to these provincial
regulations.
“It’s going to take time, and it could be years in the making. It’s not
like overnight we rebuild everything. But it does mean, from a long-range
planning perspective, they’ve changed the goalposts,” said Mr. Lammam.
Real estate consultant and commentator Michael Geller is known for
offering ideas on housing policies, some of which have been implemented by
government. One of his newer ideas is the adoption of a two-tier tax system
that puts detached houses in a higher bracket than attached homes, such as
condos and duplexes. The idea arose when he realized he was paying the same
taxes on his Coal Harbour condo as his west-side house.
Mr. Geller argues that a lower rate for multifamily homes could
incentivize the redevelopment of single-family properties into multifamily
multiplexes. Vancouver City Council last year also voted to upzone most
single-family areas up to six units per lot.
“This idea does make sense, especially since the province wants to
encourage the redevelopment of single-family lots with multiple units,” said
Mr. Geller. “What better way to reinforce the idea than to increase the taxes
on a lot when it is used solely for single-family dwellings – albeit with a
possible basement suite and or coach house? And decrease the tax by having a
lower mill rate on the same lot if used for three to six dwellings?”
He also likes the idea in principle because he sees unfairness as to how
a lot of single-family homes are taxed, such as wealthy people who live on
agricultural land reserves, taxed as farmland.
“I live in Southlands, and I am surrounded by people who live in
$25-million houses and some of them pay less property tax than you do. That’s
because they are growing $2,000 worth of vegetables on a portion of their large
lots.”
The Ministry of Housing responded to inquiries by e-mail, saying that
local councils set property tax rates and B.C. already has nine property
classifications. As well, houses are already taxed at higher values and are
paying a higher share of tax. The idea of a two-tiered residential assessment
wasn’t being considered, said Housing Minister Ravi Kahlon.
“We will continue taking action to get more homes built faster for
people,” he said.
Derek Holloway is a retired BC Assessment appraiser who handled a lot of
appeals from property owners. He says the upzoning will have the effect of
increasing land values. He cites criticism of the Auckland, New Zealand
single-family house upzoning, which some academics say resulted in price
increases and only modest net housing supply gains.
“As soon as you start seeing sales to developers or small contractors
who buy a single-family lot on a Kitsilano lot that is 50 by 120 [feet] so they
can build four units, they will tear down the old house, build … and move on to
the next one. That will drive up the price of the house being sold because it’s
taken from a single-family house to a development site, and it will drive
values up,” says Mr. Holloway, who was with BC Assessment for 30 years.
“You don’t say, ‘Everyone who owns a home in Vancouver can build three
to six units.’ You say, ‘Here’s an enclave where we are going to do that,
because it’s beside commercial and transit nodes’, and that stuff. What they
did in the old days was upzone to duplex, something like that. And that was a
buffer zone between high density and retail and single family. So, they could
do that tomorrow. … Upzone small areas, not the whole city.”
July 3 is the deadline by which most Vancouver
residents must pay their property taxes. I say most since many residents, me
included, have chosen to participate in the provincial government’s low
interest Property Tax Deferment Program.
If you are aged 55 or over, or living in a
household with children, you, too, may be eligible and should investigate the
program.
However, this column is not about people who defer
their property taxes. It is about people who avoid paying taxes. But before
proceeding, as my accountant often tells me, avoiding taxes is legal; evading
taxes is not.
One creative way to avoid property taxes is to
convince the B.C. Assessment Authority to reclassify a property from
“residential” or “business” to “recreational and non-profit” or “farm”
categories.
Although the assessed value may not change, the tax
rates for both recreational and non-profit and farm classified properties are
significantly lower. Properties with a farm classification also receive a 50
per cent reduction in school taxes.
In my Southlands neighbourhood where most of the
properties are in the Agricultural Land Reserve, it is no secret that many
properties have sought and obtained farm tax status and consequently pay less
in property taxes than some smaller, less valuable properties outside the
neighbourhood.
When these properties are actively engaged in
agricultural activities, such as a garden nursery, the farm classification may
be warranted. However, some grand estates of between two and 10 acres have been
classified as farms because they generate $2,500 a year in income from
incidental agricultural activities. This can be achieved with a few dozen
chickens in a corner of the estate.
Given the tens of thousands of dollars in tax
savings that must be borne by other taxpayers, these are very expensive eggs.
Not all Southlands estate owners have sought farm
classification. Many are proud of the fact that while they could easily
qualify, they pay their fair share of taxes based on their residential
classification.
It is not just Southlands property owners who are
playing this game. Earlier this year, Scott Bowden of Colliers, a recognized
expert in the field of property taxation, presented a report to the Metro
Vancouver Board of Directors.
He noted tax-avoiding landowners are offering free
pasture to cows and renting llamas in a bid to achieve farm status. In some
instances, the property owners reduced their taxes by up to 90 per cent and
more.
Ironically there are some farmers who will not be
able to achieve farm status, namely commercial medical marijuana growers.
Recently the provincial government created a new business classification for
these facilities given the potential loss in taxes.
To appreciate the tax ramifications, if a
$2.1-million, 25,000-square-foot warehouse on a one-acre industrial property in
Richmond was allowed to get farm tax status for growing marijuana, it would pay
just $395 in annual taxes — 99 per cent less than the $33,100 a comparable
business would pay.
While commercial marijuana growers will not get a
tax break, owners of vacant sites such as the corner of Davie and Burrard will
continue to obtain significant tax savings by allowing their properties to be
used for agricultural purposes, namely community gardens.
That is because under our property tax system, the
province has agreed to reclassify these properties from “business” to
“recreational and non-profit” as long as they are used for growing vegetables
and similar purposes.
Since the tax savings for the owner can be in the
hundreds of thousands of dollars each year, property owners are eager to allow
their land to be used as a temporary park or community garden. I would add the
reason their taxes are so high is that vacant land zoned for commercial uses is
often unfairly taxed.
Since I and other taxpayers must make up the loss
in taxes, I am not so enthusiastic about community gardens as an interim use in
order to change the tax classification. I would prefer revisions to our
property tax system to address its many inequities.
Until that happens, community gardeners will
continue to grow some very expensive tomatoes at the corner of Davie and
Burrard.
michaelarthurgeller@gmail.com
twitter.com/michaelgeller
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