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Vacancy Taxes and Rebates

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Contributed by Kerri Neil.

With their boarded up windows and peeling paint, vacant buildings can be a sore point in our communities. Creator of the Facebook page “Vacant St. John’s: A Photo Essay” called the buildings “a sign of failure.” Those in the downtown core can especially appear dull compared to the vibrant image we sell to attract tourists.

Rather than allow buildings to remain empty, there have been calls for a “Vacancy Tax” to incentivize property owners to utilize these empty spaces. Instead of a tax, the City of St. John’s currently offers a Vacancy Rebate Tax where businesses are charged only 50% of the Business Realty Tax if their commercial or industrial building is vacant and they are actively marketing the space.

This sort of rebate is common in Canada, but communities concerned about long-term abandoned buildings are starting to push back. Municipalities in Ontario are currently petitioning the provincial government who introduced the program to eliminate it entirely or allow individual towns to opt out. Vancouver has introduced a Vacancy Tax targeting residential buildings to deal with its low vacancy rate and soaring housing prices – but that’s not really the issue here.

In 2016 the City of St. John’s put forward a plan to remove the Vacancy Rebate Tax in their 2016 budget. This was expected to raise $5.5 million a year in revenue. Remember that budget? When they raised the property tax for both residential and commercial properties, and cut arts funding? Facing anger from all sides, the City opted to reel back some of its proposals and that included removing the rebate.

The business community advocated for the rebate because it lessens the blow for businesses who have had to close for financial reasons. They argue that since they are not earning money from the location, they cannot afford the full tax. The counter argument is that it can be a disincentive for businesses to engage in short-term leases or ‘pop-up’ shops at all and that by holding on to these buildings, owners are preventing new entrepreneurs to try their luck.

One solution that has been used in France could balance the concerns of both sides. Rather than a set rate, the City could offer a sliding rebate that decreases over time. An abandoned building may receive a 50% rebate the first year, 25% the next, 15% after that and so on. This would allow businesses time to recover from the financial and emotional difficulties of having their business close while also creating a disincentive to leave buildings vacant over the long-term.

The Northeast Avalon is the fastest growing region in the province and soon our urban sprawl is going to push up against each other. Rather than growing out, we can utilize the spaces that already exist within. While a Vacancy Tax might be too much of a penalty on businesses, the Vacancy Rebate may be obstructing the optimal utilization of space and maybe it’s time to bring this issue back to the table.

COMMENTS: 1
  1. September 01, 2017 by Andrew Draskoy

    How about an incentive to do something we need with it in the meantime? Like providing space to artists and community groups?

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