The number of long-time Victoria businesses, like the iconic Pluto’s Restaurant, being forced out of downtown for development is growing and those struggling to stay are facing increasingly high tax bills.
“One case, we had an increase of 31 per cent in 2020 and then on the 2021 notice, we got another 27 per cent increase,” says Bev Highton of property management firm NAI Commercial.
BC Assessment bases its valuation on the “highest and best use” — the land’s development potential — instead of its current use, essentially taxing the air above a business.
“The problem is a single-storey building that could be a 12-storey condo is taxed as if it is a 12-storey condo, making it really unaffordable for that business,” explains Victoria Mayor Lisa Helps.
Most commercial properties have tenants pay property taxes in addition to rent. And while this so-called “air tax” has been in place for years, as more properties are re-zoned, land values go up and small businesses and non-profits are paying the price.
“If your block is re-zoned for a high-rise, your taxes could be astronomical,” says Vancouver realtor Keith Roy. “We need mom-and-pop shops. Not everybody can afford to just go and develop a high-rise right now.”
Municipalities are calling on the B.C. government to implement recommendations in the Build Back Main Street report.
The report recommends taxing buildings at their current use, allowing local governments to charge small businesses a lower rate, or doing split assessments so the land owner pays for potential value instead of the tenant.
“The question isn’t about redevelopment. We need redevelopment. But in the meantime, if a building is just being used as small business with nothing up top, it shouldn’t be taxed as if it were a condo,” says Helps.
The province says it’s working on a solution but it’s not clear when — or if — changes will be made.