Councillors voted Monday night to shift some of Vancouver's property tax burden to homeowners.
The two per cent shift will happen over three years – one per cent this year, then 0.5 per cent the next two.
It's a move those in favour of the shift say will help keep small businesses in the city. Business owners have faced drastic rises in the cost of their operations, and some have been forced to close due to growing expenses.
The decision approved by council was discouraged by city staff, who recommended voting against the motion and instead opting for a different model.
Staffers said taxes are assessed on a property's market value, meaning a business in an under-developed building would have to pay a rate based on the property's development potential.
"A blanket two per cent tax shift from commercial to residential does not effectively target the 21 per cent of commercial properties impacted by assessment volatility arising from development potential," a report presented last week said.
City staff backed another option called a "split assessment," a process that would differentiate between a building's assessed development value and its existing value. Staff said a split assessment model could provide targeted tax relief to small businesses currently existing in under-developed properties.
Rebecca Bligh is one of six councillors that voted in favour of the tax shift, which was first introduced as a possibility last year.
“The message we are sending to business is that we see you, we value you," she said.
“It was clear to me that I couldn't look small business owner in the eye and say there was something we could do but we didn't want to benefit the multi-national stores so we're not going to do anything."
The tax break will save business owners about $500 a month, according to Aaron Aerts of the Canadian Federation of Independent Business.
“You don’t need to look further than 4th Avenue, or Main Street or Commercial, or wherever essentially in Vancouver, there are empty storefronts and $500 might not seem like a lot but it could be the difference between not being able to pay that lease, that tax or needing to sell that property to a developer,” Aerts said.
Meanwhile, some experts fear renters will feel the most pain.
“Even if you are a renter, the landlord is going to pass that tax onto you so it will not improve affordability," said Vancouver housing advocate Rohana Rezel.
Thom Armstrong with the Co-operative Housing Federation of B.C. said the tax shift will add $8 to $10 a month to the rent of someone living in a housing co-op or non-profit housing development.
“In a climate where housing affordability is a principal concern of this council, implementing a shift that has immediate impact of making homes for low or moderate income people income just doesn’t make any sense,” Armstrong said.
“With one stroke of a pen, they just made housing more expensive for the people who cannot afford an increase."
With files from CTV News Vancouver's Dario Balca
