Soaring land values in Vancouver spark a ‘property tax revolt’

theglobeandmail.com
By Kerry Gold
Jan. 20, 2017

Niels Bendtsen is one of Vancouver’s longest-standing design and manufacturing success stories. He has been designing and making furniture in Vancouver since 1963 and his Ribbon Chair sits in the permanent collection of the Museum of Modern Art in New York. But a recent eye-popping property tax assessment has Mr. Bendtsen considering if he should relocate his business to another city.

Mr. Bendtsen owns warehouse, manufacturing and office space in Railtown, which is part of the Downtown Eastside. The rundown area near the city’s industrial waterfront had long been ignored. But nearby residential real estate prices have skyrocketed, gentrification is pushing eastward, and even an area strictly zoned for industry is feeling the pressure of greater demand.

A couple of high-priced recent sales and increased interest in the area have meant major jumps in property values. Mr. Bendtsen’s property at 365 Railway St. tripled in value: It was assessed this month at $12.245-million, compared with $3.93-million the year before. In 2016, he paid $60,307 in taxes on the property; based on the 2017 value, his taxes will climb to $147,000.

Mr. Bendtsen’s property at 405 Railway was just assessed at $14.512-million, up from $5.751-million last year. In 2016, he paid $68,852 in taxes. Based on the 2017 value, his taxes will be an estimated $175,000.

Mr. Bendtsen says it’s unfair to penalize small and mid-size businesses that bring manufacturing jobs to the city. He has 75 employees in Railtown; however, he is considering a move to Toronto, where commercial properties are much cheaper.

“[The city] says they want this type of business down there, and yet they are taxing us out of there,” says Mr. Bendtsen.

“I was going to develop one of the properties, build on it and make a new building. But with these tax rates, there’s no way of doing it,” he says. “Of course I can sell them, but that’s not really what I felt like doing. I want to be in business.”

Paul Sullivan, of property tax consultants Burgess Cawley Sullivan & Associates, says he’s preparing for what could turn into the “biggest tax revolt in Canadian history.” Although Railtown was one of the hardest hit areas, Mr. Sullivan says Vancouver’s insane property market is wreaking havoc for businesses throughout the city. In the West End, on major shopping streets like Denman, Robson and Davie streets, it’s the small retailers getting hit hard.

Mr. Bendtsen and several other businesses around the city have hired Mr. Sullivan to appeal the assessments. He expects more to sign on to appeal before the deadline at the end of the month. He says his inbox is full of unread e-mails from angry businesses.

He cites a restaurant at 703 Denman St., that has risen in value by 268 per cent from last year, with new taxes estimated to increase to $614,000 from about $229,000. He says a public market building at 1610 Robson is also facing a 268-per-cent increase in value, with taxes estimated to rise to $727,000 from $272,000.

Tenants running small businesses, which make up most of Railtown, will be hardest hit, Mr. Sullivan says. The majority of leases in Vancouver are “triple net,” which means the tenant pays the landlord the rent, but is also responsible for maintenance and property taxes. With an unexpectedly huge tax hike, many businesses won’t survive, he says.

Mr. Sullivan says a couple of factors are at play in the industrial area: assessments in previous years were likely lower than actual market value and buyers are moving into the area and paying unexpectedly high prices.

He says part of the problem is that like many municipalities, Vancouver assessments are based on the potential for development of the property, as opposed to actual use. Also, city policies are having an impact. In the West End, the city has rezoned for significantly more high-density residential, which has driven up prices. The change could signal a similar move in the east side of the city.