London's vacancy tax rebate set to end, and this councillor says that's a good thing
'Double discount' was costing the city $1.8 million a year
For a London landowner unable to find a tenant for their commercial or industrial building, the vacancy unit rebate was a huge help.
It allowed owners to claim a 30 per cent discount on both the municipal and education portion of their property tax bill on any portion of their property vacant for more than 90 days.
But starting Jan. 1, 2019, London's vacancy rebate will be officially eliminated.
The rebate was part of a provincial program and originally created to give a break to owners having trouble finding tenants during economic slowdowns. But in 2016, Ontario's Municipal Property Assessment Corporation (MPAC) changed how it conducts assessments in a way that factors in vacancy into the overall property value.
The result created what Coun. Stephen Turner calls a "double discount" for commercial landowners, one that was costing the city $1.8 million a year in tax revenue.
"We're looking to replace one form of tax relief with another one," said Turner. "One should have replaced the other but there was a period of time where they both existed at the same time, so we're just trying to make sure that only one exists."
Cuts incentive for property speculation
There were other arguments for ending the rebate.
One is that it encouraged long-term property speculation by reducing a landlord's incentive to get a tenant.
"People may not have been looking for any tenant," said Turner. "They were looking for the highest rent-paying tenant so they could afford to hold on for a little bit longer as a result of these two discounts. That became a bit of a challenge, especially in the core where we're trying to motivate people to fill their buildings."
Turner said another problem was the double discount created a disincentive for property owners to spend money adapting old buildings to new uses, particularly heritage buildings.
"The longer a building is vacant, the more disrepair it may come into," he said. "In some circles it's been termed demolition by neglect."
Ease-in approach
Ending the vacant unit rebate entirely in one year would have left businesses facing a jarring tax increase, so the city instead opted for an ease-in period. The 30 per cent rebate fell to 15 per cent in 2018 before it will vanish entirely on Jan. 1.
"To implement that all at once is a bit of a shock to some landowners," said Turner. "We wanted to look at a way it could be implemented in a fair and appropriate manner."
Gerald Gallacher heads the London Downtown Business Association (LDBA). Like Turner, he'd like to see fewer "For Lease" signs in empty downtown store fronts, but said his members preferred an even slower opt-in period, with the full rebate not removed until 2020.
"Obviously, anyone that's going to lose this rebate isn't happy," he said.
In a letter to council, the LDBA argued that some of the money generated by ending the rebate should flow into a fund that businesses can access to restore heritage buildings.
"Those renovations are expensive," said Gallacher. The city opted against going that route.
Still Gallacher says no owner of commercial or industrial property wants to go without a revenue-generating tenant.
"I can't understand someone would have a building and hold it empty," he said. "I don't see how taking away that rebate is helping them. They should be actively out trying to get that space leased. If it's not leased, [the owner] should be able to access money from the city to get it to that point."
Turner said the end of the rebate will boost tax revenue and help hold down future tax increases throughout the city. He also hopes it will encourage more home owners to renovate their buildings in a way that will attract new tenants.
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