London Community News
By Sean Meyer/London Community News/Twitter: Newswriter22
Under provincial legislation, commercial and industrial buildings with vacant areas may be eligible for a tax rebate.
The question some have asked, including Greg Thompson, chair of the Urban League of London, is whether the rebate is always being used for the purpose it was created for. That purpose, according to Jim Logan, division manager taxation and revenue for the City of London, is to provide tax relief to commercial or industrial property owners in situations where economic conditions are deteriorating.
Thompson, who has examined the impact of the rebate for years, isn’t convinced that is always the case.
“The vacancy tax credit is there to insulate property owners during downturns or times they are doing substantial redevelopments. Those are legitimate uses,” Thompson said. “The vacancy tax rebate, in itself, is a worthwhile incentive, but it is being abused by property owners all over the city.”
Although it is a piece of provincial legislation, property owners must apply to the city for the rebate. The rebate is applied for on a yearly basis and is given to a property that has a vacancy of at least 90 consecutive days. This can also include a property that vacant during long-term renovations.
For those qualifying, the amount of the rebate is 30 per cent of the fully occupied taxes in the case of commercial properties. In the case of industrial properties, the rebate is 35 per cent of the fully occupied taxes. Rebate amounts will also depend on the number of days of vacancy and the portion of the assessment of the building not occupied.
Put simply, Thompson said, what the rebate does is take a property from the commercial tax rate and puts it back to the residential rate. The commercial rate is about two-and-a-half times the residential rate. So if, for example, a property’s commercial rate was $10,000 a year in taxes, the rebate would take it back to about $4,000.
“Of course, you have a cyclical downturn or a property owner during substantial renovation where the building is vacant for more than six months,” Thompson said. “But, and its an issue for every city in Ontario, from my perspective and that of a lot of people, it is a disincentive to revitalization. Sure it is.”
Logan, however, doesn’t see this as the case.
“I think you would find most economists would say the way to promote economic activity is to lower taxes, not increase them,” Logan said. “I think you would have great difficulty finding an economist to say otherwise. Ultimately the purpose is to provide tax relief and promote economic activity.
Logan said the city sees “a fair bit of activity” with the vacancy tax rebate as approximately 500 applications are received each year.
Thompson said the negative side of the rebate can be seen clearly in Old East where he points to buildings that have remained vacant for 20 years. Thompson said the rebate creates an atmosphere where property owners have no incentive to renovate or lease out their properties.
Thompson uses his own experiences from back in 2005 as an example. At the time, he and his wife were looking at opening a café somewhere in Old East. However, he found it difficult to even have people return his phone calls.
“I think it occurred to me then that if I owned a bunch of property on Dundas, or one property, and it was sitting vacant, what would cause a property owner to have no desire to rent the space?” Thompson said. “That was something of a light on moment for me. It is a significant incentive to allow a building, or a portion of a building, to remain vacant.”
Logan said he has heard of the same “urban legend” about people keeping their buildings vacant as some for of tax write off. However, he says the legend simply doesn’t mesh with human nature.
“In my mind, that rationale defies the logic of people will try and make the most money they can out of a property,” Logan said. “If there is any economic use that generates more than the taxes they have to pay, they will try and do that. It seems counter-intuitive that someone could maximize their profits by letting their building sit vacant.”
Thompson said his biggest “pet peeve” about the rebate is that municipalities have no say in how the legislation is applied. His biggest concern is when someone holds on to a vacant building with the expectation it will yield a larger financial windfall down the road.
“There is nothing wrong with someone buying a building and keeping it vacant, speculating if you will,” Thompson said. “I think it is wrong, but I have no problem with the idea. But they shouldn’t be subsidized for doing it.”
For more information on the vacancy tax rebate, visit the City of London website at www.london.ca.
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