Alerts

The City is considering making changes to its Vacancy Tax Rebate and Reduction Programs to better encourage the use of vacant properties in support of vibrant and sustainable communities. Residents, businesses and property owners were invited to learn more about proposed changes by:

On Nov. 8, City staff will present the Vacant Unit Rebate and Subclass Reduction Programs Report to the administrative policies committee. Update: At the Nov. 8 meeting, the motion to receive the report was deferred until the Feb. 14, 2019 administrative policies commitee meeting. 

About the program

The vacant unit rebate and subclass reduction programs provide tax rebates or reductions to property owners who have eligible vacancies in commercial and industrial buildings or land. Eligible properties receive a rebate or reduction of 30 per cent (for vacant commercial space or land) or 35 per cent (for vacant industrial space or land).

Provincial government changes and vacancy tax rebates

The Province has also been reviewing approaches related to the education property tax portion of the vacancy rebate and reduction programs. An excerpt from 2018 Ontario Budget (e-p. 321) states:  

"In the 2016 Budget, the Province introduced a legislative framework to give municipalities broad flexibility to refine their vacancy rebate and reduction programs. This greater flexibility enables municipalities to tailor these programs to best reflect local circumstances, while considering the interests of local businesses. While municipalities that decided to modify their vacancy programs have implemented a variety of changes, 80 per cent of those municipalities will phase out the municipal component by 2020.

"With respect to education property taxes, the Province currently mirrors any municipal property tax decisions related to the vacancy programs. This has resulted in different treatments of education property taxes across the province, as each municipality modifies the programs to best suit its local needs. As a result, the Province announced in the 2017 Ontario Economic Outlook and Fiscal Review that it would review approaches related to the education property tax portion of the vacancy rebate and reduction programs in consultation with municipalities and the business community.

"As a result of the review, the government will align the education property tax portion of these programs with the changes made by municipalities, ensuring greater consistency across the province. This initiative would begin in 2019 to ensure that businesses have time to plan for any necessary program changes."

The City's Vacancy Tax Rebate program

Each year, the City receives approximately 180 applications from property owners in the commercial and industrial property classes requesting compensation for vacancies of 90 or more consecutive days. The City's 2018 operating budget includes $950,000 for the cost of the rebate program.

Options under consideration include:

  • Keep the programs as is
  • Eliminate the programs immediately
  • Phase out the programs over a number of years
  • Modify the programs
  • Details related to these options are outlined in the Nov. 9, 2017 Report to the Administrative Policies Committee.

Frequently Asked Questions

What is a vacancy rebate?

The vacant unit rebate program provides tax rebates to property owners who have eligible vacancies in commercial and industrial buildings. To receive a vacant unit rebate owners must apply and meet eligibility criteria before being awarded a rebate of 30 per cent (vacant commercial space) or 35 per cent (vacant industrial space).

Who benefits from the vacant unit tax rebate?

Owners of commercial or industrial assessed property that are entirely or partially vacant are eligible to apply and benefit from the rebate. Seasonal and leased properties are not eligible for the rebate. Though residential and multi-residential property owners also experience vacancies, these properties are not eligible for the rebate.

To what extent has the vacant unit rebate program been used in the past and what is the related cost to the City?

Vacant unit rebate statistics:

Year

Total Municipal
Portion of Rebate

Total Education
Portion of Rebate

Number of
Properties

2011

465,814

320,628

174

2012

468,294

333,770

161

2013

657,819

406,094

173

2014

667,394

401,893

195

2015

944,444

584,182

208

2016

930,603

583,334

187

2017

759,249

465,412

175

 

Why was the vacant unit rebate program instituted in the first place?

The vacant unit rebate program was originally implemented to address the Province's decision to move the business occupancy tax liability from business tenants to property owners in 1998. In 2001, it became mandatory for municipalities to provide a vacant unit tax rebate program. As of Jan. 1, 2017 the vacant unit rebate program is no longer a mandatory requirement.

How does the vacant unit rebate program impact property taxes?

The City's 2018 operating budget includes an estimate of $950,000 to fund the vacant unit rebate program. The program is funded as part of the overall tax levy and is subsidized by all property classes, including residential property owners. The additional education tax component of the rebate, funded by the Province, results in a total projected rebate of $1,550,000 provided annually to commercial and industrial property owners. 

What is a Vacant and Excess Land Subclass Reduction?

The Province also allows for potential changes to the Vacant/Excess Land Property Tax Subclass Reductions. Commercial and industrial properties or portions of these properties can be assessed in a Vacant and Excess Land Property Tax Subclass. Taxable assessment included in these subclasses is taxed at a fixed percentage rate below the tax rate of the broader class. These properties are discounted at 30 per cent of the full Commercial rate and 35 per cent  of the full Industrial rate.

Why propose changes to these vacant unit rebate and subclass discount programs?

In response to municipal and stakeholder requests, the Province is allowing municipalities to propose changes to their Vacant Unit Rebate Program and Vacant and Excess Land Subclass Reductions. This allows municipalities to tailor the rebate and reduction programs to local needs after engaging with the local business community and taxpayers as a whole. Council has directed City staff to begin a consultation process with the general public, including the business community in order to gather input and feedback on available options and their impacts. 

Note: The suggested possible program changes are not comprehensive and should not be taken as the only changes or plans the municipality could consider. 

Are there issues with the current system for vacant unit rebates and Vacant and Excess Land subclasses?

Here are some things to consider:

  • Vacant unit rebates are funded by all property tax classes
  • Vacant unit rebates reduce the costs for long-term vacant properties.
  • Chronically vacant and long-term vacant properties may have an adjusted property assessment that already accounts for vacancies before the vacant unit rebate is applied. This can provide owners of vacant properties the ability to reduce their property taxes based on both a reduced assessment and a vacant unit rebate.

What are the options available if we were to makes changes to the vacant unit rebate program?

Several options have been proposed:

  1. Continue to administer the program as is.
  2. Adjust the rebate to increase or decrease the value by class. An example would be to reduce the value of the industrial vacant unit rebate from 35 per cent to 30 per cent to align with the rebate for commercial properties.
  3. Phase-out or end the program – eliminate it by a specific year or over a period of years. For example:  applications received for the 2018 tax year would be eligible for a rebate of 20 per cent; applications received for the 2019 tax year would be eligible for a rebate of 10 per cent; no rebate would be offered for the 2020 tax year and subsequent years.
  4. Apply a declining rebate for consecutive applications. An example would be to amend the vacant unit rebate eligibility to limit the eligibility period for properties to three years in a 10-year cycle.
  5. Tailor eligibility requirements to include or exclude specific property uses, property types, and/or a property based on its adherence to local property standards bylaws. An example would be to include eligibility criteria such as adherence to building code related property standards bylaws.

Note: The suggested possible program changes are not comprehensive and should not be taken as the only changes or plans the municipality could consider.

What are the options available if we were to make changes to the vacant/excess land property tax subclass deductions?

Several options have been proposed:

  1. Continue to administer the program as is.
  2. Phase-out or end the program – eliminate it by a specific year or over a period of years.
    For example: subclass discount would be 20 per cent for the 2019 tax year, 10 per cent for the 2020 tax year and no discount for the 2021 tax year and subsequent years.
  3. Adjust the discount to increase or decrease the reduction value by class.
    An example would be to reduce the value of the industrial properties discount from 35 per cent to 30 per cent to align with the discount applied to commercial properties.

Note: The suggested possible program changes are not comprehensive and should not be taken as the only changes or plans the municipality could consider.

How will my feedback be used?

Public input gathered through the online survey will be provided to council for its consideration in a staff report to the administrative policies committee in May 2018.

City staff's final recommendation to council on the future of the vacant unit rebate program and the vacant/excess land property tax subclass reduction program will consider:

  • public input,
  • precedent set across other Ontario municipalities and
  • analysis of the program's fiscal ramifications in the context of the overall municipal operating budget.