In an effort to attract and incentivize the development of new non-market affordable housing, the District of Saanich -- the largest municipality on Vancouver Island -- has approved a new policy granting eligible non-profit organizations a 100% property tax exemption.
Property taxes are one of the bigger costs associated with holding a piece of land, and they can add up depending on how long development timelines are, potentially resulting in projects becoming less viable for the provider.
To be eligible under the new Permissive Tax Exemption (PTE) policy, applicants must be a non-profit organization providing rental housing that has affordable housing as a part of their organizational mandate.
Both new and existing affordable housing will be eligible, but for different exemptions.
According to a District of Saanich Council report, new affordable rental housing will be eligible for a 100% exemption on the land and improvements -- land and building values are assessed separately by BC Assessment -- while existing affordable rental housing will only be eligible for a 100% exemption for improvements only.
As defined by the District, "new" in this case includes the redevelopment of existing sites.
Both incentive programs will only run for a limited time, as the District believes it is "good practice to end or sunset financial incentive programs." The sunset date is 2026 for existing affordable housing projects and 2030 for new projects. The dates are the latest time non-profits can apply, with granted exemptions lasting for four years and five years, respectively.
It's expected that the District will review the policy and its results after they end, with the possibility of extending the program.
The District says that it researched various municipal governments across British Columbia to better understand how a property tax exemption could impact affordable housing and found that while many municipalities had exemptions for supportive housing, few offered exemptions specifically for affordable rental housing.
"The early years are a critical time for project funding and financing and a PTE can offset some of these operational and capital costs," the District said. "Non-profit housing providers also flagged that operating costs have risen dramatically in recent years and PTEs could assist with covering ongoing (and increasing), operational costs such as insurance and utilities."
"Most non-profit housing developments are restricted by covenants to maintain low rents for their residents," the District added. "Covenants combined with provincial caps on rent increases mean that non-profit housing providers have little flexibility to offset operational cost increases."
Operational cost increases can get passed onto the end user -- even with housing provided by non-profits -- and the District says that it believes these exemptions can help reduce rent prices by around $30-60 a month.
The District also notes that funding for non-market affordable housing typically comes from the provincial or federal levels of government, municipal governments have less tools to assist. Currently, the District says, it gives non-profit housing providers reductions on development costs, waivers for community amenity contributions, and some financial grants. The District believes this PTE can become another tool in its toolkit.
Aside from helping affordable housing providers, the District of Saanich Tenant Assistance Policy also came into effect last week. Like other renter protections across the province, the policy requires tenants displaced by redevelopment to be provided with relocation assistance, the right of first refusal for an equivalent unit in the new building, and financial compensation.