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Is your society eligible for a property tax exemption?

Non-profit housing providers could be exempt from, or get a reduced assessment, depending on a number of factors, according to Patrick Murphy, BC Housing’s Director of Real Estate Services, Development & Asset Strategies.

Here’s what housing operators need to know about property taxes:

PRHC mandate is to pay a grant in lieu of taxes for all properties under its ownership:

While municipal, provincial and federal lands are exempted of property tax, Provincial Rental Housing Corporation (PRHC)-owned properties are also exempted but mandated to pay grants in lieu of property taxes for the properties it owns. The amount of the grants are the same as if property taxes are charged. Accordingly, when a PRHC property is utilized or leased by a housing provider, the requirement to pay grants in lieu of taxes (GILTs) passes on to the housing provider.

Class 3, supportive housing

If a PRHC-owned property or a private property owned or leased by a housing provider is used as supportive housing (by definition, housing funded by the provincial government or a health authority for the provision of housing that includes on-site support services for persons who were previously homeless, at risk of homelessness, and who are affected by mental illness or who are recovering from drug or alcohol addictions or have other barriers to housing), an inquiry can be made to the Housing Policy Branch, Ministry of Municipal Affairs and Housing for a Class 3, Supportive Housing exemption. If successful, the result is a write down of the value of the residential component of the project to $2.00 ($1 land value plus $1 improvement value) and taxes for the portion of the property used for supportive housing purposes are exempted. Proof of tenure/ownership, provincial or health authority funding and operational details are necessary for a successful application.

Group homes and emergency shelters are NOT eligible for Class 3 exemption

An application for a Class 3 Exemption will not be successful for group homes or shelters.

Group homes generally exist in residential zoned neighbourhoods and are very easily converted back into single family use. Accordingly, for property assessment purposes they remain Class 1 residential use and are taxed as such. However, there are some minor adjustments (up to 25%) for assessment purposes that may be applied if BC Assessment is aware that the property is operated as a group home. Operators should ensure that BC Assessment is aware of the group home use.

Emergency shelters are often located in industrial zones or other zones on an interim basis and these spaces can quickly be converted back to the other approved uses in that zone. They are not eligible for Class 3 exemption as they do not match the definition for supportive housing. Emergency shelters are also not eligible for as an exemption under the Emergency Program Act. However, emergency shelters may be eligible for a Permissive Tax Exemption under the Community Charter and Local Government Act, or in the case of Vancouver, may be exempted under the Vancouver Charter. Permissive Tax Exemptions are explained below.

Permissive Tax Exemptions

While criteria vary from municipality to municipality, a municipality and a regional district is empowered under the Community Charter and the Local Government Act respectively to exempt a property from taxes through a permissive tax exemption process. For municipalities that provide exemptions, they are generally available to non-profit organizations that provide a valued service in the community. These exemptions are voted on by council as they are established by bylaw, usually on an annual basis but can be extended for longer periods (up to 10 years). Municipalities typically have an application process and the deadline for applications is often in the spring. Permissive Tax Exemption bylaws must be passed by October 31st to be applicable for the assessment and taxes in the following year.

Assessment Reductions

Previous to 2017, BC Assessment recognized restrictions that prevented market activity on properties used for non-market housing purposes such that the value of the asset (building only) was written down. However, with land prices escalating so rapidly in recent years, BC Housing and its partners argued in 2017 that these use restrictions should be recognized on the value of the land as well – and that these properties, once used for social purposes, are very unlikely to ever return to a market use.

As a result of a large appeal in 2017, BC Assessment has concentrated on Section 19(7) of the Assessment Act allowing it to recognize restrictions on title in its assessment of value. This section provides for the ability of assessors to reflect the value impact of restrictions on title, specifically Section 219 Covenants and Operator Agreements referenced in the Section 219 Covenant. In the case of properties owned by a tax-exempt landlord such as a municipality or PRHC, Section 19(5) of the Assessment Act directs BC Assessment to consider any restriction placed on the use of the land and improvements by the owner of the fee simple interest. These restrictions are typically contained in a lease or Housing Agreement.

Accordingly, for a PRHC-owned property, a lease that completely restricts market rental activity and evidences no profit motive or a covenant or housing agreement evidencing the same OR an unregistered Operator Agreement with a non-profit housing provider evidencing the above provides an opportunity to reduce the assessed value in recognition of these financial restrictions.

In the case of a private-owned or society-owned property (non-PRHC owned property) being utilized for non-market housing, the assessors will only look for evidence of a Section 219 Covenants restriction on title. The assessor will examine the lease, a covenant and/or housing agreement if it is referenced in the Section 219 Covenant to look for long-term evidence of financial and profit restrictions. Typically, if the local municipality makes a contribution to the development in the form of added density or DCC or DCL waivers, it will place covenant and housing agreement restrictions that suffice from BC Assessment’s perspective to limit value as part of the municipal approval process. However, in older cases where the properties were developed independently, there may be no such restrictions on title or the restrictions have been lifted with the pay out of mortgages etc.

If BC Housing is to be asked to provide a covenant to restrict a privately owned or society owner property, the document either needs to be considered in conjunction with existing or requested support from BC Housing, i.e. there needs to be a rationale for BC Housing involvement and request of the covenant. These documents must also be vetted through our lending partners.

If successful proving long-term financial restrictions, BC Assessment could discount the assessed value of the entire property component utilized for social housing as much as 70% for property tax purposes.

In short, the eligibility for assessment reduction depend on the operation (shelter, group home, market housing, social housing, supportive housing) and whether the housing provider in the situation is an owner, a lessee or an operator.

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