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Tax increases contribute to rental property “conundrum”

Tax increases contribute to rental property “conundrum”

Rate increases for 2021 housing rentals have been capped at 1.4 percent by the Province. With property tax levies set to increase by multiple times that rate, the profitability of long-term accommodation rentals is reduced. Gibsons area resident and former council member Lee Ann Johnson raised concerns about this on March 23 during the Town’s 2021 budget public engagement session.   

With expense increases from rising taxes far outpacing growth in rental revenue, Johnson believes this will create problems for the supply of housing in the long-term rental market. Gibsons is proposing to increase the Town’s portion of 2021 property taxes by seven percent over 2020 levels. Two of those percent are to be allocated to offset increased costs for Town operations and capital projects. The remainder is to be saved in a reserve to help fund costs in the $1 million per year range for policing. That level of expense is anticipated once the Town surpasses a population of 5,000 and becomes responsible for 70 percent of its policing costs.

In addition to increases in the Town portion of property taxes, taxes payable to the Regional District are set to rise by just over 10 percent in Gibsons. The Regional Hospital District portion of residents’ annual tax bills is slated to increase by 1.5 percent over 2020 levels. No estimate on 2021 changes to provincially levied charges, such as School or BC Assessment Authority taxes, are available.

With property taxes on the upswing, in Johnson’s view, BC’s current “seller’s market” for real estate may be the best alternative available for rental property owners. She expressed fears that if properties currently containing rental units go on the market, purchasers may opt to keep them as primary residences. This will deepen the housing affordability crisis as residents with lower and mid-range incomes often cannot afford to buy homes at current market prices.

Another possibility is property owners converting rental housing units to short-term accommodations.

Johnson said she recognized the local government’s need to tax to provide public services. She also noted that property taxes and other cost of living factors such as real estate prices adversely affect the community’s ability to attract individuals needed to fill positions in health care and policing. Johnson said that whether they are looking to rent or buy, many young professionals opt not to accept positions on the Coast because costs are higher than in other
locations.

Councillor Annemarie De Andrade thanked Johnson for her input and stated that the Town needs to undertake public engagement on more than its budget. She said she would like to see dialogue on “where we are going as a community,” and that be used to access the “intellectual capital” that exists in its residents.  Connie Jordison

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