Kingston Council votes to end vacant property subclass reduction program and study vacant home tax

On Tuesday, Aug. 8, 2023, Kingston City Council approved recommendations from staff which could see the tax bills of owners of vacant properties and excess lands increase by thousands of dollars a year, beginning in 2024. During Tuesday’s meeting, councillors approved a report from staff that recommended the City end its Subclass Reduction Program, which provides a discounted tax rate for vacant and excess commercial and industrial properties. According to staff, under the current program, 344 properties in the City of Kingston receive the discount, totalling approximately $1.1 million. 

During Tuesday’s meeting, Desirée Kennedy, the City’s Chief Financial Officer (CFO) and Treasurer, confirmed that under the scheme, other tax classes are currently on the hook for the discount, which costs the average property owner $15 a year. “Right now, there is a discount for those property classes… Approximately $1.1 million is picked up by all the other property classes, including residential. So that does equate to about $15 for the average household,” she said. 

Kennedy elaborated, explaining that the tax burden shifted to other classes in order to keep the City’s taxation revenue at its expected levels while providing the discount to vacant and excess properties. “If one class is paying a little bit less, then the other classes are paying a little bit more, so in total, we are raising the taxes that are required through the budget,” she said. The CFO stated that should Council choose to eliminate the discounted subgroups, property owners in the other tax brackets would see a slight reduction on future tax bills. 

The report presented councillors with three different options to eliminate the program, with staff recommending members approve an option (Option 3 in the report) which would have seen the City cancel the discount beginning in the 2024 tax year while lowering the commercial and industrial tax ratios in order to keep the overall tax burden between property classes “at current levels.” However, an amendment moved by Meadowbrook-Strathcona District Councillor Jeff McLaren called on Council to endorse Option 1 in the report, which would still have the program end in 2024, but without lowering the tax ratios for affected properties.  

McLaren said, “It strikes me that the province has made it much easier to build on vacant land, and now it’s our part to make it as encouraging as possible, because we have a crisis of all kinds happening right now. Having a hoard of land that is unused for so long does not seem to sit well with our goal to improve the City.” Under Option 1, the average property tax on lands in the commercial or industrial vacant subclass would be increased by approximately $4,000 and $5,000 respectively. Meanwhile, the average property in a commercial or industrial excess land subclass would see an increase of approximately $1,750 and $3,200 respectively.

As noted in the report, Option 1 ”would shift approximately $1.1 million of taxes onto the commercial and industrial vacant and excess land properties from other property classes, including approximately $600K of taxes from the residential property tax class.”

During Tuesday’s meeting, Jeff Walker, the City’s Manager of Taxation and Revenue, further explained the differences between the two options. “The difference between Option 1 and Option 3 is just who would be receiving the benefit of the lowered taxes that are now going to be picked up through the vacant and excess lands. In Option 1, it will be shared across the assessment base… In Option 3, we would be lowering the tax ratio on developed commercial and industrial properties,” he said. 

Walker added that the intent of Option 3 is to make the tax distribution “even” amongst the various classes. “[With Option 3] the overall broad commercial and industrial classes would be raising the same amount of funds in total. It still does increase the cost to a property that is vacant or excess land, so it still does encourage the development of those properties.” 

Sydenham District Councillor Conny Glenn spoke in favour of Option 1, noting that the average residential property owner could see a $15 reduction on their tax bills starting in 2024. “I am in favour of Option 1 because even though this is a small break, it is a signal to [homeowners] that we are showing concern… To me, Option 1 is a way of moving forward quickly, getting this done and over with, and signalling to the residents… that we do understand just how painful things are for them right now.” 

When asked by Countryside District Councillor Gary Oosterhof about whether data from other municipalities support the belief that eliminating the discount will lead to increased development, Walker suggested the increased costs may encourage property owners to develop. “I wouldn’t be able to say with utter confidence that the difference in the cost to the property would be enough to determine that someone is going to develop it,” he said. “However, it is an additional cost that is certainly going to make a person look at the property more closely, as opposed to sitting on it.”

Councillors voted to accept McLaren’s amendment in favour of Option 1 and eventually voted unanimously to accept the report’s recommendations, as amended.

The report also included a recommendation to explore options to establish a Vacant Homes Tax program (VHT). While the rules and parameters of the program are still unclear, the City will spend $100,000 from the Working Fund Reserve to support the review. The motion to support the VHT study passed by a vote of 12 to 1, with Loyalist-Cataraqui District Councillor Paul Chaves the lone vote against.