Lake Country eyes tax break incentive for purpose-built rental construction

Rental incentive tax break

The District of Lake Country is looking at following the lead of other B.C. municipalities, including Kelowna, and offering a tax break to try and get more purpose-built rental housing built in the community.

In a report going to Lake Country district council Tuesday, the municipality's chief administrative officer, Paul Gipps, says with a growing population—now estimated at 17,857, up from 15,817 in 2021— Lake Country has seen 590 housing units (259 single-family homes and 331 multi-family units) built since 2020. But none of them were purpose-built rentals.

In fact, there have been no purpose-built rentals built in Lake Country since 2016.

The report says, based on population forecasts, the district will need to house more than 700 additional residents each year going forward, and purpose-built rentals are one of the best ways to do that with the skyrocketing cost of buying a home in the district.

“In 2022, the median dwelling value was $800,000 and is estimated now at over $1 million,” writes Gipps. “It is very likely that a significant number of potential residents will not be able to consider purchasing as a housing option and will require rental opportunities.”

Lake Country has looked at what other municipalities have done to encourage purpose-built rental construction, specifically bylaws in both Kelowna and Victoria.

“The federal government is looking at an enhanced GST rental rebate to build more apartments for renters (and) the City of Victoria and the City of Kelowna have incentive programs including a bylaw for, among other uses, purpose-built rentals to help attract investment in this sector of housing,” says the report.

“In considering an incentive program, we looked at our neighbour Kelowna, as their program has had good success. Staff have prepared a purpose-built rental incentive bylaw focused on similar parameters as that of the City of Kelowna’s bylaw, including length of exemption, amount of exemption and rationale for the areas within the community that could be considered (the Town Centre and Woodsdale areas). The 10-year incentive would see the municipal portion of any new tax be exempted.”

In Kelowna, the incentive dates back to 2014. To date, that city has had 51 approved projects, and an additional eight are in the application process, with five projects approved annually. It has contributed to the creation of more than 3,500 purpose-built rental units, with an additional 1,529 units in the application process.

Purpose-built rentals are seen as representing what the report calls a “vital” segment of a community’s housing stock. Unlike other forms of rental housing, such as condominiums rented out by individual owners, they are a dedicated form of rental, providing security of tenure, adds the report.

Purpose-built rental buildings also tend to offer a greater share of two- and three-bedroom units per building, better accommodating families.

However, building purpose-built rentals, particularly in urban centres, is more expensive for developers than building other forms of housing because they must invest more capital upfront and must wait longer for the project to become profitable.

“When considering a revitalization tax exemption, it is important to consider whether the desired effect of the exemption would occur without the nudge from this (tax incentive bylaw) tool, since if properties were going to be built regardless of the exemption, (the district) would be foregoing tax revenue unnecessarily.

“As it currently stands, there are only a handful of purpose-built rental properties in all of Lake Country, and none built recently. It is difficult to make the argument that putting in place such an exemption would be detrimental to the existing taxpayers through foregoing future tax revenues unnecessarily.”

Lake Country council will be asked to consider the tax incentive bylaw to promote construction purpose-built rental accommodation at its next meeting on May 21.

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