Derelict Non-Residential Tax Subclass
IT IS THEREFORE RESOLVED THAT Alberta Municipalities advocate to the Government of Alberta to amend Sections 297 and 358.1 of the Municipal Government Act to allow all municipalities the option to create a derelict subclass under Class 2 Non-Residential property.
FURTHER BE IT RESOLVED THAT such an amendment include an exemption from the 5:1 tax rate ratio limit, or include a higher ratio limit, for a derelict non-residential tax subclass, to ensure municipal councils have the necessary flexibility to set a deterrent tax rate.
FURTHER BE IT RESOLVED THAT Alberta Municipalities advocate to the Government of Alberta to remove the requirement that a property be unoccupied for a year before it can be assessed into a derelict non-residential tax subclass.
WHEREAS derelict non-residential properties impose increased costs on municipalities due to factors such as higher demands on bylaw enforcement, public safety risks, and the potential for arson;
WHEREAS the Municipal Government Act (MGA) currently restricts the ability of municipalities to create a non-residential derelict tax subclass, preventing them from using a property tax lever to encourage remediation of these properties;
WHEREAS some municipalities have authority to create derelict non-residential tax subclasses, but the utility of this authority is limited by the requirement that properties must be unoccupied for a year before being assessed as derelict, and by the constraint of the 5:1 tax rate ratio, which may disallow a tax rate high enough to motivate owners to act; and
WHEREAS expanding subclassing authority to all municipalities through an MGA amendment would provide a valuable tax tool to address derelict properties and aligns with the goals of Alberta Municipalities’ Property Taxes Reimagined initiative.
BACKGROUND:
Derelict non-residential properties are properties that contain a fully or partially constructed non-residential improvement, where the improvement shows serious signs of neglect, is dilapidated, falling into significant disrepair, or is unusable for its intended purpose, but does not include properties that are actively undergoing renovation, construction or demolition. Municipalities that can currently create a derelict non-residential subclass are permitted to define “derelict” for their own purposes.
Derelict non-residential properties have a direct impact on municipal costs, since these properties typically require higher levels of service from bylaw enforcement, fire rescue, and other municipal services. For example, fires often begin in derelict buildings as the unhoused population seek shelter and warmth in unmonitored structures with no utilities. In Edmonton, there have been several fires started in derelict buildings, causing significant property damage to the derelict structure as well as neighbouring structures.
Derelict properties also reduce quality of life for residents living nearby. In presentations to Edmonton’s City Council, residents have described living in a state of fear and heightened tension due to concern about the risks of fire and illegal activities in nearby derelict structures. A survey conducted in 2024 found that 83 per cent of Edmontonians strongly agreed that the presence of derelict properties negatively affects the overall quality of life in a neighbourhood. Surrounding non-residential properties are also impacted as the dereliction discourages patronage of their businesses.
Tax subclasses have been an effective tool to address dereliction. In 2023, Edmonton created a derelict tax subclass for residential properties that has demonstrated significant success. Of the 202 properties identified as derelict in the first year of the subclass, 62 were demolished or remediated by the end of the year. Several other municipalities have also created derelict residential tax subclasses, including the City of Wetaskiwin and the Town of Ponoka.
The Municipal Government Act currently prevents municipalities from creating a non-residential derelict tax subclass, restricting the use of property tax as a lever to encourage remediation. While Edmonton and Calgary do have authority to establish derelict non-residential subclasses, this authority is unnecessarily constrained by the requirement that properties must be unoccupied for a year before they can be assessed as derelict. This requirement makes it difficult to administer a derelict non-residential subclass, since a property owner may be able to demonstrate a minimal degree of occupation without addressing the dereliction, thereby largely defeating the objectives of the subclass.
The success of a derelict subclass depends on a municipality’s ability to impose a higher tax rate on derelict properties. Section 358.1 of the MGA sets a maximum tax rate ratio of 5:1 (highest non-residential rate to lowest residential rate), which limits the ability of some municipalities to impose a high enough tax rate on derelict non-residential properties to incentivize the owner to address the dereliction.
This resolution aligns with the core principles of Alberta Municipalities’ Property Taxes Reimagined initiative, which advocates for a fairer fiscal framework and more effective tax tools for local governments. By establishing a derelict non-residential tax subclass, municipalities can better address the mismatch between responsibilities and revenues by creating a targeted mechanism to disincentivize urban blight and encourage the redevelopment of underutilized properties. This approach supports Alberta Municipalities’ ongoing advocacy for increased municipal autonomy and targeted fiscal tools to address municipal priorities, including community safety.
ABmunis is preparing correspondence to the appropriate ministry.