A boost for downtown housing

JOE.BRYKSA@FREEPRESS.MB.CA Enlarge Image

From left: Greg Selinger, Sam Katz and Kerri Irvin-Ross, minister of housing and community development, announce plan at Stephen Juba Park on Thursday.

The on-again, off-again revitalization of downtown Winnipeg lurched back to life on Thursday with the completion of a long-awaited package of tax breaks to stimulate housing.

The city and province have agreed to offer up to $20 million worth of tax incentives to developers over the next three years in the hopes of creating 500 to 800 new rental apartments or condominium units in downtown Winnipeg.

Enlarge Image

CentreVenture may provide upfront loans to get the projects started, said CEO Ross McGowan, seen here standing in front of the Avenue Building on Portage Avenue, one of the locations that could be eligible for the tax incentives. (PHIL HOSSACK / WINNIPEG FREE PRESS ARCHIVES)

The harmonized incentive package, formally known as the Downtown Residential Development Grant program, is designed to help developers bridge the gap between the cost of bringing old heritage buildings up to code -- or building brand-new residential buildings -- and the potential profits they could garner from new developments.

"I can guarantee you the development community has been waiting for this announcement before they started work," Mayor Sam Katz said Thursday as he and Premier Greg Selinger announced some of the details of the program.

The city has offered incentives for downtown housing since 2007, when it began providing property-tax breaks of up to $20,000 per unit in multi-family and mixed-use buildings. But developers complained they also needed breaks on provincial education taxes in order to make their projects work.

The new incentive package, which will effectively replace the city program, provides developers with combined tax breaks of up to $40,000 per unit. Under a complex formula that's still being worked out, apartment and condo buildings with affordable components are supposed to receive the biggest grants.

"The higher subsidies go to the units that have the most affordable components," said Selinger, defining "affordable" as a $500-a-month one-bedroom apartment or condo units with assessed values below $250,000.

At least 10 per cent of the units created by the new program will be affordable and 10 per cent will be designed for people with disabilities. But those ratios will not be imposed on every building that will qualify for the tax breaks.

With Winnipeg's apartment vacancy rate hovering around one per cent, there is a pent-up demand for downtown housing from students, empty-nesters, young professionals and low-income people who currently live in substandard housing.

But many of the newer buildings in downtown Winnipeg, such as the condos along Waterfront Drive, are beyond the means of many of the people who want to live in the centre of the city. According to Statistics Canada, the average household income in the Exchange District -- home to the Waterfront Drive condos -- was $100,641 in 2005, making it one of Winnipeg's wealthiest neighbourhoods.

If the new program is successful, an additional 1,000 to 1,500 people will be added to the estimated 15,000 who already live in downtown Winnipeg. The program aims to ensure not all of them are condo dwellers.

"It's a great start. I certainly like the piece about needing to have some affordable housing," said Deborah Zanke, a public relations professional who lives in the Exchange District with her IT-consultant husband, Steve Porter. "Certainly, the Exchange has started to skew toward less affordable. The more diversity we have, the better."

But the affordable-housing component is contentious, as it limits the power of the financial tool the city and province are using to fund the incentive program.

Under a mechanism called tax increment financing, the grants offered to developers will be based on new taxes that will flow from increases in the assessed value of the properties in question.

The wider the gulf between the current use of a property -- say, a run-down, empty building in a blighted neighbourhood -- and the redevelopment, the greater the potential exists for new taxes to flow. Governments in dozens of U.S. cities like this arrangement because the dollars that flow from the program wouldn't exist if it weren't for the new developments.

The projects most likely to apply for the new program include Qualico's planned conversion of seven East Exchange buildings into 150 new residential units and Taurean Global's planned conversion of the former Penthouse Furniture warehouse on Princess Street into 60 to 70 new condos.

The grants would flow to the projects when they're completed, said Stan Dueck, the city's housing manager. Downtown development agency CentreVenture may provide upfront loans to get the projects started, CEO Ross McGowan said.

Pending council approval, the program is slated to begin in May.

bartley.kives@freepress.mb.ca

Developers react B4

Build now, avoid taxes later

Downtown Winnipeg's housing stimulus plan:

What's the plan? Stimulate the development of 500 to 800 new downtown apartments or condos over the next three years, which will translate into 1,000 to 1,500 more downtown residents.

How will that happen? The city and province are offering up to $20 million worth of tax breaks over the next three years. Developers will receive grants of up to $40,000 per unit.

Which buildings are eligible? Technically, any new residential building or residential redevelopment within the formal boundaries of downtown Winnipeg, a sprawling area that lies north of the Assiniboine River, west of the Red River and southeast of a line that zigzags from the Great-West Life campus to Chinatown.

What about commercial buildings? If there's no residential component, no dice.

Which buildings will get the money? It's basically first-come, first served. But the highest grants will go to buildings with "affordable" components -- that is, one-bedroom monthly rents below $500, or condos assessed at less than $250,000.

When do they get the money? When the projects are completed. CentreVenture may provide upfront loans.

Where will the money come from? The developments themselves. The city and province will offer grants equal to the new taxes expected to flow from the developments, up to the $40,000-per-unit maximum.

Why are the city and province doing this? Developers say they can't afford to convert heritage buildings or empty surface lots into residential buildings. And more residential buildings means more people, more economic activity and greater safety downtown.

Have other cities done this? Yes, but mostly in the U.S. For example, Fargo, N.D., has enjoyed modest but significant success with a package of tax incentives in its downtown "renaissance zone."

-- Bartley Kives

Republished from the Winnipeg Free Press print edition March 26, 2010 A3