Denley: City’s $22-million tax break for developers was a waste

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To combat the housing shortfall, the federal and Ontario governments have delivered a dizzying and ever-changing array of policies, new rules and pots of money, all intended to make housing plentiful and affordable.

Ontario Premier Doug Ford would have you believe that his plans and financial supports will increase the pace of building in the province by 50 per cent over historical norms. So far, there has been limited progress. Not to be outdone, Prime Minister Justin Trudeau says his latest plan will double the pace of housing construction. He likes to call it “ambitious.”

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All this activity, especially on the federal side with its incentives for both builders and buyers, has moved housing from a market-driven private sector activity to something closer to a social program.

Given all of that, one might have thought the City of Ottawa wouldn’t need to throw tax dollars at developers. And yet, last week councillors approved the giveaway of $22,369,800 to encourage the development of just seven projects.

They include four apartment towers on Lees Avenue, a hotel and apartment tower on York Street, a rental apartment tower adjacent to the Rideau Centre, townhouses in Vanier, a 23-storey condo tower on Somerset Street West, an unspecified project on Clyde Avenue, and a two-tower residential proposal on Carling Avenue.

The money is granted through the city’s brownfields development program, which is intended to encourage development on unused commercial or industrial land, particularly where there is soil contamination.

Like most politicians, Ottawa’s councillors like to indulge in the fantasy that they have their hands on economic levers, when in reality their hands are in your pockets.

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Perhaps they convinced themselves otherwise, since the brownfields program is paid for with the magic of “property tax uplift.” The city reduces taxes temporarily on new brownfield development on the grounds that there would have been no additional property taxes without the development. Everyone wins.

It’s a plausible argument, until one considers that the same might be said of every housing or commercial development in the city. They all increase taxes, but they don’t all get the tax break.

The question councillors should have asked themselves was which of these projects wouldn’t go ahead without help from taxpayers. They might have learned a lesson from their experience with a hotel company that said it wouldn’t build at the Ottawa International Airport without a tax incentive. Councillors said no. The hotel is going ahead anyway.

Some will remember that Mayor Mark Sutcliffe, when a candidate, opposed these kinds of tax giveaways and promised to examine the policy. Turns out, most councillors like the giveaways better than the mayor does.

In an interview, Sutcliffe said that there was not enough support on council to eliminate the grants completely, so he supported a compromise. New rules council passed last week will limit the brownfield handouts to no more than $3 million a project, although up to $5 million would be available if there was an affordable housing element. At the same meeting, councillors approved the more than $22 million in brownfield grants on the grounds that the proposals were submitted under the old rules.

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While wasting less money is always preferable to wasting more, reducing the size of the grant weakens the argument that the projects wouldn’t proceed without city help. It’s unlikely that a significant development project’s future will be determined by a few million dollars from property tax payers. If the developer’s financial plan is that shaky, he’d be best advised not to go ahead.

If the City of Ottawa wants to help those seeking housing, it could stop looking for fussy, bureaucratic reasons to slow projects down and start saying yes more quickly. That would make things easier for buyers and builders. In the end, though, the housing industry will only build as many units as buyers can afford, no matter how much largesse they get from all levels of government.

Randall Denley is an Ottawa journalist and author. Contact him at randalldenley1@gmail.com

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