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

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To combat the housing deficit, the federal and Ontario governments have implemented a dizzying array of policies, new rules and big money, all aimed at making housing abundant and affordable.

Ontario Premier Doug Ford would have us believe that his plans and financial support will increase the pace of construction in the province by 50 per cent above 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 of this activity, especially on the federal side with its incentives for both builders and buyers, has transformed housing from a market-driven private sector activity to something closer to a social program.

Given all that, one might have thought the City of Ottawa wouldn’t need to spend tax money on developers. And yet, Last week the councilors approved the donation of $22,369,800 to encourage the development of only 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-story condo tower on Somerset Street West, a unspecified on Clyde Avenue, and a two-tower residential proposal on Carling Avenue.

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

Like most politicians, Ottawa councilors like to indulge in the fantasy that they have their hands on the economic levers, when in reality they have their hands in their pockets.

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Perhaps they were convinced otherwise, since the brownfield program is paid for by the magic of “property tax increases.” The city temporarily reduces taxes on new brownfield development, arguing 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 could be said for every residential or commercial development in the city. Everyone raises taxes, but not everyone gets the tax break.

The question councilors should have asked was which of these projects would not happen without taxpayer help. They may have learned a lesson from their experience with a hotel company that said it wouldn’t build at Ottawa International Airport without a tax incentive. The councilors said no. The hotel will go ahead anyway.

Some may remember that Mayor Mark Sutcliffe, when he was a candidate, opposed these types of tax donations and promised to examine the policy. It turns out that most councilors like gifts more than the mayor.

In an interview, Sutcliffe said there was not enough support on the council to remove the grants entirely, so he supported a compromise. New rules approved by the council last week will limit brownfield donations to no more than $3 million per project, although up to $5 million would be available if there was an affordable housing element. At the same meeting, councilors approved 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 projects would not move forward without the city’s help. The future of any significant development project is unlikely to be determined by a few million dollars from property taxpayers. If the developer’s financial plan is so shaky, it would be better if it didn’t go ahead.

If the City of Ottawa wants to help those looking for housing, it could stop looking for complicated, bureaucratic reasons to slow down projects and start saying yes more quickly. This would make things easier for buyers and builders. In the end, however, the real estate 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 a journalist and author from Ottawa. Contact him at [email protected]

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