The city of Ottawa is looking at making changes to tax grants that would encourage developers to add more affordable housing in new builds or redevelopments.
A report prepared for the upcoming finance and corporate services committee outlines proposed changes to community improvement plans (CIPs), which have sometimes been controversial. Two recent high-profile examples include the proposed but ultimately rejected tax grant for a hotel at the Ottawa International Airport under the Ottawa Airport CIP and a tax grant for a Porsche dealership at the corner of Montreal Road and St. Laurent Boulevard that was approved by the last term of council.
In the report, city staff are recommending changes to CIPs in order to align with this term of council’s priority of increasing the availability of housing and, in particular, affordable housing.
The first step would be the creation of an affordable housing CIP. This plan would designate the entire city as a “community improvement project area”, unlike more targeted CIPs such as those on Montreal Road, or at the airport.
Under the proposed plan, the city would enter into an agreement with a developer to offer grants of between $6,000 and $8,000 per affordable rental unit per year for 20 years, so long as the developer agrees to include at least 20 per cent of the units being built (minimum of five units) as “affordable”, as defined by the Canada Mortgage and Housing Corporation. The units must remain affordable for at least 20 years.
This CIP will incentivize the creation of affordable rental units starting at average market rent to 80 per cent of AMR and less, with tiered incentives depending on level of affordability.
Source: Ministry of Municipal Affairs and Housing Renter Household Incomes and Affordable Rents, 2022. Household incomes estimated based on Consumer Price Index (Ontario) and 2020 reported incomes from Statistics Canada Census of Population, 2021. (City of Ottawa)
The grant is intended to offset the loss of revenue from renting out units below the local market rent. The grants cannot exceed the amount paid in property taxes and will only be given once the project is complete.
“The City of Ottawa has a target that 20 per cent of all new residential units be affordable. However, the residential construction sector is grappling with increased interest rates, labour shortages and supply chain disruptions. In Ottawa, residential construction expenses have risen by approximately 51 per cent since 2019,” a document prepared for the finance committee says. “The high cost of building combined with high interest rates has resulted in the challenging delivery of new affordable units. The Affordable Housing CIP provides an opportunity for housing providers to offset some of these costs, thereby improving the viability of constructing affordable units.”
If the draft plan is approved at committee and council, staff will be directed to return with a completed plan by the first quarter of 2024.
Montreal Road, Orléans plans to remain, airport plan to be paused
City staff are also recommending pausing the community improvement plan at the Ottawa International Airport, but keeping the targeted plans for Montreal Road and Orléans in place, with some changes that incentivize building more affordable housing.
Germain Hotels applied for an airport CIP grant to build a hotel at the Ottawa International Airport, but city council rejected the application earlier this year. The hotel is going ahead without the grant.
Staff say, given the shift to prioritize projects with affordable housing components, it is appropriate to pause the airport program until the next term of council and evaluate its potential impact moving forward to ensure resources are effectively allocated.
Changes to the Montreal Road and Orléans CIPs including raising the minimum increase to the value of the property upon redevelopment to $250,000 from $50,000 and reducing the total value of the grants. Staff are also recommending removing the planning fee grant and the building permit fee grant from the Orléans CIP.
Staff say these CIPs are “stackable” and that developers are encouraged to apply to as many eligible CIPs as they can.
Brownfield CIP to refocus on housing
Last December, city council suspended the brownfield CIP for a full evaluation of the program after it had been in place since 2007.
“Brownfields” are abandoned, vacant, or underutilized properties where past actions have resulted in actual or perceived environmental contamination, according to the city. The original program has resulted in the creation of 120,000 square metres of office space, 180,000 square metres of commercial space, and 18,000 new residential units. Zibi and Greystone Village are examples of communities that have used the brownfield CIP.
Staff are now recommending that brownfield CIP grants only be given to developments that also qualify under the proposed affordable housing CIP.
“The goal of the Brownfield CIP is to help applicants to overcome the impediments to redevelopment due to site contamination, leading to environmental, economic, and social benefits for the neighbourhood and the City overall,” staff say.
Using an example of a private development with 250 proposed residential units, 20 percent classified as affordable units, and an annual property tax uplift of $1 million, staff say the affordable housing CIP grant could be up to $400,000, leaving another $600,000 available for other programs. Applying for the brownfield grant as well could facilitate the “prompt redevelopment of contaminated sites and assist in making viable centrally located, amenity rich brownfield sites for the provision of affordable housing units,” staff say.
The finance and corporate services committee meets Nov. 7. If approved, plans will rise to city council on Nov. 22.
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