At Mondays City Council meeting Keith Scheinous, President of Eden Care Communities, (a non-profit organization) presented the case for why his Milton Heights redevelopment should receive a tax exemption. Council voted to deny the tax exemption for all but 7 accessible dwelling units, created as part of the renovation.
Milton Heights is a residential tower redevelopment at 1100 Broadway Avenue. The project will turn 139 market value dwelling units into 135 affordable (income tested through a Sask Housing formula for lowest income people) dwelling units. There are 31 dwelling units specifically for low-income seniors, 7 accessible units for the physically challenged and at least 8 for adults with emotional and mental challenges (DE11-55). Rent at the building is set to 10% below CMHC market rate, which the CMHC Rental Market Report Fall 2010 states the average Regina rent, for all types, to be $802 (pg 1). A tax exemption through Housing Incentives Program (HIP) would save Milton Height $90 000 per year, for three years, which could help reduce the cost of rent.
This is not the first time tax exemptions have been requested or denied for this project. In 2007 and 2008 funding was denied but the City helped to introduce Eden Care Communities to other orders of government for funding. As a result, Milton Heights has received funding from CMHC, Sask Housing and the federal Economic Action Plan
With this help renovations were able to start but because of construction issues beyond their control (weather for one) they suffered cost over runs. The budget was based on a 33% vacancy rate but the delays resulted in a vacancy rate was closer to 50%. They estimate the delays result in a loss of $400 000 in revenue.
Originally built in 1956, the structure was falling apart, (due to poor maintenance over the years) so its previous owners donated the building to Eden Care Communities, rather than demolish it.
The report from Finance Committee (CR11-98) recommended denial for all but the 7 accessible units. In the HIP, new rental units, in buildings with 5 units or more, may receive a conditional tax exemption of 90% over 3 years. The policy, however, does not support tax exemption for the renovation of existing rental units (ie. the 128 remaining in the building).
Councilor Bryce asked Mr. Scheinous how many units were in the original compared to now, later stating these units were not new.
The argument from Eden Care Communities is that they are new as affordable units with a specific, non market, pricing structure.
A second argument for denial was taken up by Councilors Fougere and O’Donnell: that allowing this tax exemption would set a bad precedent. Councilor Fougere spoke about opening a “flood-gate” of applications for renovation, exposing the City. Support for this line of thinking comes from the report: “Allowing the entire Milton Heights apartment building admittance into the HIP would set a precedent that would encourage other property owners to apply for updating or renovating rental units.”
Mr. Scheinous countered this, suggesting it is unlikely a developer will come to Council to change market rate housing, into income tested affordable housing just for a city tax break. This argument was rebuked by Councilor O’Donnell who rejected making assumptions and felt others would likely come forward if this tax exemption were allowed.
The report, from administration, continues the case for denial by listing such reasons as: Non-profits are not exempt from property taxes; in previous attempts (2007 -2008) Eden Care did not qualify under the Inner City Housing Stimulation Strategy (ICHSS) nor the current HIP; and very few seniors housing developments have been given tax exemptions in the past.
Within the administration’s report, however, is a rather supportive statement to the applicant:
The purpose of the HIP is to encourage housing development that makes efficient use of established City infrastructure and helps build vibrant, sustainable and inclusive neighbourhoods. The eligibility requirement of this policy requires large-site housing developments with five or more dwelling units to be new construction or adaptive re-use of an existing building for the purpose of creating new residential units.
It was clear from some of Councilor Fougere’s statements the definition of “adaptive re-use” was debated fully at Finance Committee.
Council was certainly sympathetic to the goals of Eden Care Communities’ project. Councilor Browne opened up the floor to Mr.Scheinous so he could speak about the policy limbo his development was stuck in.
Councilor Browne wanted to refer the motion to administration so they could review the housing strategy, since currently the city lacks a market based to affordable adaptive re-use policy. The administration mentioned they are looking to review the city’s housing policy, within the context of the new provincial housing strategy, by next year.
Councilor Fougere, arguing against the referral but supportive of the review, made it clear he didn’t want the city exposed to funding housing or means testing, because these were provincial and federal concerns. He was weary of opening the City to “downloading” from other orders of government.
Councilor Browne’s motion for referral was defeated
Sitting in the gallery, watching the delegation and then council, it felt like the most marginalized members of the community were not being supported by the city. Citing the limits of the HIP, Council hid behind city policy. In the past, specifically with condo conversions, Councilors were more than capable of over turning administration’s recommendations, and often the reason given was to allow for upgrades and renovations to former rental properties.
We hear over and over about how it is difficult for the private sector to make new affordable rental housing profitable. That is why large rental developments are rare, with most new rental applications comprising one component of a larger, often suburban, development.
The argument that this would open a flood of applications seems trivial. Is this not an exceptional case? How often does someone give away a whole residential tower? Is it not City Council’s role to deny or approve cases as they come?
The bottom line, if Eden Care Communities were for profit with the capital to build new, they would receive the tax exemption. The fact they are re-using existing infrastructure and without massive private financing means they are punished by the City. A City that sees no difference between a market rate apartment (whatever the owner decides to charge) and an attempt at affordability. A City where words like inclusive, sustainable and opportunity are for visions that have no place in reality.