Reposted from The Star's September 26th article by Murray Whyte:
Where on the emotional spectrum do relief and elation meet? Last Tuesday it was at 401 Richmond the much-loved arts and culture haven that’s been at the centre of a property tax snafu for almost a year.
The provincial government announced Tuesday morning that it’s willing to work with the city to create a brand-new tax class for buildings like 401, which rents its spaces at well below market rates. It was hit with a massive property tax assessment last year that would have endangered its business strategy, one that’s grown increasingly alien in the red hot property market: nurturing community.
That’s what 401 Richmond has always done. When UrbanSpace, the company formed to acquire and salvage the disused factory at the corner of Richmond St. W. and Spadina Ave. in 1992, took on the tumbledown building, it wasn’t an exercise in long-term property speculation. In time, it was repurposed as an artfully disheveled home for artists, non-profit cultural organizations, galleries and small craftspeople — the vision its owner, Margie Zeidler, had had all along.
It quickly became a refuge for such tenants as property values elsewhere skyrocketed. As the building led an urban renaissance through the late 1990s and early 2000s, new condominiums and commercial spaces began to bloom all around it, pricing out their peers as one property after another was either demolished or changed hands.
But 401 wouldn’t be immune to its own success. By 2012, the neighbourhood had become a thriving hub, and property values told the tale. 401, which had cruised along with tax increases of about 1 percent annually per year, saw its taxes balloon by 90 percent between 2012 and 2017, from $446,689 to $846,211 this year.
UrbanSpace had absorbed most of the increases itself as it pleaded with the Municipal Property Tax Assessment corporation for relief, but little seemed forthcoming. This year, it began passing the weight of the burden onto tenants, many of whom saw their monthly tax bill immediately double (commercial tenants often pay property taxes apart from their rent).
With taxes set to increase by another 50 percent, to $1,286,800, by 2020, 401’s status as the lone holdover from an era where the central core of the city could house anything other than corporate offices and high-end chain retail seemed unlikely.
In a city where value has almost always been calculated by the hard measure of dollars, not the softer notion of kinship and community, 401 was always an anomaly. In the new world order of highest-and-best use — MPAC’s measure for tax assessment — it was a radical outlier, a sudden misfit in the vibrant sector of the city it had helped to create.
Remarkably, in this era where the market has ruled every aspect of urban development — ask any developer about height restrictions, and they’ll tell you about the Ontario Municipal Board — the city saw the value of difference, and mobilized quickly to put in some stops. It re-designated portions of the building — its broad hallways, open gallery space, a courtyard, a garden — as a community benefit, offering some tax relief.
But the brass ring was a new class of property tax, specifically for buildings where the landlord had put aside market rent in favour of incubating culture and community. To do this, it would need to be written into provincial tax code; laws would need to be changed. As of Tuesday morning, the province has signaled that it’s ready to do that, and the change could well be profound. “This is a game changer for tons of small cultural organizations,” said Karen Carter, the executive director of Myseum of Toronto, a non-profit organization focused on Toronto history, and a tenant at 401.
“Something had to give. For us, it might have meant moving, and now that means out of the city centre, because there’s no way we could afford it. That means moving away from where you can be most effective. And then what? What this does is it stops the city from being gutted to its core.”
It’s critical to note that this isn’t a law to benefit 401 Richmond. Under the current tax regime, building owners who weren’t maximizing profits through sky-high rents or redevelopment had a gun to their heads. They were being taxed for that virtual building anyway, so why not sell and let someone build it? What that always means is an old building sacrificed for new, and eclectic use supplanted by homogenizing forces of market rates.
With the new tax class — which the city must now formally request, and in October will, under Councillor Joe Cressy, who has lead the city’s efforts on this front — owners of old buildings can ease their tax burden by having a say in how their properties are used. Arts and culture hubs will get breaks proportionate to the revenue they choose to collect, at-market or not. It’s the argument 401 and its supporters have made all along.
The tax class is yet to be written, of course, but it seems fair to hope that at the very least it will cease to be punitive to landlords with altruistic intentions. It will be province-wide, providing real alternatives to property owners where previously there had been none.
A very real concern is the damage already done. Many buildings have faced mass evictions when tax burdens and market forces combined to make small creative tenants like artists unwanted burdens. A mass eviction last fall at 224 Wallace was simply the market taking its course; a similar purge at 213 Sterling Road last winter was another symptom of a larger affliction.
If the city and the province had identified the problem sooner — and this is not a new thing, with gentrification and displacement having been a transformative wave over downtown for more than a decade — how many of these buildings might yet remain?
The first warning signs emerged more than a decade ago, when a grassroots movement in 2006 to save 48 Abell Street, a haven for hundreds of artists on Queen Street West, failed to gain political support and the building was demolished to make way for condominium towers.
Hindsight may be 20/20, but in a downtown property market already well on its way to previously-unimagined heights, was it reasonable to consider Abell an isolated incident, and that properties like 401 Richmond would be forever immune? And why did it take an emblematic building like 401 to move the province to action?
Even there, a problem remains. Tax increases have already pushed many tenants near the breaking point. New tax law isn’t written overnight, and relief, for them, will be far from instant, if it comes at all.
UrbanSpace successfully applied for reassessment from MPAC, reducing its assessed value from $57.6 million to $33.2 million, which will mean tax refunds for bills paid as far back as 2013. But the company had absorbed years of increases to that point, shielding tenants from the worst of it until it could bear no more.
“We’re obviously thrilled but there’s still a lot of work to be done,” said Jennifer Bhogal, the executive director of Open Studio, 401’s largest tenant. “There may be a brighter future for buildings like these, but as tenants here and now, we’re in the same spot today as we were yesterday.”
The province has one chance to get this right. Let’s hope this is more than lip-service PR, because the clock hasn’t stopped ticking. And midnight is already far closer than it ever should have been.