The City of Victoria will try to incentivize new rental housing by giving builders a decade-long reduction on their redeveloped property’s municipal taxes, if certain affordability requirements are met.
Council on Thursday (Oct. 13) directed staff to draft a bylaw that would aim to build on the city’s current incentives for rental housing. Staff said interest rates and construction costs have created extremely challenging conditions for builders to make rental projects feasible.
The bylaw is expected to be produced over the coming weeks and will be centred around tax exemptions.
For non-market rental projects, the bylaw would spare builders from paying municipal taxes on the increase in the assessed value of the redeveloped property for ten years. To qualify, the project would need to be owned by a non-profit housing provider and give any displaced tenants the option to return at their previous rent rate once the new build is complete.
The bylaw will also give market-rental projects the 10-year tax break if they make 10 per cent of units affordable to median-income households and, again, if displaced tenants have the right of first refusal at their previous rent.
Another incentive the city will consider is allowing non-market rental projects proposed by non-profit housing providers to pay no development cost charges – which are fees municipalities collect to pay for infrastructure that supports new construction.
Staff recommended the city consider having those projects only pay half of their development cost charges, but councillors hope exempting the projects entirely will address the slow pace of housing being approved for lower-income households.
That came after staff said the city is meeting its market rental unit targets, but Victoria is consistently lagging in approving enough rentals that would be affordable to low and median-income households. A median-income household in the city would currently need to make $2,800 more a month just to afford an average two-bedroom rental that’s on the market, staff noted.
Several councillors on Thursday stressed the city needs to move much quicker in spurring more housing for those on the lower end of the income spectrum.
A third-party financial analysis of the incentive policies found any financial savings for non-market projects translate into lower rental rates and greater affordability.
Staff said the policies complement the city’s existing incentives and when tied with ones from other levels of government – like the feds removing the GST on rental projects – the new tax changes could offset the cost of requiring affordable rental units for builders.
The city would report back on the tax changes after one year. Mayor Marianne Alto said she doesn’t think the proposals go far enough and foreshadowed that council will bring in bolder incentives when that one-year review comes.
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