Is the city doing enough to deal with downtown's vacant buildings?

Councillor Stephen Turner is blunt when asked if he thinks London's city council has done enough to deal with vacant commercial buildings in the city's core: 

"I think we've put a lot of carrots out there. I think it's time we start using a few more sticks."

One of those sticks, a twig depending on who you ask, was passed last night at city council. London's updated vacant building bylaw now comes with penalties of $400 per infraction, double that for repeat offences. 

The fine applies when an owner fails to submit a floor plan or contact information for buildings left empty for more than 30 days. They can also be hit if the building is boarded up after a year. 

Councillors emphasize that the new vacant building bylaw is not meant to penalize business owners who have boarded up their properties because of the pandemic. But they say that now is the time to look at how the city deals with empty commercial buildings in the core and what it can do — and what powers it can ask the province for — to limit even more vacancies. 

In 2020, London's downtown commercial vacancy rate was 16 per cent. It's being predicted to be 20 per cent in 2021. 

"I think people are recognizing that we can't revitalize our downtown unless everybody's on board, and that means government, private sector, non-profit organizations, the citizens of London, everybody. Everybody has an interest in this so everybody has to be on board," Coun. Maureen Cassidy told CBC News. 

End of vacancy rebate

Much of what the city is able to do is limited by the Ontario Municipal Act. 

For example, until 2019, building owners qualified for a 30 per cent tax break on commercial buildings that sat empty. 

It amounted to almost $2 million in lost tax revenue for the city, and when the province allowed municipalities to get rid of the vacancy tax rebate, city council jumped at the chance. 

"That was one of the moves we tried to take, to recognize that revenues for the municipality had been impacted, and to try to disincentivize property speculation by sitting on vacant buildings," Turner said. 

The rebate was part of a provincial program created to give owners who were having trouble finding tenants a break. 

But in 2016, Ontario's Municipal Property Assessment Corporation (MPAC) changed how it calculates what a building is worth, in a way that factors in vacancy into the overall property value. 

That resulted in a double discount for commercial landowners, who would pay less taxes because their buildings were worth less, and because they could then apply for the rebate. 

Property speculation tax

Today, Toronto is using taxes in a different way. It's increased taxes on vacant residential buildings. The trouble is, London is not allowed to do that under the Ontario Municipal Act. 

"I would really love to see the provincial legislative tools that allow municipalities to address vacancy and property speculation because pure and simple, that's what this is," Turner said about many of the vacant properties downtown. 

CBC News has reached out to Ontario's municipal affairs and finance departments but has not heard back about whether changes to the rules about taxing vacant commercial rules are coming. 

Property speculation is the act of buying property and holding on to it, without development, in the hopes of reselling it at a higher price in the future. 

"Notwithstanding the significant amounts of investment and policy focus that London has put into the core, it's undermined by property speculation and our inability to really do anything about it," Turner said. "We can turn the screws a few ways and that's what the (vacant building bylaw does) but it certainly doesn't create a huge disincentive that would turn the buildings into productive and occupied buildings." 

Other cities, such as Montreal, have started charging taxes on empty buildings for the highest and best zoned use, Cassidy said. So, if a building is zoned for a 20-storey high rise, the owner is charged the property taxes for that. 

"That's an incentive for the owner to either develop the land or divest," said Cassidy. 

London has no power to do that. 

Ontario's non-resident speculation tax came into effect in 2017, but is only imposed on some foreign buyers of real estate. 

Incentives galore

The city has done a lot to make downtown attractive for both commercial and residential development, Turner said. 

"Over the past two decades, there has been over $100-million in municipal investment in the core," he said. 

Dundas Place, Budweiser Gardens, the Covent Garden Market, Fanshawe College, have all been added relatively recently, and there have been numerous studies and master plans that aim to make downtown a livable, attractive place. 

Residential development in the core is booming, with several towers sprouting up, each with underground parking for residents and a portion for those who want to rent out parking spaces. There are development charge rebates for those who want to develop in the core. 

"We also have, on the commercial side, policies that restrict larger commercial office spaces to the core. About 80 per cent of London's commercial office space is downtown and we want to keep it that way. We need people working downtown, and we need things for them to do during work, at lunch, and after work," Turner said. 

"We're doing everything in our power. We could use some help from the province."