One of city’s iconic build­ings at risk

401 Rich­mond is an im­por­tant an­chor for cre­ativ­ity in Toronto

Midtown Post - - News | Sewell On City Hall - JOHN SEWELL

Full dis­clo­sure: John Sewell has shared of­fice space at 401 Rich­mond for the past few years.

Some think it is the most iconic build­ing in Toronto, although it is noth­ing to look at — a four-storey in­dus­trial brick build­ing from the 1880s.

What makes it re­mark­able is what it con­tains: al­most 150 tenants in­volved in cre­ative work of all kinds: film, paint­ing, dance, mu­sic, pro­duc­tion, fes­ti­vals, video, mag­a­zines, pho­tog­ra­phy, so­cial en­ter­prise and more, in­clud­ing a non-profit day care. This struc­ture, 401 Rich­mond St. W., is a model for cre­ative life, an an­chor for cre­ativ­ity in all parts of this city.

Given the tax prob­lems the tenants of 401 face, it may bring cre­ativ­ity to our stul­ti­fied and mori­bund prop­erty tax sys­tem.

Twenty-five years ago, this sec­tion of Spad­ina south of Queen was the scene of gar­ment in­dus­try work­shops clos­ing down as Third World clothing flooded the mar­ket. That’s when Margie Zei­dler pur­chased and re­pur­posed 401 Rich­mond. She wanted to make a cre­ative place that re­flected the think­ing of Jane Ja­cobs, and with cheap rents, she be­gan at­tract­ing a di­verse lot of in­ter­est­ing tenants.

It was a suc­cess­ful ven­ture, and her busi­ness model was eco­nom­i­cally vi­able even with low rents. The suc­cess of 401 at­tracted other en­trepreneurs to the area, then prop­erty spec­u­la­tors and then the con­do­minium mar­ket.

To­day prop­erty val­ues are out of sight. That has posed a big prob­lem for 401 since the prop­erty taxes are di­rectly re­lated to the mar­ket value of the prop­erty.

In­come tax de­pends on your earn­ings. Prop­erty tax de­pends on as­sess­ment, which is set at mar­ket value — that is the amount peo­ple will pay for prop­er­ties in your neigh­bour­hood. Your mar­ket value in­creases be­cause of the ac­tions of oth­ers, and then your prop­erty taxes in­crease.

Ms Zei­dler has de­lib­er­ately kept rents low to en­sure her tenants re­main vi­able, but prop­erty taxes have sky­rock­eted, from $2.50 a square foot in 2012 to a pro­jected $7.00 per square foot in 2020. The prop­erty tax as­ses­sors say the law re­quires them to look at the rents of nearby prop­er­ties to es­tab­lish mar­ket value in the area.

The ac­tual rents paid by the tenants of 401 are not rel­e­vant. We see the same prob­lem caused by gen­tri­fi­ca­tion.

Long­time home­own­ers find their taxes ris­ing in­ex­orably. Re­tail shops that have been a fix­ture for years are no longer vi­able be­cause land­lords charge mar­ket rent, and the prop­erty taxes grow enor­mously.

In­di­vid­ual own­ers don’t have the where­withal to fight the as­ses­sors. At the other end of the scale, the Aga Khan Foun­da­tion is big enough to ask the provin­cial gov­ern­ment for leg­is­la­tion to ex­empt it from prop­erty taxes (which it has al­ready done for its new prop­erty in Don Mills); 401 Rich­mond is large enough to fight but not to ask for total ex­emp­tion.

The so­lu­tion 401 ad­vo­cates is that the prov­ince cre­ate a spe­cial class of prop­er­ties un­der the As­sess­ment Act where as­sess­ment is based not on mar­ket value, but on the ac­tual rent paid. As­sess­ing on some­thing other than mar­ket value is not new: the prov­ince al­ready does this with prop­er­ties where it is en­cour­ag­ing the growth of trees, the “man­aged for­est class” of prop­er­ties, which are given an as­sess­ment re­duc­tion. It is also done for sports sta­di­ums, such as the ACC and Rogers Cen­tre.

Pro­vid­ing fair as­sess­ment for low-yield cre­ative and so­cial en­ter­prises can be done by cre­at­ing a class of prop­er­ties as­sessed not on mar­ket value but on ac­tual rents paid. Many down­town coun­cil­lors seem pre­pared to en­dorse this res­o­lu­tion, and if the prov­ince agrees, that would make things eas­ier for the tenants at 401 Rich­mond as well as tenants in other build­ings through­out the city that can’t af­ford prop­erty taxes set ac­cord­ing to mar­ket value.

That de­bate might help us re­think how a suc­cess­ful prop­erty tax sys­tem could func­tion rather than try­ing to pre­tend that mar­ket value should rule the world.

A re­pur­posed her­itage build­ing, 401 Rich­mond has be­come an arts and cul­ture hub in the city

Post City Mag­a­zines’ colum­nist John Sewell is a for­mer mayor of Toronto and the author of a num­ber of ur­ban plan­ning books, in­clud­ing The Shape of the Sub­urbs.

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