One of city’s iconic buildings at risk
401 Richmond is an important anchor for creativity in Toronto
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.