Preserving the old not always sensible

Opinion

Hey there, time traveller!
This article was published 23/06/2019 (1915 days ago), so information in it may no longer be current.

Once again, we see plucky “neighbourhood activists” standing up against a “multimillionaire” developer. These activists no doubt celebrate the 11th-hour decision by Winnipeg’s director of planning, property and development to issue an emergency order to nominate “the Crescentwood neighbourhood as a historical conservation district.” The mansion at 514 Wellington Cres., reputedly the former home of many of our most prominent citizens, is now safe from the wrecking ball, at least for the moment.

However, this decision is wrong on many levels.

To begin, if the opponents to the demolition of this “historic structure,” many of whom are multimillionaires in their own right, truly believed in their cause, they would pony up and buy it. Then they could pay the $18,000 annual property tax and figure out how to use an 8,000-square-foot single-family home built in 1909, with 16 rooms, without air conditioning, attached garage or finished basement.

The current owner purchased this property in good faith and under the expectation he could redevelop it. If the historical district designation holds, this will carve out much of its value in an action that is tantamount to bureaucratic thievery. This is an effective way to discourage investment in older neighbourhoods, something which I had always understood was a goal for the city.

Using a neighbourhood-wide designation, possibly to avoid litigation had the stricture been property-specific, may create bureaucratic obstacles for developers in one of Winnipeg’s more vibrant districts.

The Crescentwood area is experiencing revitalization. Many single-family homes are being remodelled into multi-unit structures or replaced entirely, usually with condos. For example, the seven-storey apartment that replaces the derelict homes on Roslyn Road just behind the Safeway on River Avenue will inject additional purchasing power into Osborne Street businesses, reinforcing this area as a retail destination.

It also will offer homes for up to 200 workers within walking and cycling distance to downtown. Creating development opportunities near the inner city aligns with what seems to be a consensus among planners. As a side note, at the time the old homes were scheduled for demolition, neighbourhood activists also vigorously opposed that development.

But the implications of this planning directive run deeper.

Consider property tax revenues. Imagine that the city allowed multi-family use at 514 Wellington Cres. and the developer constructed a 10-unit condo, something that would be feasible on this lot. Also, imagine the assessed value of each unit was a conservative $600,000, resulting in $9,000 in property tax per unit, for a total of $90,000 for the property. This is far in excess of the current $18,000 in tax revenue for this property. The decision to freeze development has effectively cost the city $72,000 in forgone property tax.

Who pays for this loss? To comprehend this requires a little explanation for how a city sets property tax. First, the city calculates the total spending requirements on roads, salaries, parks, etc.; then it divides this into the total assessed value of all property to arrive at a mill rate, which is currently about $15 per $1,000 of assessed value.

When we take out some of the assessed value through exemptions or failing to develop properties, everyone pays more tax to make up this loss.

So, if we forgo the $72,000 in tax, all other Winnipeg homeowners and renters, including the neighbourhood activists, must pay more. Of course, if the city were not growing, the 20 people who might reside at the “condos of 514” would buy homes elsewhere and we might not lose the revenue. But the city is growing, and this leads to an important point.

We often hear that amenities such as the ballet, the Jets and the cultural life of Winnipeg are vital to attract and retain investment. In fact, Winnipeg’s low-cost housing is one of the important tools in the competition to attract investment and jobs. Both the city and the provincial government need to focus on affordable housing as a strategic advantage for Winnipeg when competing with other cities in North America.

To do that, governments should ensure excess regulation does not impede urban housing investment, and last-minute blanket heritage designations are a perfect example of bureaucratic excess.

If 514 Wellington Cres. truly has heritage value, the city or province should purchase it and convert it into a museum. I expect that bringing it up to code and then creating the installations in memory of the distinguished former residents could easily run into several millions and result in perpetual operating losses. No doubt, given the parlous state of municipal finances, most residents would reject such an expenditure and few politicians would dare suggest it.

When cities discourage owners from investing in housing, they encourage the reaction of New York landlords in the 1970s. Confronted with rent controls that failed to cover costs, they simply dropped off the keys at city hall and abandoned their buildings (the movie Midnight Cowboy is set in just such an apartment).

If the conservation designation persists, what is to prevent the current owner from simply refusing to pay the tax, boarding up the house, turning off the utilities and ignoring the yard? This property would quickly become a derelict eyesore, well beyond any hope of rehabilitation. Quite possibly the same activists will then petition the city to take action.

Council must reverse this bureaucratic diktat and be more diligent with its heritage designations. It should not discourage the entrepreneurship that is revitalizing our older neighbourhoods.

Gregory Mason is an associate professor of economics at the University of Manitoba.