Developers seek financial incentives to spur downtown housing construction

A tug-of-war over downtown development saw city council and advocates for property developers trade stances over the best way to spur home construction in Edmonton's core.

What ends up happening could depend on who blinks first in the chicken-or-egg scenario.

The City of Edmonton would like to see more housing built downtown, in part to spur recovery, but developers say without municipal financial help, core apartment construction projects are a bad investment.

Advocates for the industry are asking the city to create a financial incentive program because of relatively low rents, and high construction costs and property taxes.

Puneeta McBryan, chief executive officer of Edmonton's Downtown Business Association, told the executive committee while tens of thousands of new units are being built across the city, there have been no housing starts downtown in the last two years.

"If we don’t do anything to make sure that residential development happens, we are building a donut city," McBryan said, adding that while construction costs in Edmonton are about the same as those in Calgary and Victoria, rents on finished housing in the latter two cities "are double or, in some cases, triple."

"The math simply doesn’t work right now for downtown Edmonton," she said. "The land is too expensive, the property taxes are too high, and then building costs and everything else."

Kalen Anderson, the director of the Urban Development Institute - Edmonton Metro, which lobbies governments on behalf of the land development industry, said the city's downtown is struggling mostly due to increasing commercial vacancy rates as well as "a lack of private sector financial viability to support new residential development."

"This continued devaluation of our assets downtown will erode the tax revenues for the whole city and will inevitably place increased pressure on the rest of the community to recover that burden," she said.

City staff estimate a $40-per-square-foot grant could help build an additional 1,000 units downtown, costing taxpayers nearly $14 million.

Mayor Amarjeet Sohi, speaking to media following Wednesday morning's session, said the city needs "to make sure that we are very prudent in using tax dollars to be effective as much as possible" before it can commit to an incentive plan.

"I hear from the (construction) industry that more incentives are required, but we are also in a very tough financial situation," Sohi told reporters, adding the city needs to address financing services such as transit, snow and ice removal, and staff salaries.

He said he'd like to see the industry focus on infill and downtown growth, and "commit not to continue to grow outwards."

"I think that will reduce pressures on city finances," Sohi said.

The executive committee delayed a decision on financial incentives for downtown development to city council's meeting on April 2 so the full council could ask questions and vote on the proposal.