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Council ponders tax breaks for residential construction

In response to acknowledged housing shortage

Qualifying residential building owners and those wishing to build could soon qualify for tax exemptions from the District of Houston based on improvements to existing properties and new construction.

A six-page briefing document presented to council Feb. 16 sets out the reasoning for exemptions and the broad strokes of what would be involved.

Exemptions have the ability to improve the quality and quantity of a wide-range of housing options, corporate services director Duncan Malkinson indicated in the document.

And doing so would fit the District’s strategic plan regarding housing options within Houston and address a series of shortcomings outlined in a 2020 housing assessment study commissioned by the District.

The assessment listed a complete lack of emergency housing, a lack of subsidized housing for low-income residents of every age group, a shortage of supportive and assisisted living accommodation, a lack of high quality rentals, rentals for larger families and concerns about age of existing homes, the lack of newer homes and the lack of options to downsize.

“A key recommendation of this assessment was to broadly support the development of stakeholder capacity and increase overall housing quality,” Malkinson noted.

“Further to this, the development of an incentive program to support the development of more accessible housing and rental housing units was identified.”

Malkinson also indicated that, based on the housing needs assessment study, District “staff understand the increase of housing units to be a key aim of a potential bylaw rather than renovations of existing units.”

Discussion points presented to council included designating areas where the District would want to increase the supply of housing, how incentives are calculated and maximum and minimum dollar values where they would apply.

New housing within built up areas would tap into existing infrastructure and blend maintenance and other costs while providing incentives elsewhere would have service cost implications.

“The Official Community Plan states that greater density of residential uses close to downtown support the provision of more efficient services,” the document stated.

Generally speaking, a tax exemption length of 10 years has been suggested with 100 per cent exemption on increased assessment values for the first year and declining by 10 per cent every year thereafter.

If council wished to encourage single family dwelling construction and multi family dwellings within targeted areas, it could consider a five-year tax exemption term declining by 20 per cent a year.

The document did caution there is a cost risk in establishing taxation exemptions in more rural locations as service levels are different than they are downtown.

“If council did wish to designate rural areas as eligible under the bylaw, staff recommend council designate areas with road and other services [already] in place, the document added.

As far as dollar values to be set in order to qualify, council could establish a minimum amount and a maximum amount so that “outliers to council’s objectives are not incentivised (i.e. extremely low and extremely high value new builds).”

But council could also waive an upper limit for the construction of multi-family or apartment units.

Pending a council decision, staffers are recommending a minimum valuation increase of $150,000 for newly-built residential dwellings and a minimum valuation increase of $30,000 for rebuilt residential dwellings.

The document did note that granting tax exemptions, depending upon how they were applied, could pose a risk in reducing potential tax payments to the District.

The District already has a bylaw encouraging the construction of retail space and a draft bylaw to encourage industrial development.

About the Author: Rod Link

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