Eight months in, little uptake on city hall cash to turn core offices into housing

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Eight months after being introduced, London’s subsidy to turn empty office space into homes has a grand total of one project with money committed to it, while one more is publicly known to be in the works. Reporter Jack Moulton takes a look at why uptake has been so tepid in a city flush with empty offices.

WHAT’S THE SUBSIDY?

Announced in January during the state-of-the-city address, the city would pull up to $10 million from the $74 million federal housing accelerator funds awarded to London to help offset the high costs of converting office space into housing.

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Based on similar incentives including in Calgary, the intent is to address both an explosion in office vacancy rates – London recently had the highest downtown vacancy in Canada, stemming from the pandemic shift to working from home – but also to bolster the housing supply in a tight and expensive market.

Initially offering a range of $21,000 to $28,000 per apartment converted from an office with a cap of $2 million, in July city council approved a boost to $35,000 per apartment, and removed the cap.

Office conversions are incredibly expensive, when not totally impossible. Many office building floor plans lack the plumbing needed to accommodate new bathrooms and kitchens, for example. Developers also need to bring the buildings up to code for residential use, such as installing windows that open.

WHAT’S BEING WORKED ON?

In May, the city granted $415,000 to the Mississauga-based development company Maas Group, in order to create 14 two-bedroom and one single-bedroom apartments in the top three floors of the former Rexall building at 166-170 Dundas St., at Richmond St.

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While city money hasn’t officially begun flowing yet, an announcement in April promised a collaboration between Sifton Properties, Homes Unlimited, and the Anglican Diocese of Huron to convert the building at 195 Dufferin Ave. into 94 units, 80 one-bedroom and 14 two-bedroom apartments. 

Mayor Josh Morgan also confirmed to The London Free Press at least two other projects are in talks.

MAYOR WEIGHS IN

Morgan says he is satisfied with the progress so far, saying the program is a first attempt in a complex process. However, he says the city is still re-evaluating the incentives.

“I would much rather ensure we get it right and have a functional program that incentivizes rather than us just put something out there and hope it works,” he said. “What we’re trying to do is get some results, stretching every dollar that we have in the housing accelerator fund as far as we possibly can.”

Stacking other incentives the city offers, such as $45,000 per affordable unit included in a development, can also slow the process as developers evaluate their options for a limited pool of 285 converted apartments, he said.

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INDUSTRY WEIGHS IN

Jared Zaifman, chief executive of the London Home Builders’ Association, says that while it’s positive to see some projects in the works, the cost of gutting an entire building coupled in with a relative lack of optimal building types for conversion still poses a challenge.

Property owners downtown also may not be interested. They may hope to have an office return at some point, or they’re worried about starting an expensive process to apply but missing the limited window.

“There might be people that might be interested in participating, broadly, from the industry. At the same time, those people may not be the ones that currently own the buildings downtown,” he said. “If the city’s hope is to have more conversions take place, then a greater incentivization even on a per unit basis, could make a difference.”

WHAT’S NEXT?

It remains to be seen whether the city will see more converted office space, largely boiling down to the desire of the private sector. Morgan anticipates “forthcoming announcements” from the “worthwhile program.”

Since the housing accelerator fund is only a three-year fund aimed at creating homes, the city can redirect funding to or away from office conversions depending on interest, Morgan said.

“Our goal is to create the units we committed to,” Morgan said. “How we create them is less of a concern, but we’re going to try some things that have a benefit.”

jmoulton@postmedia.com

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