Affordable, sustainable space for cultural activity remains most challenging in Toronto. In response, the City of Toronto has introduced a new property tax subclass, beginning in 2018, giving a 50% tax reduction to landlords (for eligible portions of their facilities) who offer arts and cultural spaces at a minimum of 30% below market rents. This is a new and indirect form of subsidy, and is available to both for profit and non-profit landlords. It is directed at sustaining existing spaces.
The tax benefit was introduced following a crisis which affected the tenants of the 401 Richmond property in Toronto, a large, privately-owned former factory mainly used by the arts and culture community. The landlord had been offering space at below market rents for the cultural sector, but rapid property tax increases were making it impossible to keep the rents affordable. The new tax subclass enables landlords to keep leasing spaces at affordable rates. Some commercial tenants cross subsidise the non-profit organisations, and overall, the building is sustainable in an overheated real estate market, rather than being forced into redevelopment.
The tax subclass is based on multiple tenants and supports the idea of cultural hubs and resource sharing. The key agencies involved are the City of Toronto, the provincial Ministry of Finance and the Municipal Property Assessment Corporation. In the initial year, six properties with an eligible 238,000 square feet benefit from the new tax subclass.