Signs of High-Rent Blight

While Cookstown works within the framework of a Heritage Conservation District to preserve the essence of the community and Alcona struggles to create a new but traditional shopping district, both Innisfil neighbourhoods are plagued with under-utilized and undeveloped commercial spaces.

In my last article, I questioned the logic of giving property tax rebates on empty commercial spaces. It seems entirely counter-productive to the economic and social health of our community. However, in some circles, it’s seen as being ‘business-friendly’. I was told that the real problem is that Innisfil property taxes are too high. It was suggested to me that commercial rates should be lower to compete with neighbouring communities like Barrie. That seems too simplistic for a couple of reasons:

  • We already tried that approach on a national scale with lower corporate taxes and ended up with companies sitting on what the Bank of Canada described as a mountain of “dead” money. There can be little expectation that lower taxes for landlords would proportionally benefit their commercial tenants.
  • We shouldn’t necessarily be trying to energize our local economy by impoverishing a neighbor’s opportunities. Can’t we create incentives and opportunities to motivate entrepreneurship within our own growing community?

The factors involved are more complex and in trying to understand it, I came across a revealing article published in the New Yorker that demonstrates how universal some issues are. (Why are there so many shuttered storefronts in the West Village, Tim Wu, The New Yorker, May 24, 2015).

“High-rent blight” happens when rising property values, usually understood as a sign of prosperity, start to inflict damage on the city economics …”

In Innisfil’s case, property values seem to have been bid up in anticipation of future development. It has attracted absentee landlords whose paper calculations are based on leasing to large national chains with equally distorted expectations of sales per square foot. In some cases it justifies the already inflated value some have put on an empty lot.

“In the West Village, rent spikes are nearly universally reported as the reason so many storefronts have closed over the past few years … Compounding the problem is the fact that the closed storefronts often stay that way, sometimes for years, in an apparent contradiction of the law of supply and demand. If a storefront remains empty for a long time … basic economics suggest that the price being charged is too high. So why doesn’t the owner lower the rents?

There are potentially some tax benefits for the owners of empty storefronts. But the more likely explanation is that landlords are willing to lose a tenant and leave a storefront empty as a form of speculation. They’ll trade a short-term loss for the chance eventually to land a much richer tenant, like a bank branch or national retail chain, which might pay a different magnitude of rent.”

Doesn’t this sound familiar? It helps to explain why most stable and prosperous retail businesses in Alcona are franchises of national chains, why development of a retail core in Alcona is stalled, and why some Cookstown properties are chronically vacant. Why is it harmful? Here are a few reasons noted in the New Yorker article:

  • [Jane Jacobs] “famously argued that cities were explosive drivers of economic growth, based on a theory of intra-city trade. She highlighted, among other things, the ease with which local businesses trade goods and services with each other, and eventually make the city into a net exporter of desirable goods and services. But high commercial rents can threaten that basic dynamic. If national businesses, not local ones, come to fill a neighborhood, the area may become merely an importer of goods and services ….”
  • “Local wealth isn’t created, and the economy of the area begins to match the less-inspiring examples of suburbia.”
  • “high commercial rents also damage what made neighborhoods like the West Village attractive and appealing to buyers and renters in the first place. One usually pays for distinction, and there is nothing distinct about a neighborhood where new businesses are national chains or safe, high-margin operations.”
  • The outcome is “what James Howard Kunstler termed “a geography of nowhere.” It is possible that entire classes of stores may disappear from some neighborhoods, like mid-range restaurants, antique stores, curiosity shops, bookstores, and anything too experimental… at some point high property values may begin to destroy local economic activity.

In Innisfil, it is being strangled before it can begin. It’s time to rethink our approach to local economic development.