London To Use Housing Accelerator Funding Towards Office Conversion Incentives

The city of London, Ontario is set to be latest in Canada to make a serious effort in encouraging office-to-residential conversions, addressing two problems — increasing office vacancies and a housing supply shortage — with one move.

On Thursday, during the annual State of the City speech hosted by the London Chamber of Commerce at RBC Place London, Mayor Josh Morgan announced a series of actions he will take using his strong-mayor powers, several of which pertained to housing.

Perhaps most notable was that Morgan said the City will make use of the $74M it received via the federal government's Housing Accelerator Fund towards incentivizing office conversations, offering $20,000 for each one-bedroom unit created and $28,000 for each two-bedroom unit.

The City of London has been in the process of creating an office conversions incentive program since May, as part of its Core Area Land and Building Vacancy Reduction Strategy. At that time, City staff concluded that "there is a market structural issue with London Core Area commercial office vacancy," as London has seen its office vacancy rate increase by 6% from Q3 2019 to Q3 2022, to 24.6% — one of the highest vacancy rates in the country — with just under 1,200,000 sq. ft of vacant space available.

A map of the geographic boundaries of London's Core Area.(City of London)

Staff also noted that the vacancy issue is specific to Class B and Class C office buildings, which represent approximately 75% of London's vacant office space. Those classes of office buildings, however, are the most common class of office buildings converted into residential uses.

Outlining additional avenues it could explore, the Core Area Land and Building Vacancy Reduction Strategy also detailed the possibility of incentives based around improving air quality in office-to-residential conversions, as well as a grant program that covers the costs of application fees for conversion projects.

On Thursday, Morgan did not elaborate further on these aspects, but said that further details regarding the office conversions incentive program would be considered by Council in February. Once created, London would join a list of Canadian cities to introduce office conversion incentives, or are set to, that includes Calgary, Edmonton, and Toronto, with Ottawa and perhaps other cities joining the list this year.

Other actions Morgan announced during his State of the City address included encouraging developers to turn existing surface parking lots in downtown London into housing — also originally outlined in the Core Area Land and Building Vacancy Reduction Strategy — and a partnership between four local developers to acquire and transform a long-term care facility into supportive housing for those experiencing homelessness.