Winnipeg's latest deal to finance True North Square will require the developers to help build market-rate rental housing elsewhere in the city.

On Thursday afternoon, city council approved a series of changes to Winnipeg's financing package for True North Square, a $550-million development led by the owners of the Winnipeg Jets.

It will now include a provision for the developers to pay the city an affordable-housing grant estimated at $185,000 to $200,000.

True North's real estate arm and a second firm, Northland Properties, are building a total of four towers on either side of Carlton Street; two are residential buildings.

The city and province plan to offer True North and Northlands rebates on the new property taxes generated by the residential towers, once they are built.

But since the city doesn't have the statutory power to offer these rebates without using a bylaw, it's relying on an existing bylaw that supported a city-provincial housing-stimulus program that expired two years ago.

That program used to require 10 per cent of the new housing units be affordable, which under provincial terminology means mean-market rates. The city's new deal for True North includes an exemption for the affordable-housing component, which the province insists was never part of the deal.

The resulting backlash from housing advocates led councillors Cindy Gilroy (Daniel McIntyre) and Jenny Gerbasi (Fort Rouge-East Fort Garry) to propose an amendment that would require True North and Northlands to return 10 per cent of the new municipal property taxes from the towers to the city for use as an affordable housing grant.

That grant will end up being $185,000 to $200,000, depending on the final property assessment, Winnipeg communications director Felicia Wiltshire said.

"We all here understand the need of affordable housing," Gilroy said after praising the public amenities that will be part of True North Square.

"We found a way to work with the proponents," added Gerbasi, who has told constituents True North has agreed to the grant.

True North Real Estate president called the council process "interesting" but said True North Square will make the grant. (Jeff Stapleton/CBC)

True North Real Estate Development confirmed it's willing to make the grant.

"Interesting, this process," president Jim Ludlow said in the lobby of the first tower to be completed at True North Square.

He said everyone knows how much his firm has done for downtown already but said True North is receptive to council's efforts to create more affordable housing.

"I don't know how to resolve everything in downtown. I would tell you where we live and work today and what we try to do downtown, a big issue for us is downtown safety," he said. He said he is fairly certain the grant won't affect True North or Northlands' plans for the rest of the project.

Earlier, Coun. Scott Gillingham (St. James-Brooklands) told council there never was an affordable-housing component for this project and blamed the controversy on poor communications.

He urged critics to contact the province, which he identified as the level of government responsible for housing.

Council wound up voting 14-2 in favour of the amended deal. Couns. Ross Eadie (Mynarski) and Jason Schreyer (Elmwood-East Kildonan) voted in opposition.

The province is mulling new rules for this type of tax rebate, which is known as tax-increment financing, or TIF.

In most North American cities, TIF is used to stimulate economic development in undesirable, underdeveloped or otherwise blighted neighbourhoods. Property owners in those areas are often reluctant to invest in upgrades for fear of getting hit with higher property-tax bills after the improvements are made.

What TIF does is allow cities to capture the additional tax revenue generated by properties that are improved and then do a number of things with that money, including return the new tax revenue to developers in the form of tax rebates.

Addressing council during the morning, labour-endorsed election candidate Josh Brandon, who is running against Gilroy in Daniel McIntyre, admonished the city for subsidizing luxury residential towers while thousands of inner-city residents are either homeless or at risk of homelessness.

The former provincial NDP government inserted the median-market rental requirement into the old downtown housing stimulus program.

Such measures are not common in tax-increment financing schemes, which rely on creating the greatest possible differential between existing property taxes on an unimproved property and the additional taxes generated by an improvement to that property.