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Yesterday afternoon, our team had a productive in-person meeting with senior planning staff at the City of Toronto. The purpose of the meeting was to talk about the challenges associated with delivering infill missing middle housing and to brainstorm the possible solutions.
Some of the key topics that we discussed: Type-G loading / garbage requirements, amenity space requirements, right-sizing the Site Plan Control process, single-stair exiting, the cost of connecting to Toronto Hydro, the challenges with assembling small lots, specifics of the Major Street Study, and a bunch of other things. So many of the things that we regularly talk about on this blog.
We also walked everyone through the site we had under contract but eventually dropped because the margins were just too thin. This included opening up our pro forma, projecting it onto the screen, and going through it line-by-line. We are happy to do this because we think this transparency helps everyone truly understand the obstacles.
What's clear is that we all want to see more family-friendly housing lining our avenues and major streets. And so there's a real feeling of collaboration during meetings like the one we had yesterday. We're all at the stage of "what is it going to take? Let's figure it out!" This can-do attitude makes me feel optimistic that we are going to get there. And once we do, Toronto will be that much better for it.
It was also nice having an in-person meeting back at City Hall. To be honest, I can't remember the last time I did that. But it used to be standard operating procedure. We'd all arrive early, huddle in the cafe at the bottom of the building for a pre-meeting, and then look around to see what other teams/projects were also on deck with the city. It made me feel nostalgic — and older.
Enjoy the weekend, everyone.
Yesterday, the City of Toronto announced that it would be "unlocking" 7,000 new rental homes -- including 1,400 deeply affordable homes -- by doing two key things:
Waiving development charges on rentals
Providing a 15% reduction on property taxes
And by their estimates, the value of these benefits would be roughly $58k per new rental home:
Great news, right?
But wait, there's a catch. If you read the details, you'll see that in order for a project to be approved under this program, there is also a requirement to deliver at least 20% of the homes as affordable rentals.
So let's look at what this could mean.
Here is a chart comparing a market rental suite at $3,000 per month to a more affordable one at $1,500 per month:
Market | Affordable | Variance | |
Face Rent | $3,000 | $1,500 | ($1,500) |
Suite Size | $600 | 600 | 0 |
PSF Rent | $5.00 | $2.50 | ($3) |
Annual PSF Rent | $60 | $30 | ($30) |
NOI Margin | 70% | 70% | $0 |
Annual Net Rent | $42 | $21 | ($21) |
Cap Rate | 4.50% |
Both are assumed to be 600 square feet. In the case of the market suite, the per square foot (PSF) value is estimated at $933 psf, and the affordable suite is estimated at $467 psf. This represents a halving of the value (which makes sense because I halved the rents).
On a per unit basis (again, we're assuming 600 sf), this is a loss in value of about $280k. But since only 20% of the units would need to be "affordable", I multiplied this number by 0.2. The result is a per unit loss of approximately $56k.
What this means is that we're basically doing a whole bunch of stuff to get right back to the same place. Like, hey, we're not building enough rental housing and we're certainly not building enough affordable housing -- because the development margins are so dangerously thin -- so here's a credit of $58k per unit. But at the same time, here's a bill for $56k per unit.
What's the point, besides making it sound like we're doing something to create more housing? This program will do absolutely nothing to spur the creation of new rental housing.
Toronto has been making great progress when it comes to allowing more housing in its low-rise neighborhoods. We now allow laneway suites, garden suites, multiplexes, and soon we'll allow 6-storey apartments. But interestingly enough, there is one small part of the city that is looking to regress. This past summer, council asked planning staff to bring forward a zoning by-law amendment to remove garden suite permissions for some of the properties backing onto Craven Road, near Danforth and Coxwell.
Here's a community consultation flyer that went out to residents and that shows the affected properties:
4.50%
$0 |
PSF Value | $933 | $467 | ($467) |
Per Unit Impact | ($280,000) |
20% of Units | ($56,000) |
We've spoken about Craven Road before. It's a relatively odd street with a unique history. Its most obvious characteristic is that it's a kind of single-sided street. For the most part, there are homes on the east side of the street, but no homes on the west side. On the non-home side there is typically a garage, or the longest municipally-owned fence in the city. Here's some of the backstory on Craven Road's infamous fence (which occurs on a stretch further south), and below is what the study area in question looks like today:
So why remove the garden suite permissions here? The answer is to block housing. The people who live on Craven Road like it the way it is and don't want anyone to build new housing on the other side of the street. What's interesting about this is that it roughly mirrors what happened over a century ago. We couldn't figure out how to broker a deal between two adjacent streets and so we just said "screw it, let's build a really really long fence and call it a day."
Today we're saying, "yeah, we really need more housing in the city, but I dunno, somebody might get upset here." There is nothing sacrosanct about the old garages, or the fence, that line the west side of Craven. It is a street, proximate to a major subway station, that is missing homes on one entire side. It's low hanging fruit for infill housing. In fact, there's an easy argument to be made that garden suites aren't nearly enough density for a location like this. We should be encouraging a lot more.
But this is just my opinion. If you'd like to share yours, the City of Toronto is hosting a community meeting this week on September 19, 2024 from 7 - 830 PM. To participate, register here.
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