Our cost consultant, Finnegan Marshall, gave our team a presentation today on what's happening with construction costs in Toronto and across Canada. I've said this before, but hard costs are no joke right now.

One of the areas that they focused on was the impact that inclusionary zoning is likely to have on development economics here in Toronto. To illustrate the point, a sample high-rise condominium pro forma was used. Think something in the 30-35 storey range.

Assuming a requirement of 10% affordable (the policy details are still TBD), there is going to be a real cost to development pro formas that will need to be somehow paid for.

One school of thought is that land prices will simply adjust downward. In this case, the landowner would be the one paying. I don't think this will be the case (land prices tend to be sticky), but if they were to adjust downward, it would need to drop by $44 per square foot buildable to maintain the project's margins in this example. (That's $13.2 million on a 300,000 sf project.)

If, on the other hand, the price of the remaining market rate condominium suites were to increase to offset the cost of the affordable component, they would need to increase by $91 per square foot. This translates, in the above example, into a sticker price increase of approximately $60,000 per suite.

These numbers are, of course, not exact. That is not the point of this post. Every project is different. But hopefully it gives you an idea of some of the levers that will invariably need to be pulled when inclusionary zoning comes into force.

My sense is that this latter scenario is more likely to happen. I have yet to see land prices adjust downward in the face of rising costs. So all of this is likely to be bad for broad-based affordability, but good if you want to be bullish on market rate home prices.

This is a good follow-up to my recent post about the barriers to developing mid-rise here in Toronto. I have just learned (thanks to Michael Mortensen) that Vancouver has proposed some specific zoning changes that are intended to increase the supply of new rental housing.

Oddly enough, some of these proposed changes are consistent with what I put forward in my post and include 1) streamlining the development approvals process and 2) simplifying the allowable built form. i.e. Fewer step-backs.

Here's a capture from the report that went to City Council:

The report is dated May 2020 and I truthfully don't know the current status of these proposed changes. I'm sure Michael would have all of the details. But regardless, the report very clearly acknowledges that lengthy entitlement timelines are a barrier to new rental housing, as are more complicated building forms. Speed and simplicity can go a long way.

Our cost consultant, Finnegan Marshall, gave our team a presentation today on what's happening with construction costs in Toronto and across Canada. I've said this before, but hard costs are no joke right now.

One of the areas that they focused on was the impact that inclusionary zoning is likely to have on development economics here in Toronto. To illustrate the point, a sample high-rise condominium pro forma was used. Think something in the 30-35 storey range.

Assuming a requirement of 10% affordable (the policy details are still TBD), there is going to be a real cost to development pro formas that will need to be somehow paid for.

One school of thought is that land prices will simply adjust downward. In this case, the landowner would be the one paying. I don't think this will be the case (land prices tend to be sticky), but if they were to adjust downward, it would need to drop by $44 per square foot buildable to maintain the project's margins in this example. (That's $13.2 million on a 300,000 sf project.)

If, on the other hand, the price of the remaining market rate condominium suites were to increase to offset the cost of the affordable component, they would need to increase by $91 per square foot. This translates, in the above example, into a sticker price increase of approximately $60,000 per suite.

These numbers are, of course, not exact. That is not the point of this post. Every project is different. But hopefully it gives you an idea of some of the levers that will invariably need to be pulled when inclusionary zoning comes into force.

My sense is that this latter scenario is more likely to happen. I have yet to see land prices adjust downward in the face of rising costs. So all of this is likely to be bad for broad-based affordability, but good if you want to be bullish on market rate home prices.

This is a good follow-up to my recent post about the barriers to developing mid-rise here in Toronto. I have just learned (thanks to Michael Mortensen) that Vancouver has proposed some specific zoning changes that are intended to increase the supply of new rental housing.

Oddly enough, some of these proposed changes are consistent with what I put forward in my post and include 1) streamlining the development approvals process and 2) simplifying the allowable built form. i.e. Fewer step-backs.

Here's a capture from the report that went to City Council:

The report is dated May 2020 and I truthfully don't know the current status of these proposed changes. I'm sure Michael would have all of the details. But regardless, the report very clearly acknowledges that lengthy entitlement timelines are a barrier to new rental housing, as are more complicated building forms. Speed and simplicity can go a long way.