When you're preparing for a panel discussion, one of the things you usually do is have a pre-meeting with all of the participants. The purpose of this meeting is, of course, to get to know everyone and decide on what you're going to talk about. Everything then gets buttoned up and you have the actual panel.

But one of the things I've been feeling lately is that oftentimes the pre-meeting is more interesting than the actual panel. And that's because everyone is more relaxed and everyone is engaged in a genuine discussion that hasn't been pre-meditated. Nobody wants to hear boring and overly-scripted answers. Natural and free-flowing discussions are so much more engaging.

So I'm going to try and keep this in mind and not put on a sucky panel next week at the land & development conference (which, by the way, will be in person). I'm moderating a panel on innovations in project design, delivery, and building operations. If you'd like to join, you can register over here.

Colliers recently hosted a webinar about inclusionary zoning here in Toronto. On the panel was Jeremiah Shamess (SVP at Colliers / moderator), David Bronskill (partner at Goodmans), Giulio Cescato (senior planner at IBI Group), and Richard Witt (principal at BDP Quadrangle). I wasn't able to attend (either because of a critical meeting or because I was off attending to a gluttonous lunch burrito), but the slides are now available online. I was going through them this morning and I came across this chart from NBLC:

What you are seeing here is a comparison between a typical market development before IZ and a development after IZ. As you can see, soft costs remain the same, hard costs remain the same, and the profit margin remains the same. What changes is the overall revenue. Market revenue goes down because you now have fewer market-rate units and a new IZ revenue is added, which is the revenue generated from the addition of affordable units to the project.

But when you add up the market revenue and the IZ revenue, you don't get back to the same economic equilibrium. In other words, there has been a destruction of value, and so something is going to have to give in order for this project to pencil and remain financeable. Otherwise, no development will take place. This shortfall is the red box area in the above graph that says, "impact of inclusionary zoning."

We have discussed this red box gap a lot on the blog, because how you think this gap gets filled might determine how you think of inclusionary zoning as a policy tool. In this particular instance/graph, the gap is filled by a reduction in the value of the land. Everything else remains static. So what is effectively happening in this model is that the landowner, who has decided to sell their land to the above developer, is now the one who has to indirectly pay for this new affordable housing.

This may seem like a sensible way to go about it. I mean, people who own land must be rich. Let's make them pay. But is this actually what is going to happen in practice and over extended periods of time? Soft costs -- things like development charges -- are always going up. Why aren't land values perpetually declining in order to offset these additional costs? It is largely because market revenues have also been increasing. Housing keeps getting more expensive. And that is what has been keeping the market going.

I suspect that over an extended period of time, the same thing will happen here.

I am moderating a panel at the Toronto Real Estate Forum later this year (it's on December 2 to be exact). The topic is innovation in development. There is a great panel of speakers (more info here) and the plan right now is to cover everything from new design and construction approaches to the rise of crypto and blockchains. Topics that are all near and dear to this blog.

But we are still in the early stages of planning and I haven't yet figured out what the questions to the panel will be. So I thought it would be interesting to hear from all of you: What would you say are the most important topics to cover when it comes to innovation in development? What's next for our industry, or what should be next for our industry?

If you have any thoughts, please leave a comment below. That way everyone can see them. Supposedly this is one of the most asked for topics at the real estate forum, and so it's clearly top of mind for many people.