As a follow-up to last week's post about giving free land to the City of Toronto, I am now thrilled to report that, today at 12:14 PM, we received our building permit!
Some of you were keen to hear about what happened following the post. So here's the update. I published the original post last Wednesday. And to be honest, it received far more attention than I was expecting.
On Thursday morning I received a call from the city. They weren't thrilled about my post, but were very helpful and said that they would ensure the conveyance happened immediately. It then got done before noon that same day.
Planning then sent a note to buildings saying that the permit was ready for issuance. Yay. Buildings acknowledged that they were working on it, and on Monday of this week we received a summary of the outstanding fees and the instructions for the wire transfer.
We paid the fees immediately and on Tuesday we received a payment receipt from the city. Then today -- Wednesday -- we received the building permit. So it was exactly one week from post to permit. A big thanks to everyone who helped to finally move this forward.
Hopefully it's clear that last week's post came strictly from a place of prolonged frustration. I wasn't trying to be mean. Our lawyer reminded me, after the post, that we've actually been working on this land conveyance for over 2 years.
As a follow-up to last week's post about giving free land to the City of Toronto, I am now thrilled to report that, today at 12:14 PM, we received our building permit!
Some of you were keen to hear about what happened following the post. So here's the update. I published the original post last Wednesday. And to be honest, it received far more attention than I was expecting.
On Thursday morning I received a call from the city. They weren't thrilled about my post, but were very helpful and said that they would ensure the conveyance happened immediately. It then got done before noon that same day.
Planning then sent a note to buildings saying that the permit was ready for issuance. Yay. Buildings acknowledged that they were working on it, and on Monday of this week we received a summary of the outstanding fees and the instructions for the wire transfer.
We paid the fees immediately and on Tuesday we received a payment receipt from the city. Then today -- Wednesday -- we received the building permit. So it was exactly one week from post to permit. A big thanks to everyone who helped to finally move this forward.
Hopefully it's clear that last week's post came strictly from a place of prolonged frustration. I wasn't trying to be mean. Our lawyer reminded me, after the post, that we've actually been working on this land conveyance for over 2 years.
Currently, we are on hold and waiting to pour a number of columns on the ground floor because the city has not yet issued our above-grade building permit. And the reason the city has not issued our above-grade building permit is because we have not yet conveyed our parkland dedication land to the city. Frustratingly though, we have been ready to convey this land for over a year! We simply need the city to allow us to give them this free land. To date, we have meticulously documented at least 3-pages of follow-ups and back-and-forth emails as we try our best to do this.
I’ve been doing this long enough that this isn’t surprising or unusual. But it remains deeply maddening. Younger people on the team can’t believe that this is par for the course. On top of this, the city continues to charge interest on the fees that are payable upon issuance of the first above-grade building permit. The result is an insane dynamic where the city can delay things as long as it wants and then charge us, and all other developers, interest on its own delays! I mean, is it any wonder that housing keeps getting more expensive in this city?
During the last mayoral election, some candidates were quick to promise that, if elected, the city itself would start building affordable housing. This, I'm sure, sounded good to most. Toronto needs more affordable homes. But for all of us involved in the building of buildings, it was frankly impossible to imagine. If the city takes this long to accept free land from developers, how could it possibly build anything?
In the wake of Bill 23, there has been a lot of discussion and concern around development charges and parkland dedication revenues. At a high level, the concern is that the proposed changes will reduce the amount of money that cities are able to collect from developers, and that this will exacerbate any existing funding shortfalls and possibly force municipalities to do things like raise property taxes. In the case of Toronto, the estimated figure is about $230 million of lost revenue per year.
For all intents and purposes, this is objectively true. Bill 23 includes changes that will reduce the amount of revenue that cities are able to collect when new stuff is being built. Here is one such example:
New sections 4.1, 4.2 and 4.3 provide, respectively, for exemptions from development charges for the creation of affordable residential units and attainable residential units, for non-profit housing developments and for inclusionary zoning residential units.
This makes for great headline fodder: "Bill 23 is bad, it is going to reduce city revenues by $X million, your property taxes may need to go up, so you should be deeply upset about this." Hmm. We should talk about this. I'm not going to suggest that Bill 23 is entirely perfect. But I do think it is important to consider two important facts when it comes to things like development charges.
Firstly, the above exemption (to use just one example) is specifically related to affordable and attainable housing. It is not a reduction in DCs for the sake of reducing DCs. It is an attempt to recognize that we need more affordable/attainable housing and so maybe we should do things that make it easier and less costly to build it. And this brings me back to a point that I frequently make on this blog, which is that we can talk all we want about the need for more affordable housing, but at the end of the day it comes back to this: Who is going to pay for it? There is no such thing as a free lunch.
The common rebuttal to exemptions like this is that developers will always profit maximize and price their housing at the most the market will bear. In other words, there is no evidence that developers will pass on any cost savings to the end consumer. But this is not entirely true. For developers, pricing a project is typically a cost-plus exercise: how much is this going to cost to build and what do I need in revenue in order to hit my required returns?
When costs go down, it reduces what you need to make a project feasible. This in turn reduces developer risk, because there is always a very real question of absorption. The more you push pricing, the more you slow market absorption. So you might actually be better off selling for less, more quickly. An example of this line of thinking is when condominium developers choose to sell 100% of their inventory upfront as opposed to holding some back with the expectation that prices will increase in the future. Doing this means that you value certainty over profit maximization.
Development charges are fees collected from developers at the time a building permit to help pay for the cost of infrastructure required to provide municipal services to new development, such as roads, transit, water and sewer infrastructure, community centres and fire and police facilities.
Put differently, development charges are based on the idea that growth should pay for growth. When you build something new you create additional servicing demands, and so developers should pay for whatever incremental needs their projects are creating. This is, of course, fair. However, it is not the intent that growth pays for existing services. i.e. Ones that would be required regardless of whether there was the presence of development.
So in theory, if new development were to shut off entirely and if development charge revenue were to go to $0, there shouldn't be any issues funding the existing services. And in theory, nobody should be complaining about this lost revenue, because there is actually no need for this additional revenue. There is no growth to fund and all existing services are being adequately funded by the residents who are already there and using them.
Of course, not all city services are self sustaining. Public transit, for instance, typically requires subsidies. Ridership fares aren't enough to pay for operations, and this shortfall got understandably a lot worse during the pandemic. But is this a growth-related problem or is it an existing-resident problem? I mean, technically the problem is notenough riders. So isn't that kind of the opposite of growth related? More people would be a benefit right now.
In any event, the point I am raising today is that there is a right way and a wrong way to complain about lost development charge revenue. The wrong way is thinking, "ah, this lost revenue is going to impact my quality of life and the existing city services that I enjoy. I may have to pay higher property taxes." The relevant points for this particular discussion should not be that there's an operating budget shortfall or that existing taxpayers maybe can't afford to pay.
The more valid way to complain would be to say, "hey, these reduced development charges are going to make it difficult to fund the growth-related upgrades needed to support new and more housing in my community. And we need more housing!" Because if the concern is not actually this second one, then the headlines are a great big red herring. We have a larger financial problem on our hands that we are not speaking about.
Currently, we are on hold and waiting to pour a number of columns on the ground floor because the city has not yet issued our above-grade building permit. And the reason the city has not issued our above-grade building permit is because we have not yet conveyed our parkland dedication land to the city. Frustratingly though, we have been ready to convey this land for over a year! We simply need the city to allow us to give them this free land. To date, we have meticulously documented at least 3-pages of follow-ups and back-and-forth emails as we try our best to do this.
I’ve been doing this long enough that this isn’t surprising or unusual. But it remains deeply maddening. Younger people on the team can’t believe that this is par for the course. On top of this, the city continues to charge interest on the fees that are payable upon issuance of the first above-grade building permit. The result is an insane dynamic where the city can delay things as long as it wants and then charge us, and all other developers, interest on its own delays! I mean, is it any wonder that housing keeps getting more expensive in this city?
During the last mayoral election, some candidates were quick to promise that, if elected, the city itself would start building affordable housing. This, I'm sure, sounded good to most. Toronto needs more affordable homes. But for all of us involved in the building of buildings, it was frankly impossible to imagine. If the city takes this long to accept free land from developers, how could it possibly build anything?
In the wake of Bill 23, there has been a lot of discussion and concern around development charges and parkland dedication revenues. At a high level, the concern is that the proposed changes will reduce the amount of money that cities are able to collect from developers, and that this will exacerbate any existing funding shortfalls and possibly force municipalities to do things like raise property taxes. In the case of Toronto, the estimated figure is about $230 million of lost revenue per year.
For all intents and purposes, this is objectively true. Bill 23 includes changes that will reduce the amount of revenue that cities are able to collect when new stuff is being built. Here is one such example:
New sections 4.1, 4.2 and 4.3 provide, respectively, for exemptions from development charges for the creation of affordable residential units and attainable residential units, for non-profit housing developments and for inclusionary zoning residential units.
This makes for great headline fodder: "Bill 23 is bad, it is going to reduce city revenues by $X million, your property taxes may need to go up, so you should be deeply upset about this." Hmm. We should talk about this. I'm not going to suggest that Bill 23 is entirely perfect. But I do think it is important to consider two important facts when it comes to things like development charges.
Firstly, the above exemption (to use just one example) is specifically related to affordable and attainable housing. It is not a reduction in DCs for the sake of reducing DCs. It is an attempt to recognize that we need more affordable/attainable housing and so maybe we should do things that make it easier and less costly to build it. And this brings me back to a point that I frequently make on this blog, which is that we can talk all we want about the need for more affordable housing, but at the end of the day it comes back to this: Who is going to pay for it? There is no such thing as a free lunch.
The common rebuttal to exemptions like this is that developers will always profit maximize and price their housing at the most the market will bear. In other words, there is no evidence that developers will pass on any cost savings to the end consumer. But this is not entirely true. For developers, pricing a project is typically a cost-plus exercise: how much is this going to cost to build and what do I need in revenue in order to hit my required returns?
When costs go down, it reduces what you need to make a project feasible. This in turn reduces developer risk, because there is always a very real question of absorption. The more you push pricing, the more you slow market absorption. So you might actually be better off selling for less, more quickly. An example of this line of thinking is when condominium developers choose to sell 100% of their inventory upfront as opposed to holding some back with the expectation that prices will increase in the future. Doing this means that you value certainty over profit maximization.
Development charges are fees collected from developers at the time a building permit to help pay for the cost of infrastructure required to provide municipal services to new development, such as roads, transit, water and sewer infrastructure, community centres and fire and police facilities.
Put differently, development charges are based on the idea that growth should pay for growth. When you build something new you create additional servicing demands, and so developers should pay for whatever incremental needs their projects are creating. This is, of course, fair. However, it is not the intent that growth pays for existing services. i.e. Ones that would be required regardless of whether there was the presence of development.
So in theory, if new development were to shut off entirely and if development charge revenue were to go to $0, there shouldn't be any issues funding the existing services. And in theory, nobody should be complaining about this lost revenue, because there is actually no need for this additional revenue. There is no growth to fund and all existing services are being adequately funded by the residents who are already there and using them.
Of course, not all city services are self sustaining. Public transit, for instance, typically requires subsidies. Ridership fares aren't enough to pay for operations, and this shortfall got understandably a lot worse during the pandemic. But is this a growth-related problem or is it an existing-resident problem? I mean, technically the problem is notenough riders. So isn't that kind of the opposite of growth related? More people would be a benefit right now.
In any event, the point I am raising today is that there is a right way and a wrong way to complain about lost development charge revenue. The wrong way is thinking, "ah, this lost revenue is going to impact my quality of life and the existing city services that I enjoy. I may have to pay higher property taxes." The relevant points for this particular discussion should not be that there's an operating budget shortfall or that existing taxpayers maybe can't afford to pay.
The more valid way to complain would be to say, "hey, these reduced development charges are going to make it difficult to fund the growth-related upgrades needed to support new and more housing in my community. And we need more housing!" Because if the concern is not actually this second one, then the headlines are a great big red herring. We have a larger financial problem on our hands that we are not speaking about.
