Earlier this week I saw the Chief Planner of Toronto, Jennifer Keesmaat, tweet this out:

New buildings shouldn’t maximize the envelope prescribed by guidelines, but employ creative designs within it. pic.twitter.com/l7axVB4Hke

— jennifer keesmaat (@jen_keesmaat) March 3, 2016

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I responded with the below quote retweet because I figured I should probably devote a blog post to this topic and not just a tweet.

🤔 https://t.co/WqdaCCWkNi

— Brandon G. Donnelly (@donnelly_b) March 3, 2016

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Now, I don’t know for sure, but I am guessing that her tweet was in response to the criticism from architects and developers that Toronto’s design guidelines are creating homogenous architectural outcomes. Some people – and I’ve written about this before on ATC – believe they’re too prescriptive.

So today I’d like to talk about why playing creatively within the guidelines/zoning envelope, particularly at the mid-rise scale, is a lot easier said than done.

Generally speaking, the value of land is dependent on what you can do with it or, in this case, what you can build on it.

If all you could do was plant things on it, then the value of the land would be correlated with crop yields. If on the other hand you could build a building, it would be correlated, at least in theory, with the amount of space you could build and the rents you could charge for that space.

Of course, this isn’t a perfect science. That’s why I said “in theory.”

Landowners obviously want to maximize the value of their asset when it comes time to sell. So they, along with their brokers, will naturally try and stretch what is possible with the land. Why else do you think the best neighborhoods seem to magically grow new boundaries?

When you combine this with the fact that mid-rise buildings are inherently less efficient to build and with the fact that their smaller size creates diseconomies of scale, it can be exceptionally difficult to find development sites where the numbers make any sort of financial sense. That is, even if you “maximize the envelope” and push rents or sale prices.

So, with all due respect, not maximizing the envelope is almost unthinkable, unless you somehow managed to get a bargain on the land.

Many of you will likely respond in the comments saying that all of this is simply a result of real estate developers being greedy capitalist pigs. But what we are talking about is no different than in any other competitive business environment. 

Developers rent and sell products – albeit products that take an incredibly long time to make and bring to market. To make those products, there are a many costs, ranging from the cost of land to the cost of drawings. But hopefully within all of those numbers sits a profit margin that makes sense given the amount of work and risk that the developer has taken on. 

Put differently, telling developers not to maximize the envelope is like telling a pizza maker to throw out 10-15% of her dough before she makes every pizza – even though she already (over)paid in full for the dough.

If you’ve ever created a development pro forma, you’ll know that it’s not easy getting the numbers to work when you’re operating in a competitive market. This is not a knock against creative design. Trust me, I am a design snob. This is just business.