Yesterday it was announced that, starting January 1, 2015, the Ontario Building Code would be changed to allow wood frame buildings up to six storeys. Previous to this, the highest you could go was 4 storeys. 

This change has been in the works for a number of years. And it’s already allowed in most of Europe and in other places in Canada, such as British Columbia. So it’s nice to see this finally happen here in Toronto.

The reason this is a big deal, and worthy of a blog post, is that it changes the cost structure for mid-rise buildings. Simply put, wood frame buildings are cheaper to construct compared to reinforced concrete and other buildings materials.

Some people think this just means developers will make greater returns. But I don’t think that’s the case (see microeconomics). The real opportunity here is to spur mid-rise development on sites that – before this change – would have been previously un-developable. That is, you just couldn’t make the numbers work.

As much as mid-rise buildings make a lot of sense from an urban design standpoint, it’s not always easy to find good mid-rise development sites. Mid-rise buildings are generally less efficient to build compared to towers and you have a lot of fixed costs that don’t scale down just because you’re doing a smaller project.

So what this change in cost structure will, hopefully, do is allow more product to enter the market. And since many big urban centers operate with perpetual supply deficits – precisely because it’s often so hard to build – this should actually help with affordability.