PEEL REGION INCENTIVES FOR INTENSIFICATION-OUTLINE
PHASE 1 REPORT – ISSUES AND OPPORTUNITIES
Intensification Incentives in Peel Region Phase One: Issues and Opportunities
The Regional Municipality of Peel
March 2010
Intensification Incentives in Peel Region Phase One: Issues and Opportunities
The Regional Municipality of Peel
TABLE OF CONTENTS
EXECUTIVE SUMMARY...... 1
1.0 INTRODUCTION...... 4
2.0 POLICY CONTEXT...... 7
3.0 UNDERSTANDING INTENSIFICATION...... 12
4.0 INTENSIFICATION IN PEEL...... 16
5.0 ISSUES: BARRIERS TO INTENSIFICATION...... 28
6.0 OPPORTUNITIES: EXAMPLES AND IMPACTS OF INTENSIFICATION INCENTIVES...... 31
7.0 CONCLUSION ...... 43
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities March 2010 EXECUTIVE SUMMARY
Peel Region has initiated a review of its Official Plan, a process that is structured around a sustainable development framework which will enable the integration of environmental, social, economic and cultural imperatives into the future plan. Intensification refers to the increasingly efficient (re)use of land that occurs through the development of medium and higher-density land uses within central urban communities. Properly planned, communities as they become intensified can be highly sustainable, offering a rich quality of life for its residents and significant environmental and cost benefits over suburban forms of development. Intensification relates directly to each of these imperatives and virtually every aspect of long term planning policies in Peel Region.
N. Barry Lyon Consultants Limited (NBLC) was retained by the Peel Region to undertake a study of incentives that may be utilized by the Region and lower tier municipalities to encourage residential and employment development in identified intensification areas. The purpose of the project is to “explore options available to the Region and area municipalities to promote and encourage residential intensification in order to meet or exceed the targets in the Growth Plan and to examine feasible approaches to incite employment intensification in the Regional Municipality of Peel”.
This report examines the policy, market and development issues that drive medium and high- density developments. It examines the tools that are currently in use in Ontario and their relative performances. Finally, the study examines the barriers to intensification and key issues to help frame more detailed analysis and policy recommendations in Phase Two of the study. These key issues are summarized in the following:
• Peel Region and its local municipalities have captured a significant amount of growth in townhouse and higher density residential formats over the past 8 years. In fact, the Region has attracted more apartment projects in intensification areas than any other 905 community during this period.
• Virtually all development within intensification areas has come in the form of residential townhouse, apartment condominium development, senior’s retirement rental and market rental buildings. New high-density office development has not occurred in the downtown areas of any of the local municipalities due, in part, to the costs of providing underground parking. The majority of this investment has been oriented to the Airport Corporate Centre and Heartland employment areas.
• Attracting development to Peel is not the issue. How to manage, prioritize and direct the investment and shape market forces to ensure growth is directed to the Urban Growth Centres and other intensification areas is, by far, the greatest challenge.
• It is unlikely that development will return to levels experienced between 2001 and 2007 soon. Given the lack of demand, what take-up can we expect from incentive programs? If the take-up is estimated to be limited (even with incentives) does this have a bearing on program offerings? Should incentives be more aggressive, understanding that they would
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 1 | Page essentially subsidize land owners and/or developers or should the market be allowed to take its course?
• The Region of Waterloo has developed a Regional Re-urbanization Community Improvement Plan that gives the Region the power to acquire and consolidate lands for redevelopment within their Central Transit Corridor. The program is designed to target brownfields, or underutilized lands that may not otherwise be redeveloped. What similar role could a Regional CIP play in the development of Intensification areas on Peel’s Transit Corridors or are land values so strong that municipal intervention is unnecessary?
• Exemptions of development charges are, by far, the best method of incentifying intensification efforts in Greater Toronto Area (GTA) communities, especially those that have significant market issues in their downtown cores. For the Region of Peel, this is also the most costly approach. A closer examination of development charges for projects in compact communities that are more efficient and sustainable than suburban development should be analyzed. Are “scaleable” development charges feasible?
• The Region of Peel is already facing significant financing issues with respect to growth related expenses. Development charge income has declined substantially as the markets have slowed. This reduction in revenue is expected to impact heavily on future growth related expenses. In the face of this, how do the costs of incentives balance with the need to increase development charge revenue? Does this suggest that very specific response is required that targets key areas?
• Should incentives be applied in all nodes and areas identified for intensification? Or should, given the fiscal constraints and likely limited take-up, incentives be focused on areas that will benefit the most from increased residential populations such as the downtown areas where business and transit ridership should benefit more than a suburban site that is less dependent on pedestrian traffic?
• Low cost loans for residential construction have proven to be successful in Hamilton. Would low cost loans to developers of office developments provide an incentive to development in Peel? Could these loans be properly secured and what risks do they present to local and or regional governments?
• Section 37 of the Planning Act can be used to allow developers to exchange density for community benefits. For the City of Toronto, this has been a useful tool in generating additional revenue. Developers, in general, during strong market periods, have been willing to pay these charges given the very high demand and revenue for condominium apartments. The major criticism to this has been the uncertain approach to calculating the charges. In Peel, where demand is weaker and development charges and parking requirements higher, is it realistic to assume that developers will pay for additional density when margins are already thin? How do you reconcile incentifying development through the waiving of fees or charges in some areas and apply additional charges in others?
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 2 | Page • Conditional zoning would allow a developer to have a site pre-zoned subject to conditions such as design, payment of fees, and delivery of certain community benefits, but may create a flood of applications in areas where high-density may be unfeasible. Could conditional zoning techniques assist in intensification efforts?
• Is there a funding cap that needs to be employed? How do regional dollars get distributed equitably among area municipalities in incentive programs when each municipality has different needs, market demands and land economic issues? The City of Mississauga’s development charges are almost $5,000 less for a large apartment than Brampton’s. How does this get reconciled in the equation? Can a regional evaluation matrix for assessing the reward of development charge grants be paralleled to Brampton’s and still be equitable to Caledon and Mississauga?
• Are reduced parking standards a viable way of encouraging intensification, especially in the absence of high order transit?
• Even with financial incentives, intensification efforts, especially in downtown Brampton and Bolton, may be difficult given issues with lot assembly. Is there a role that the Region or the local municipalities could play in assisting in redevelopment efforts that provide significant public benefits, but are driven by a private developer?
• Should municipalities take a leadership role in assisting with land assemblies through its powers of expropriation where projects are deemed to aid in intensification efforts for either employment or residential developments such as was the case in Dundas Square in the City of Toronto?
• Can the environmental benefits associated with Leadership in Energy and Environmental Design (LEED) certified buildings be quantified in terms of water and waste water reductions, to justify a regional development charge credit?
• How can we evaluate the extensive non-financial benefits of sustainable compact developments against the cost of financial incentives?
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 3 | Page 1.0 INTRODUCTION
1.1 Purpose of this Study
This study and its findings inform the Peel Region Official Plan Review (PROPR) process. The PROPR is being guided by a sustainable development framework which provides for integration of the environmental, social, economic and cultural imperatives into the future Plan. Intensification relates directly to each of these imperatives. How and where Peel Region intensifies is a core issue to consider in the PROPR. The purpose of the study is to “explore options available to the Region and area municipalities to promote and encourage residential intensification in order to meet or exceed the targets in the Growth Plan, and to examine feasible approaches to incite employment intensification in the Regional Municipality of Peel1”.
To this objective, this study is conducted in two Phases. Phase One, is this report, which provides:
• A review of the existing policy environment that shapes intensification; • A review of the dynamics that drive intensified residential and employment uses, including mixed-use developments; • Peel Region’s experience with higher density forms of development; • Barriers to intensification; • Tools currently in use to encourage intensification; and, • Issues and opportunities to consider for the Phase Two Report.
The Phase Two Report builds on the outcomes of the Phase One report to examine:
• The rational to encourage intensification in Peel Region as it relates to the PROPR sustainability framework; • An analysis of each area identified in Peel Region for intensification; • An analysis determining the need for financial incentives to encourage intensification; • Recommended strategies to inform the PROPR process; and, • Policy recommendations for consideration in the PROPR process with respect to the use of incentives for intensification. 1.2 Defining Intensification
Intensification refers to the increasingly efficient (re)use of land that occurs through the development of higher density land uses within urban areas. Higher density is a relative term. What may be considered intensification in Niagara Region may be different than that in the City of Toronto. In Peel Region, most would agree that intensified forms of development include townhouse and apartment developments. Most would also consider multi-level office or mixed-use as intensification within the context of Peel Region.
1 Consulting Services for Managing Growth-Incentives for Intensification Project, Terms of Reference.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 4 | Page
Figure 1- Port Credit Village - Live Work Development
The growth that drives intensification is driven by a broad range of ever shifting socio-economic factors. While geography and economics underpin the foundations of urban development and intensification in Ontario, various jurisdictional bodies have developed and invested in a variety of tools/programs with the objective of encouraging and directing intensification.
Intensification, as a process, can be nurtured, directed and encouraged through a broad range of public policy and other incentives, including:
• Investment in infrastructure, including; roads, public transit, water, and other utilities; • Investment in community amenities/facilities, such as; parks, public spaces, schools, universities, libraries, sports facilities, and cultural attractions and destinations; • Financial incentives, such as grants, loans, and tax exemptions; • Planning policy, including that which dictates land use, design, height and density; and, • Public sector leadership and authority, such as the right to expropriate and acquire lands for strategic municipal purposes.
The Provincial planning document, Places to Grow: the Growth Plan for the Golden Horseshoe, establishes a timetable and target for the intensification process for much of Southern Ontario. These policy initiatives put a new imperative on municipalities to do what they can to bring higher density forms of development into their communities.
While the majority of intensification tools available are exploited at the local municipal level, there is a role for upper-tier municipalities to play in the Community Improvement Plan process. This role has become more prominent with the recent amendment to the provincial Planning Act, which now recognizes upper-tier municipalities in Community Improvement Planning in terms of financial support of lower tier initiatives and in areas such as:
1. Infrastructure that is within the upper-tier municipality’s jurisdiction. 2. Land and buildings within and adjacent to existing or planned transit corridors that have the potential to provide a focus for higher density mixed-use development and redevelopment. 3. Affordable housing.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 5 | Page Furthermore, Regions can also incentify intensification through planning documents that properly anticipate development, provide clear rules and certainty to the development community, and provide guidance for lower-tier municipalities. A good example is the York Region 2031 Intensification Strategy, February 2009. 1.3 Study Approach
This report is based on the following steps:
• A review of the PROPR work that has been completed to date as well as the existing regional and local Official Plan Policies related to intensification. • Literature review of related research. • Mapping areas planned for intensification and overlaying historical residential and employment uses developments. • Undertaking a survey of Regional Governments and relevant policy efforts with respect to intensification incentives. • Undertaking a detailed, site by site analysis of each intensification node to examine long term potential for intensification including identifying regional lands. • Proforma evaluations and scenario analysis of prototypical developments. • Interviewing stakeholders including local municipal and regional staff, developers, and consultants working in Peel Region.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 6 | Page 2.0 POLICY CONTEXT
2.1 Provincial Context
The new Provincial Policy Statement (PPS), approved in 2005, provides policy direction on matters of provincial interest related to land use planning and development, and sets the foundation for regulating the development and use of land. One of the core principles of the PPS is managing and directing land use in the Province to achieve efficient development and land use patterns, with particular attention to intensification of residential and employment uses.
Further to the PPS, the Province of Ontario approved Places to Grow: the Growth Plan for the Greater Golden Horseshoe in 2006 in an attempt to co-ordinate growth management efforts in the Greater Golden Horseshoe (GGH), which includes the Region of Peel. A core principle of Places to Grow is the more efficient use of infrastructure and the building of more sustainable urban communities through the intensification of land use. Places to Grow establishes the following targets relating to intensification in Peel Region.
• It establishes boundaries for urban growth;
• It establishes Mississauga City Centre and Downtown Brampton as Urban Growth Centres, with a target of 200 residents and/or jobs per hectare by 2031;
• Major transit station areas and intensification corridors as designated in official plans and should be planned to achieve increased residential and employment densities that support and ensure the viability of existing and planned transit service levels, with a mix of residential, office, institutional, and commercial development wherever appropriate.
• A minimum of 40 percent of all growth must occur within the established built-up area for the Region by 2015, and each year thereafter; and,
• A target of 50 residents and jobs per hectare must be planned for in designated Greenfield areas. 2.2 Existing Regional and Municipal Policy Context
The current Region of Peel’s and the Official Plans of Mississauga, Brampton and Caledon all recognize the importance of intensification. Within the current Regional Official Plan, growth and development that takes place in an efficient and effective manner is recognized as one of the five general principles of the plan. Furthermore, part of the general policies for the urban system, is the provision of transit-supportive opportunities for redevelopment, intensification and mixed-use development.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 7 | Page Similar goals and policies are present in the three local Official Plans, including:
• Mississauga: One of the main goals of the plan is the “establishment of an urban form which is compact, efficient, comfortable, and supportive of transit”. The City’s Official Plan, as part of its residential policies, provides detailed direction regarding future intensification in the City, including location, density targets and general policies.
• Brampton: One of the six pillars of the City’s Official Plan is growth management. Within this pillar is the following objective: “Promote balanced land-use development that will accommodate population, housing and employment growth to 2031, through community block planning, higher density and mixed-use development in the Central Area and along major corridors and designating sufficient commercial lands”.
• Caledon: One of two principle objectives within the general policies section of the Town’s Official Plan is; “to encourage all forms of residential intensification in parts of built-up areas that have sufficient or planned infrastructure. 2.3 Peel Region Official Plan Review (PROPR)
The Peel Region Official Plan Review (PROPR) provides the opportunity to examine the pattern of intensification achieved under the current policy environment and adjust the approach within the context of Places to Grow and the imperatives of the Region. The sustainable development framework of the PROPR includes fifteen areas of focused study. This study informs the Managing Growth Focus Area but relates to virtually all other areas of study within the Official Plan review. Planning Tools, Transportation, Greenbelt Conformity, Agriculture, Water Resources, Energy, Housing, Employment Lands, Waste Management, Air Quality and Sustainability are all areas that will either, directly or indirectly benefit from proactive Regional Intensification policies for inclusion in the Official Plan.
The environmental benefits associated with intensified development are extensive. Intensified development forms make better use of land and infrastructure reducing the pressure for costly urban sprawl and the consumption of agricultural lands. At the same time, compact development facilitates pedestrian, cycling and transit travel, reducing car use and greenhouse gases. Medium and higher density office and residential buildings can also be constructed more efficiently from an energy consumption perspective than low density formats. From a social view point, compact communities can provide for closer human interaction which supports a sense of community and place. Opportunities to socialize are increased, streets are safer and investments are made. With less distance to travel and available transit services, access to health care and other services is more efficient and accessible. Concentrated populations also tend to attract retail and service commercial as well as entertainment uses satisfying both the economic and cultural imperatives of the framework. Municipalities also benefit from the more efficient delivery of services and increased tax assessment.
The benefits of compact communities and intensification go well beyond these examples. We can also benefit from the knowledge gained from poor examples of intensification. We understand better the impacts of excessive densities and their impacts on stable neighbourhoods. We know
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 8 | Page that an apartment tower can be as socially isolating as a suburban development. Planners also understand the importance of properly positioning density to promote street life and activity along with the benefits of properly mixing uses. These experiences and many others both locally and internationally, will help Peel Region shape and guide intensification towards truly sustainable communities. 2.4 Target Intensification Nodes
Places to Grow highlights the two Urban Growth Centres as well all Major Transit Station Areas and Intensification Corridors as the location of urban intensification in the Region. The Major Transit Station Areas and Intensification Corridors are to be designated in local and regional official plans.
The Region of Peel Official Plan designates Downtown Brampton and Mississauga City Centre as Regional Urban Nodes, which are to be the location of compact forms or urban development, providing a range and mix of housing, employment, recreation and entertainment uses. The Regional Official Plan also recognizes other nodes in the Region that are designated in local area municipal Official Plans.
The existing Mississauga Official Plan recognizes the Mississauga City Centre as the interim target area for intensification activity. However, the plan is currently under review. Based on the growth management work completed to date relating to the Official Plan review, intensification is to be targeted towards the City Centre, as well as to Major Nodes, Community Nodes, and Intensification Corridors. While office development is encouraged in these same nodes, additional employment intensification is also targeted towards designated Corporate Centres. The proposed Major Nodes and Community Nodes in Mississauga include:
• Hurontario “Uptown” – Major Node • Central Erin Mills – Major Node • Clarkson Village – Community Node (Traditional Village) • Port Credit – Community Node (Traditional Village) • Streetsville – Community Node (Traditional Village) • Malton – Community Node (Mall Based Node) • Meadowvale – Community Node (Mall Based Node) • Rathburn/Applewood – Community Node (Mall Based Node) • Sheridan – Community Node (Mall Based Node) • South Common – Community Node (Mall Based Node) • Dixie/Dundas – Community Node (New Corridor Based Node) • Lakeview - Community Node (New Corridor Based Node)
The existing City of Brampton Official Plan targets a variety of areas for residential and non- residential intensification. This includes the Central Area, which is made up of the Downtown, the Queen Street Corridor and Bramalea City Centre, as well as Transit Supportive Nodes and intensification corridors. The City is currently reviewing its Official Plan to conform to the Growth Plan. Based on a draft Official Plan amendment released in September 2009, focus areas for
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 9 | Page intensification within the City will continue to be the Central Area/Urban Growth Centre, Mobility Hubs (currently Transit Supportive Nodes), Major Transit Stations Areas (currently Transit Supportive Nodes) and primary and secondary intensification corridors (currently intensification corridors). The proposed Mobility Hubs and Major Transit Station Areas include:
Mobility Hubs • Queen Street and Main Street (Anchor) • Steeles Avenue and Hurontario Street (Gateway) • Steeles Avenue and Bramalea Road (Gateway) • Mt. Pleasant Go Station (Gateway)
Major Transit Station Areas (MTSAs) • Mississauga Road and Steeles Avenue • Hurontario Street and Ray Lawson Boulevard • Dixie Road and Queen Street • Bovaird Drive and Highway 410 • The Gore Road and Queen Street
The Town of Caledon does not recognize any intensification nodes or corridors in their existing Official Plan, with the exception of certain sites within the Town of Bolton. The Town is currently undertaking a Growth Plan conformity exercise, which is expected to offer more specific direction on intensification in the Town.
It should be noted that intensification corridors have purposely not been reviewed, due primarily to the large number of nodes indentified by the three Official Plans and the fact that large segments of intensification corridors are incorporated into the node boundaries. 2.5 Metrolinx Regional Transportation Plan
In November 2008, the Regional Transportation Plan for the Greater Toronto and Hamilton Area was adopted by the Board of Metrolinx, a provincially created agency with the mandate to improve the coordination and integration of all modes of transportation in the region.
The Regional Transportation Plan (RTP), titled The Big Move: Transforming Transportation in the Greater Toronto and Hamilton Area, supports all policies outlined in Places to Grow, including its focus on intensification. The RTP highlights Mobility Hubs (referred as Major Transit Station Areas in Places to Grow), Major Transit Station Areas (areas within a 500-metre radius or 10 minute walk to an existing or planned high-order transit), Anchor Hubs (major mobility hubs with importance to UGCs), and future higher-order Transit Corridors as the target areas for future urban intensification. Downtown Brampton, Mississauga City Centre, most GO Train stations within the Region, and Hurontario Street, Dundas Street, Burnhampthorpe Road, Queen Street and Steeles Avenue, are all included within the RTP under one of these designations.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 10 | Page Figure 2: Intensification Areas
Source: DMTI Spatial Can Map and N. Barry Lyon Consultants, City of Brampton Official Plan, 2006, Mississauga Plan 2009 and Town of Caledon Planning Department. Note: Numbers on map relate only to Phase 2 Report (October 2009).
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 11 | Page 3.0 UNDERSTANDING INTENSIFICATION
The factors that drive intensification are complex and often interdependent. In general, medium and higher density developments only locate where there is a strong enough market demand to not only sell/lease all units/space, but at a price that allows for acceptable developer profit. This market demand exists in areas that offer superior economic and social advantages to building owners, residents, and tenants. These advantages, whether they are building amenities, proximity to commercial services, entertainment, and/or public transit, are perceived to outweigh traditional suburban choices for both living and working, which typically include affordability, perceived safety, parking and space. 3.1 What Drives Residential Intensification?
The factors that drive medium and high-density development in the residential sector, while varying from one neighbourhood to the other, can be split into four general categories; affordability, transportation, proximity, and design & amenities.
3.1.1 Affordability
Affordability is by far the most significant determinant when buying a home, impacting on both the location and housing type chosen. The principal reason driving the strength of the GTA condominium industry is affordability. With only a few exceptions, the cost of condominium apartments in the GTA are significantly lower than other comparable housing forms. As of April 2009, the average cost of a resale single detached home in the GTA was $369,000 and $457,000 in the western GTA, while the average price of a resale condominium in the GTA was $247,000 and $226,000 in the western GTA.
For single person, young couple or empty nester a condominium apartment allows them to purchase only the amount of home they actually require.
As the land supply for lower density housing becomes increasing limited, pricing for these homes will rise. In comparison, the opportunities for higher density housing are much greater and can offer greater affordability in communities that offer a greater level of services and amenities.
3.1.2 Transportation
After affordability, transit that is part of an extensive network and offers frequent, continuous and low cost service is likely the most significant driver of intensification. Transit of this nature has far reaching influences on how people work and live. In the simplest terms, it relieves the requirement for many people to either own or use cars, representing significant personal financial and social benefits, as well as broader societal savings in terms of congestion, pollution, road maintenance, safety and other issues directly related to PROPR’s sustainability framework. In the GTA, only the Toronto Transit Commission (TTC) subway system meets these criteria.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 12 | Page Transit at lesser levels of service, such as GO Transit, or surface bus routes have a less powerful market influence.
Access to highways and major corridors is also an important contributor to market demand. Since a large proportion of the GTA population is unable to quickly and easily commute to work and to other frequent destinations via public transit, driving ease is also important. It is for this reason that most suburban high-density developments, including those in Peel Region, are located close to major highways.
3.1.3 Proximity to High Quality Neighbourhoods
A large part of the attraction of urban living with compact communities is that it allows for people to live in neighbourhoods that they might not otherwise be able to access due to affordability issues or the suitability of available homes. In downtown Brampton and Mississauga, new condominium developments will allow access to high quality residential living within walking distance to neighbourhood amenities. These neighbourhoods are highly attractive to some as they offer easy (walkable) access, not only to various transportation options as already discussed, but to a variety of other services and amenities, including:
• Cultural and social attractions; • Major institutions (ex. hospitals, colleges & libraries) • Sporting venues; • Bars and restaurants; • Employment districts; • Parks and public open space; • Recreational areas (ex. waterfronts and boardwalks) and, • A variety of commercial/retail services and conveniences.
3.1.4 Design & Amenities
The design and amenities offered by intensification developments themselves are also attractive to various buyer groups. Such things as; building architecture, security, concierge services, exercise and entertainment facilities, and unit finishes, all provide for greater convenience and a sense of exclusivity and prestige, often not associated with other housing forms. It should be noted that the international design competition for a major condominium development in Mississauga City Centre, and the eventual winning “Marilyn Monroe” design, played a large role in Figure 3 -The Creative Design of Fernbrooks Absolute Development Accelerates sales
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 13 | Page increasing the market acceptance of the area as condominium market as well as raising the average cost of units in the area.
3.1.5 Buyer Groups
Market demand for residential intensification products is driven by buyers and renters. There are four general buyer groups. Understanding their needs as buyers or renters provides some insight into what areas will successfully intensify.
• Empty nesters (55-75) and Retirees (75+) no longer in need of a large family home typically seek apartment living for its low maintenance, access to neighbourhood amenities and services, security and building facilities. Due to the wealth accrued over time and through previous ownership of real estate, these two buyer groups are able to afford more expensive units and prefer to live in surrounding neighbourhoods rather than downtown locations. These buyers prefer lower buildings in familiar neighbourhoods that offer a sense of prestige and community. Port Credit Village has attracted a strong component of this buyer group.
• First time buyers (25-35) are typically attracted to apartments due to the prospect of affordable homeownership. In many markets, condominium units are the only affordable housing choice for this buyer group. This buyer group typically purchase smaller units, located in downtowns and other vibrant urban communities, with emphasis on transit or walkability. Within this buyer group there are several sub groups, including singles, professional couples and divorcees. Single women are a new and growing market segment. Mississauga City Centre projects have drawn heavily from this sector.
• Move-up buyers (35-55) generally make up the smallest proportion of households living in apartments. This is generally due to their ability to afford other housing types and, because of families, greater indoor and outdoor space requirements, safety concerns and the need to live close to community facilities, such as schools, parks and community centres. There is some evidence that this buyer-group will grow as urban living becomes more accepted and as the product offered adapts. These buyers are typically second generation condo buyers and largely found in downtown Toronto.
• The final buyer group, which is almost exclusive to condominiums, are Investors. Those that purchase units and then rent them out, seeking to capitalize on the lack of rental units in the marketplace and the desire to live in certain areas. Investors are typically interested in purchasing smaller units that have lower purchase prices and can be rented out less expensively (and are more marketable). This was a strong sector of the Mississauga City Centre market.
The demand from all buyer groups is projected to increase over time, as the cost of low-density residential choices increases with limitations in supply, as the population ages and as condominium living becomes more accepted.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 14 | Page 3.2 Employment Intensification
There are a variety of factors that create market demand for high-density employment developments, i.e. offices (government and private sector) and research & development facilities, some of which are similar to those that create residential demand. Some of the factors include:
• Access to public transit for employees; • Access to highways, major road corridors and other major transportation facilities (airports, rail, etc.); • Parking; • Proximity to support services, similar businesses and basic commercial services; • Proximity to related institutions (hospitals and colleges); • Highly visible and exclusive/prestigious locations; and, • Relative affordability.
Based on these factors, the three areas where recent developments of this nature have occurred within the GTA are: Toronto (Downtown), which offer all of the factors with the exception of affordability; new suburban business parks, which offer only some of the factors but are typically the most affordable; and within existing suburban areas along major highway corridors, such as along the QEW in Oakville and Burlington and Highway 404 & 407 in Richmond Hill and Markham. There has been little to no new office development in suburban downtowns and nodes in the GTA (beyond those already mentioned), due to the lack of core factors and/or the cost advantage of competitive areas.
Demand from professional services, public sector, finance, technology, media and telecommunications businesses are underpinning new office developments in the GTA. Mississauga City Centre, and to a lesser degree Downtown Brampton, are the only areas that have been targeted for intensification in Peel Region that are likely to see any significant employment intensification. Other target areas in the Region present some challenges to employment intensification such as lack of transit, highway access and parking requirements, and may see a greater number of small office developments, primarily accommodating local serving professional services.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 15 | Page 4.0 INTENSIFICATION IN PEEL
Peel Region is composed of a mixture of suburban communities, historic agricultural service centres and urban settlement areas that have urbanized rapidly due to their proximity to the City of Toronto. Growth in Peel has also been driven by the presence of the powerful economic influences of Lester B. Pearson Airport, a collection of major transportation corridors, a large and well- educated workforce, its juxtaposition between other major centres in the Greater Golden Horseshoe, and its proximity to U.S. markets and border crossings. These features have made Peel Region one of the central employment areas in Canada. In fact, the large industrial areas surrounding the airport contain more jobs than the downtown core of Toronto.
Residential growth has followed the strong job growth. Between 2001 and 2006 Peel’s population grew by 165,000 or 17.2%, making it one of the fastest growing areas of the Province. In the same time period, the Region added roughly 59,000 housing units, representing growth of over 19%.
In terms of building activity, between 2001 and 2006 the region averaged roughly 1,600 apartment starts per year, with Mississauga accounting for over 90% of the activity and Brampton the remaining amount2. NBLC’s future outlook for development, excluding recent declines due to the economic climate, is for apartment starts to average between 1,500 and 2,000 units per year, with the City of Brampton accounting for a slightly larger percent.
A further indication of this intensification is the number of condominium developments actively marketing throughout urban areas of the Region, these include:
• 5,600 active condominium units within Mississauga City Centre; • Over 800 active units close to Erin Mills Town Centre; • Over 850 active units in Downtown Brampton; and, • River’s Edge condominium in Downtown Bolton (Caledon). 4.1 Residential Development
Intensification is not a new concept in the Region of Peel, with apartment and office development occurring in central areas and major corridors throughout the Region for decades. However, in the past several years, medium and high-density residential development within the municipal built boundaries of Brampton and Mississauga has increased dramatically. In fact, Mississauga and Brampton are respectively the second and fifth largest condominium markets in the Greater Toronto Area. In 2007, the Region of Peel accounted for almost 22% of the GTA apartment and townhouse market.
2 Housing starts refer to the number of new housing units in which construction was started over a given period of time. Housing starts are typically lower than building permits due to the frequent issuance of building permits for units in which construction does not begin within the same time period.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 16 | Page
Intensified residential forms of development come in three basic formats; medium-density townhomes and higher density mid and high-rise apartments.
4.1.1 Townhouse Development
Townhome developments cater to virtually every type of household demographic. As the price of a single family detached home has risen, so has the demand for more affordable townhomes. Daniel’s “First Home” project in Erin Mills offers townhome style homes at the very affordable range. These projects have been very successful often selling out within the first week of opening. Townhomes also appeal to both middle income and affluent groups in areas where the land value would make detached forms of housing out of reach for most buyer groups. Port Credit Village offers very expensive townhomes that benefit from the proximity of the waterfront as well as access to restaurants and services along Lakeshore.
From an intensification viewpoint, townhouse projects are often the first sign of community redevelopment. They are relatively simple homes, can be easily incorporated into most neighbourhoods and downtown areas and appeal to a broad range of users. For families, townhomes are the most favoured intensified housing form as they offer many of the benefits of a detached home, including private play areas for children, at more affordable pricing and frequently closer to a broader range of amenities and community services.
Figure 4 Port Credit Village Townhomes catering to Affluent Buyers
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 17 | Page Figure 5 Daniel’s First Home Project
4.1.2 Mid-Rise Apartments
Mid-rise apartment buildings typically refer to buildings between four and six storeys in height. While there is no rule on what defines mid-rise buildings this definition is preferred as beyond these heights, wood and steel frame construction techniques must be abandoned for more expensive concrete construction.
Condominium apartment developments can deliver marketable home products due to efficient construction techniques, combined with a highly efficient use of land. However, if height and density is restricted, the loss of efficiencies must be compensated by lower land costs or increased revenues. To achieve higher revenues, buildings must be located in more affluent communities which often raise approval issues. In addition, since a great deal of the value of condominium apartments is placed on views, increasing revenue, even in the most marketable areas is often difficult.
In short, while there are many good examples of mid-rise buildings in the GTA, the smaller scale of these projects creates increased risk in comparison to higher density formats making them less popular with developers. However this condition is not likely to persist. As developers continue to look for new market niches, and opportunities become available, especially in established nodes/communities, we expect the long term demand for smaller scale projects to increase.
4.1.3 High-Rise Developments
High-rise developments, that offer the greatest economies of scale to developers, have formed the most significant component of apartment development in Peel Region. In terms of building activity, between 2001 and 2006 the Peel Region averaged roughly 1,600 apartment starts per year,
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 18 | Page with Mississauga accounting for over 90% of the activity and Brampton the remaining amount3. NBLC’s future outlook for development, excluding recent declines due to the economic climate, is for apartment starts to average between 1,500 and 2,000 units per year, with the City of Brampton accounting for a slightly larger percent.
A further indication of this intensification is the number of condominium developments actively marketing throughout urban areas of the Region, these include:
• 5,600 active condominium units within Mississauga City Centre; • Over 800 active units close to Erin Mills Town Centre; • Over 500 active units in Downtown Brampton; and, • River’s Edge condominium in Downtown Bolton (Caledon).
4.1.4 Mixed-Use Developments
Mixed-use developments refer to projects that integrate a variety of uses, often in a number of buildings, linked by landscaping or pathways. These types of projects can offer some of the most sustainable and beneficial forms of development linking the needs of residential or commercial uses to services, retail, entertainment and cultural opportunities in a highly efficient and compact form.
Figure 6 Mixed-use Project - Burlington
3 Housing starts refer to the number of new housing units in which construction was started over a given period of time. Housing starts are typically lower than building permits due to the frequent issuance of building permits for units in which construction does not begin within the same time period.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 19 | Page It is also the mixing of uses that make these forms of developments the most complex and challenging to complete. The mixing of uses requires integrated market and proforma analysis which often work from independent assumptions (which are not always complementary). In the example of an apartment building with retail at grade, the requirement to dedicate the main floor primarily for street retail impacts heavily on project economics. Unlike residential condominiums, retail development is rarely presold or leased. Even on the strongest retail streets, the sale/lease of new retail space is frequently slow. This is not only due to a weaker market for space (at the rents needed to justify the construction), but also due to limitations on the types of retail that are permitted with residential buildings. Condominium corporations often limit the range of uses to prevent nuisances such as odours and noise. Financing for the building is therefore frequently not available for the retail component, placing demand for increased equity or alternatively, higher cost financing sources.
Other issues, such as; the need to consolidate land, managing separate parking for residential uses and commercial uses, achieving community support, and limited developer experience are additional challenges.
However, where these hurdles can be overcome, the results are usually higher quality and more interesting urban spaces. They also have the ability to integrate better into communities through the services they can provide, especially where heights are lower.
Figure 7 – Mixed- Use Development – Port Credit Village
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 20 | Page
Figure 8 – Mixed- Use Development – Victoria, British Columbia. 4.2 Residential Development and Intensification Areas
Brampton, Caledon and Mississauga have been successful in attracting significant intensification for a number of reasons including;
• A limited supply of designated Greenfield lands in the City of Mississauga and diminishing greenfield lands in the City of Brampton;
• Strong population and employment growth in both the Region and the GTA as a whole;
• Relative affordability, especially compared to the City of Toronto;
• Strong ethnic communities, including demand from a large number of new immigrants settling in the Region annually;
• Permissive development rules in Mississauga City Centre (no height constraints);
• Significant public sector investments (City Hall and Living Arts Centre in Mississauga and Rose Theatre in Brampton); and,
• Relative proximity and good highway/transit connectivity to Downtown Toronto and the rest of the GTA.
The areas identified for intensification in Peel Region that have attracted townhome, mid-rise and high-rise development are those communities that provide the greatest range and selection of general factors that create market demand, such as price, transit, and proximity to amenities/services, as well as benefiting from the reasons specific to the Region of Peel, highlighted as the basis for the recent surge in high-density development in the Region.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 21 | Page Figure 10 illustrates the distribution of new residential (condominium and rental) buildings constructed or currently being marketed in Peel Region, since 2001. Of the 23 areas identified for potential intensification, the majority of development has occurred within 10 areas and of these areas, 5 have attracted more than 2 projects since 2001. The five areas are:
• Downtown Brampton; • Hurontario Uptown ; • Central Erin Mills; • Mississauga City Centre; and, • Port Credit Village.
Figure 9 Mississauga City Centre
While much less urban than Brampton or Mississauga, Caledon has recently attracted a mid-rise residential development in Bolton. This project was supported by development charge grants. However, the new development charge by-law proposes to eliminate this incentive due to its cost. Interestingly, Caledon has a unique problem in encouraging intensification in that its fire department has an equipment limitation of 4 storeys.
The following summarizes the key factors driving the demand for intensified development in the five target intensification areas of the Region that have seen recent development.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 22 | Page
Port Credit Village • GO Transit station • Waterfront promenade and waterfront views • Access to restaurants and retail • Schools and libraries • Parks • Port Credit marina • Close to the QEW and downtown Toronto • Affluent neighbourhood, with aging demographics • Deep pool of potential purchasers • Master Planned FRAM development
Downtown Brampton • GO Transit within walking distance • Well defined urban core • Rose Theatre • Parks • Restaurants and Retail, including large big box in close proximity • City Hall/office employment • Aging demographics of surrounding residents • Affordability
Mississauga City Centre & Uptown Hurontario • City Hall and concentration of office employment • Transit Hub – connections to TTC system • Theatre • Library • YMCA • Square One Shopping Centre • Access to Highway 403 • Low land costs and development charges to the initial developers (Daniels) • Affordability • Relaxed planning controls
Central Erin Mills • Proximity to Credit Valley Hospital • Demand from seniors – Amica Lifestyles Development • Access to retail and community service • Access to Highway 403 • Low land costs
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 23 | Page
Figure 10: Condominium Activity and GO Transit
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 24 | Page
4.3 Employment Intensification in Peel
It is a principle component of the sustainable development framework guiding the PROPR that a broad range of employment opportunities be encouraged into the Urban Growth Centres and intensification nodes and corridors. However, market demand and land economics have to date driven these uses outside of these areas. To achieve the objectives of PROPR, it is important to understand the barriers to employment use intensification, with a view to examining possible approaches to encouraging this form of development.
Employment uses in high-density forms are generally office or highly specialized media, medical or technology facilities. The vast majority of recent employment developments of this nature have occurred in more suburban locations in Peel, including Airport Corporate Centre and Meadowvale in Mississauga, and along Highway 410 in Brampton. Figure 12 identifies the general location of new office development over 20,000 square feet, between 1999 and 2008. These uses typically employ large numbers of people and require access to good transit and/or large amounts of parking.
Figure 11: Airport Corporate Centre
To date, transit in Peel has not evolved to the service levels necessary to significantly reduce demand for parking. Therefore, these employment uses require large amounts of parking at no charge to the user. In the Region’s Urban Growth Centres and other urban nodes, land costs require that parking be underground or in structured above grade parking lots. However, the costs associated with underground parking, combined with the lack of higher order transit, effectively
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 25 | Page make office development in these areas uncompetitive to less expensive suburban greenfield options both within and outside of the Region of Peel.
Initiatives such as the Hurontario High Order Transit proposal would help reduce parking requirements in many of the nodes. However, it is likely that in the near term (5 to 10 years), that meeting the Provincial targets for intensification in Peel’s Urban Growth Centres and nodes, as well as for all other “905” centres, will be subject largely to the strength of the residential condominium market and institutional/public investments.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 26 | Page
Figure 12: Office Development
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 27 | Page 5.0 ISSUES: BARRIERS TO INTENSIFICATION
The difficulty in successfully encouraging residential and non-residential intensification is evident in the fact that there are many designated downtowns, nodes, and corridors throughout the GTA that have been targeted for intensification, yet have received little or no development interest. This lack of success is due to a variety of issues associated with the market; planning policy; and, development. Understanding these barriers will help identify the need for incentives in achieving the objectives of the PROPR. 5.1 Market
Intensification is a process, the pace of which varies over time and is tied directly to regional economic activity and demographic trends. In general, as regional and provincial economies fluctuate, levels of urban development follow suit. Since urban townhouse and apartment development is almost exclusively developed by private sector initiatives, which are subject to the “ebbs and flows’ of the economy, municipalities can, at best, direct and help guide market influences. There is very little however, that the municipalities can do to influence the broader economic forces that drive the marketplace.
Even during periods of strong economic growth, local conditions may not be sufficient to support high-density employment or residential development. The area may not be conducive to development, may lack the necessary amenities or access to transit, may not support the necessary rents or purchase prices to make the development feasible, or there may already be an adequate supply in the area to meet demand.
In Peel Region, Port Credit Village, Mississauga City Centre, and Downtown Brampton have all attracted significant amounts of new residential development through the 2001-2008 period. While we expect demand for new apartment condominiums to continue, the pace of demand/intensification has declined in the aftermath of the global credit crisis of 2008. Moving forward, demand is likely to return as consumer confidence builds. However, based on past post recessionary experiences, it is likely that demand in both employment and residential development sectors will show only modest signs of increase over the next four to six years. 5.2 Planning
Local planning policies can also have a limiting impact on intensification efforts of a developer. The areas that are typically best suited for townhome or apartment developments are also frequently challenging to gain planning approvals. Areas that offer a sense of exclusivity or have existing services and amenities attractive to the market are often within established neighbourhoods with planning regulations designed to maintain the ‘character’ of the neighbourhood.
These neighbourhoods also very often have active and well organized resident associations that oppose any significant new development. As a result, many developers are deterred from investment due to the uncertain outcome, despite a strong planning case.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 28 | Page Alternatively, some planning policies, such as the lack of height limits in Mississauga City Centre, can have likely facilitated new growth by allowing market demand and design issues to direct height.
Finally, well intentioned municipal planning policies, in suitable neighbourhoods, that attempt to provide a conducive and supportive framework for intensification very often fail to consider the economics of intensification. For example, height limits of five storeys or less frequently cannot generate the necessary revenues to make projects feasible. Similarly, high parking requirements can generate excessive, unwarranted costs (and are often contrary to sustainability objectives). Since parking is typically included in the purchase price of a unit (outside of Toronto), this places a greater financial burden on the developer.
Planning policies that have the objective of intensification must consider the market and financial implications of development to be successful. Understanding these issues, planning policy and incentives can be better drafted to shape and influence market forces. 5.3 Development Issues
Areas designated for intensification are frequently located within existing older or historic downtown areas such as Streetsville and Downtown Brampton. These communities are typically developed around small and narrow lots fronting on the Main Street. Few parcels in these communities are large enough to accommodate the land area necessary to build a high-density office or residential redevelopment (and underground garage).
This necessitates the need for land assemblies which can be complex, costly and have uncertain outcomes. The cost of acquiring land from vendors who may not wish to sell or who are operating businesses on the property frequently rise above market values. Clarkson Village is a good example of an area that could likely attract more intensification but large parcels of vacant land are very difficult to find. Projects such as Stonebook Condominiums are therefore forced to occur at the edge of the village, which does little to support the street life of the community and has a lesser overall impact in terms of achieving sustainability objectives.
Queen Street, east of the downtown in Brampton has a much different problem. This strip, which developed during the 60’s and 70’s and initially oriented towards highway commercial uses, such as restaurants and car dealerships, is characterized by large parcels of land well suited to redevelopment. However, the road is both wide and with heavy traffic volumes, giving it much less of an urban feel and un-conducive to pedestrian activity, reducing market interest in the area. Public investment in streetscape improvements might be an effective method of incentifying both office and residential development.
Many of the areas targeted for intensification throughout the GTA are older neighbourhoods with local infrastructure, including roads, municipal services and utilities, both aging and not designed for significant levels of growth. As a result, a number of areas are limited in their redevelopment potential due to the lack of servicing capacity or the costs associated with replacing infrastructure.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 29 | Page Sudden changes in costs can also have an impact on developments. The recent significant increase in regional development charges will significantly reduce the viability of projects until the market has had an opportunity to adjust, either in terms of increased pricing or reduced land or other costs, to compensate for these increases.
A final development issue is that mixed-use developments very often encounter funding/financing issues for the non-residential component of the building. As previously discussed, street related commercial space is very difficult to finance unless the space is pre-leased; a rarity when building occupancy is frequently several years away. If not pre-leased the development of the space has to be funded by the developer, or with very expensive 2nd mortgage or mezzanine financing.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 30 | Page 6.0 OPPORTUNITIES: EXAMPLES AND IMPACTS OF INTENSIFICATION INCENTIVES
There are a variety of incentives available to regional and/or local municipalities, some of which have led to successful residential or non-residential intensification development, while others have played more of a supportive role to intensification developments. The majority of initiatives are available only to local municipalities; however in each of the primary incentive categories there is a role for regional governments. The principal incentives include: Community Improvement Plans; public infrastructure investment; planning; financial incentives; and, development participation.
The rest of the chapter briefly describes each of the primary incentives, providing examples of successful implementation, and concludes with a discussion of how each incentive relates to regional municipalities, and more specifically the Region of Peel. 6.1 Community Improvement Plans
Community Improvement Plans (CIPs) are considered by local, and recently regional municipalities to be effective tools for encouraging urban investment and intensification, especially in areas where new investment is believed to be hindered by social, physical or economic causes. Provided for under Section 28 of the Planning Act, municipalities are allowed to plan and finance activities related to redevelopment in order to achieve specific goals or objectives, such as an increase in urban intensification.
Figure 13 - The Dundas Square Revitalization in Toronto was initiated through a CIP Process.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 31 | Page In general, lower and upper-tier municipalities can provide incentives in designated Community Improvement Areas to developers in the form of; rebates on taxes or fees, such as planning application fees, as well as providing grants and loans. A number of regions and local municipalities in the Greater Golden Horseshoe (GGH) have initiated Community Improvement Plans (CIPs). Below is a list of all Regions and most municipalities, excluding those within the Region of Peel with active CIP programs in Ontario:
Regions Municipalities Region of Waterloo City of Niagara Falls Region of Niagara City of St. Catharines York Region (OP amended, no CIP) City of Hamilton Durham Region (OP amended, no CIP) City of Brantford City of Guelph City of London City of Kitchener City of Oshawa City of Newmarket Town of Halton Hills (not yet approved) City of Vaughan Town of Ajax
Measuring and calculating the overall success of CIPs is difficult, especially when it comes to establishing a direct causal relationship. That is, would the investment have occurred without the grant, loan, or cancellation of fees offered under the CIP? While there is some debate as to the magnitude of impact of CIPs, based on annual reports and in discussions with respective regional and municipal staff, CIPs are recognized as being successful in attracting investment for upgrades and expansions to existing buildings, which does indirectly encourage intensification, as well as in attracting new development, especially for residential and commercial developments.
The following is a brief description of major CIP programs, highlighting some successful examples from municipalities in Southern Ontario.
6.1.1 Tax Increment Grants
Tax Increment Grants (TIGs) assist developers by effectively reducing or eliminating the cost of property taxes for a set period of time. These programs recognize that through development, a property’s assessed property tax rate will increase, not only resulting in increased density and an improved property, but also increasing municipal tax revenue. Tax Increment Grants, often referred to as Tax Increment Financing (TIFs), are most often aimed at brownfield redevelopment, targeting remediation costs, as well as expansions of existing residential and commercial buildings.
Typically TIG programs require developers to pay taxes based on the full assessed value of the property each year, with a portion/percentage of the increased property tax rebated back each year. TIGs are popular as municipalities are getting at least some tax revenue on sites that would have otherwise remained vacant. It should be noted that TIG programs in Ontario are very different from tax increment financing (TIF) programs utilized in the U.S. For the most part, TIF
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 32 | Page programs in the U.S. are used to fund larger scale urban renewal projects. The tax increment (from new investment as a result of the renewal project) between the current assessment and the target, post development assessment is used as basis to issue and finance municipal bonds in support of the project.
The following are examples of TIG’s in Ontario.
Examples:
City of Hamilton. Between 2002 and 2008 the Enterprise Zone Grant Program has received 33 applications with a total construction value of $192.5 million.
City of London. Between 1998 and 2006 the Downtown Rehabilitation and Redevelopment Grant Program has resulted in 7 projects with a total construction value of over $110 million and resulting in the addition of 1,330 residential units.
6.1.2 Grants & Loans
In these programs, a municipality will provide either a grant or an interest free or low-interest loan to a developer to help offset the cost of: remediation, consulting fees, property improvement or expansion, and in some cases even property development, such as residential intensification.
Most often, an applicant will be allowed a percentage of the total cost up to a predetermined amount. For example, an applicant who applied for a façade improvement grant may receive up to fifty percent of the cost on a project to a maximum of $5,000. Façade improvements are by far the most ubiquitous use of grants and loans, particularly in attempts to revitalize historic downtowns and traditional main streets. In terms of incentifying intensification however, the impacts of these grants are marginal.
Grants are typically only for smaller investments, such as consulting fees, whereas loans are often used for larger investments. Loans are typically given a ten year life span. However, unlike TIGs, these programs do result in financial loss to the municipality, either directly as a result of a grant or with loans, through the loss of interest revenue. However, this and any financial investment of the municipality must be evaluated against the non-financial benefits associated with intensification.
Examples:
• City of Oshawa. Exploited their façade improvement program in a unique way by directing almost $1.0 Million to assist in the conversion of a downtown office building into residential condominium. The funding made the project at 40 Bond Street feasible and successful in achieving a major municipal objective.
• City of Brantford. In an attempt to attract new development in their downtown, they offered to cover twenty-five percent of the total construction value of a project. The projects were both commercial and residential. Intended to be a simplified approach, the municipality has contributed $4.0 million, where the private sector has provided nearly
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 33 | Page $21 million in project costs spread over 22 projects. The total cost of individual projects ranged from nearly $8,000 to $1.4 million.
• City of Hamilton. Through the Downtown Residential Loan Program, as of year-end 2008, the City has loaned almost $13.5 million for the creation/renovation of 755 units. The total value of the projects is estimated at over $126 million.
• City of Hamilton. Main Street Housing Loan and Grant Program. In 2008 the City provided $330,000 in loans and grants to four programs resulting in the renovation/development of 44 units.
It is important to note that in each of these examples, the communities have a much weaker market demand for both townhome and apartment housing than communities in Peel Region.
6.1.3 Exemptions, Rebates and Credits
The main aim of these programs is to reduce the costs associated with a development or renovation project. In these cases, fees and levies (e.g. building application and planning fees, and parking requirement) may be suspended outright or refunded once the project is complete.
These programs most often target areas where development and new investment is seen as a catalyst for stimulating revitalization efforts and where there is infrastructure already in place, limiting the need to have additional charges levied against development. Residential and non- residential intensification initiatives are very often targeted by these programs.
These programs are popular as they have limited financial burden on the administering municipality and can provide significant financial savings to a developer. For example, underground parking is generally accepted to cost roughly between $25,000 and $30,000 per space. As a result, a reduction in parking requirements can result in significant savings.
Development charge exemptions or reductions can be part of these programs, but are discussed in a separate section since they can be utilized outside of CIPs, requiring amendments to municipal Development Charge by-laws.
Example:
• City of St. Catharines. Between 2005 and 2008, 155 residential units were created through a variety of incentive programs, not including the waiving of development charges.
6.1.4 Tax Assistance
Most often associated with brownfield projects, the costs associated with remediation may be alleviated by reducing a percentage or cancelling municipal taxes and/or educational taxes during the rehabilitation of a property. The intention is to level the costs of brownfield redevelopment with greenfield development. In order to make these projects more cost effective
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 34 | Page to proponents, some Tax Assistance CIP programs may even reduce or cancel property tax fees for a specified period beyond remediation.
Tax assistance can also be applied to non-brownfield developments, typically major renovations, expansions and developments in areas targeted for re-urbanization and intensification.
6.1.5 Tax Relief
Upon completion and occupancy of a project, a grant is offered to the developer to reduce the property tax for a fixed period. The major difference between this and programs that offer tax assistance is that these become active once a project is complete. The motivation to use this type of program is to ensure that construction occurs in a timely manner. Programs of this type are not very common.
Examples:
• Kitchener. EDGE (Encouraging Development for Growth Efficiency) Program. Under the umbrella of this program, Kitchener has adopted an optional property class called Multi- Residential Property Class, which offers a lower tax on new buildings within this class. The goal behind developing this program is to promote the development of rental housing units where there has been a shortage. For illustrative purposes, a property under this class will receive a tax ratio of 1.000 for 35 years. Whereas an existing property in this class is charged 2.5250. Over the term, this represents an approximate savings of roughly 54 percent.
6.2 Investing in Public Infrastructure
Investment in public infrastructure has gone a long way to encouraging intensification throughout Southern Ontario. Interestingly, unlike other incentives to intensification, such as planning and financial incentives, investment in public infrastructure is typically not undertaken with the primary intention of encouraging intensification. Rather, investment in public infrastructure is part of overall civic improvement which has the result of improving overall quality of life and/or making areas/municipalities more attractive places to live, which in-turn creates residential market demand necessary for intensification to occur.
Public infrastructure investment can be split into four categories; transit, municipal infrastructure, community facilities & public space, and programming. Examples of public infrastructure investments that have directly or indirectly resulted in residential and/or non-residential intensification are provided below.
6.2.1 Improving Transit
As discussed earlier, the availability of good transit service is one of the most significant market drivers to intensification and a major incentive to private developers. The following are some of the more recent investments and impacts.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 35 | Page • TTC Sheppard Subway Line, Toronto: The introduction of a new subway line along Sheppard Avenue between Yonge and Leslie in 2002 is one of the more recent and significant infrastructure investments that can be directly linked to increased intensification.
• The new subway line has helped to transform a suburban corridor with low density uses into an urban main street with a mix of uses and densities. Since 2000, approximately 5,300 condominium units have either been sold or are currently being marketed along the Sheppard Avenue corridor. The subway line has also encouraged the assembly of once disparate land parcels. The large-scale NY Towers development by the Daniels Group is an example of where 55 single family detached homes where purchased to consolidate a land parcel of sufficient size to accommodate a four tower redevelopment.
• TTC Designated LRT Routes (Spadina, Harbourfront & St. Clair), Toronto: While each of these three corridors in the City of Toronto had existing high-density residential markets prior to the development of the designated LRT right-of-ways, the right-of-ways helped to expand the market attraction for each of the corridors. For example, since the opening of the Harbourfront LTR route in 2000, roughly 10,400 condominium units have either been sold or are currently being marketed directly along the route.
• GO Transit Stations: Only a few GO stations have experienced any sort of residential or non-residential intensification occur in close proximity, including; Appleby in Burlington, Port Credit in Mississauga, Brampton City Centre and Bramalea City Centre in Brampton, and Langstaff and Unionville in Markham. In all cases, the market demand for development was a combination of a number of factors, such as access to parks/waterfront, retail/commercial amenities, highway access, and affordability, with proximity to the GO station having a marginal impact. While numerous planning jurisdictions throughout the GTA have designated GO train stations as target areas for future intensification and there does exist some market attraction to living and/or working in close proximity to GO stations, there is little evidence to suggest that GO train accessibility alone can be a catalyst for intensification.
• VIVA Bus Rapid Transit, York Region: Similar to GO transit, the linkage between the bus rapid transit routes along Highway 7 and Yonge Street in York Region and increased intensification in the area are indirectly linked. That is, the presence of the transportation service certainly helped to increase the marketability of the areas for medium and high density development, but cannot be held directly responsible. The significant number of new condominium units and some office space, especially along Highway 7 in Markham and Richmond Hill, are due more to the area’s commercial amenities, highway access and affordability than the presence of the VIVA service.
6.2.2 Municipal Infrastructure
Investment by local and regional municipalities into core public infrastructure, including roads, water and waste water sewage can significantly impact on future intensification investment. Such investments can:
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 36 | Page • Reduce time to development;
• Significantly reduce development costs for the builder, or if front-ended by municipality, provide certainty in servicing costs;
• Limit exposure to cost overruns and additional engineering costs; and,
• Provide clear direction as to the amount and location of future intensification in the area.
In order to ensure sufficient capacity exists, a number of municipalities in the GGH have recently made, or are in the process of making, significant investments into public infrastructure for areas targeted for intensification. This includes the Region of Peel, the Region of York and the Region of Durham. It must be recognized, however, that there is a tremendous amount of financial risk involved for the municipality by providing infrastructure prior to development. Since these investments are planned and financed based on expected development levels, if the levels are not achieved in the timeframe expected, the municipality must cover the cost.
6.2.3 Community Facilities & Public Spaces
Investment in facilities and public space by the public sector can also encourage residential and non-residential intensification in two principal ways, depending primarily on the investment.
• Investments in publically accessible facilities/spaces, such as parks, public squares, waterfronts, museums, libraries, arts centres and sports complexes, have a similar impact on intensification investment as public transit. That is, by providing sought after services and amenities and increasing the overall quality of life, market demand to live and work in the area increases.
• Alternatively, investment in other facilities, such as public administration buildings (town hall, court rooms, and municipal offices), educational facilities, as well as performing arts centres and sports complexes, serve to instigate investment in an area and act as catalysts or anchors for further development/intensification.
There are a number of recent investments in community facilities and public spaces that have, or are likely to, contribute to intensification efforts. These include:
• Living Arts Centre, Mississauga; • Rose Theatre, Brampton; • New City Hall, Guelph; • New City Hall, Cambridge; • GM Centre, Oshawa; • John Labatt Centre, London; • Guelph Sports and Recreation Centre, Guelph; • University of Ontario Institute of Technology, Oshawa; • Sheridan College Campus (proposed), Mississauga;
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 37 | Page • Dundas Square, Toronto; • HTO Park, Toronto; and, • Spencer Smith Park, Burlington.
6.2.4 Programming/Business Improvement Area (BIA) Activities
Some municipalities and local business/resident associations have initiated various forms of programming, public events and activities in the hopes of attracting people/visitors to certain areas, encouraging investment and creating the feeling of vibrancy and activity. This again can indirectly encourage intensification in certain areas by providing amenities/activities that are sought after by the market. Involving existing BIA and development groups will encourage intensification in Peel; there are already existing groups such as the Brampton Downtown Business Associate, Streetsville BIA, Port Credit BIA and the Clarkson BIA. Examples of such programming, events and activities, include: farmers markets; plays and other events in parks and public spaces; sporting events (marathons and bike races); charity events; and business promotional events.
6.3 Planning
While regional and local urban planning policies and controls cannot create the market demand necessary for successful intensification to occur, they can encourage and shape intensification by: providing strong direction on the amount, location and nature of desired intensification; simplifying and expediting the approval process; and, providing greater certainty in the development approval process.
The majority of planning tools available are applicable only to local municipalities, with only limited authority resting with regional governments. Some of the planning tools available include:
• Strong land-use designations and policies within local and regional Official Plans are able to provide direction towards the location, design and character of urban intensification, ensuring certainty in land-use and providing developers with greater assurance of obtaining necessary approvals.
• Municipal zoning by-laws can contain a number of policies that not only provide direction as to the location and character of future intensification, but can encourage intensification through such things as liberal height and density allowances, as well as limiting parking, parkland dedication and amenity space requirements.
• In some urban areas, especially where land values are higher, a minimum level of density and/or heights are required in order to achieve the necessary economy of scales to make a development economically viable, such as a condominium requiring a minimum number of units or an office building requiring a minimum amount of leasable square footage.
• Furthermore, reducing such things as parking, parkland dedication or amenity space requirements reduces development costs that are either borne by the developer or passed down to the buyer. The Town of Newmarket has significantly reduced both parking and parkland dedication requirements within its CIP areas.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 38 | Page • Other planning documents, such as Secondary Plans, Centres and Corridors studies and specific intensification studies, can also provide policy direction and assurance as to the type, location and nature of intensification in urban areas, further ensuring planning approvals and providing certainty in land-use.
• Ensuring that the planning requirements and approval processes of local and regional municipalities are both necessary and aligned can limit the amount of time/money it may take a developer to achieve development permission. This includes all pre-development requirements, such as traffic, air, noise and shadow studies, as well as Phase 1 environmental audits.
• Section 37 of the Planning Act allows local municipalities to approve site specific by-laws permitting increased building height/densities over and above existing planning permissions, in exchange for community benefits, as determined by the community. While these benefits do represent additional cost to the developer, bonusing allowances provide developers the security of knowing that there is the potential to increase building height/densities to levels that better reflect market demand, providing better financial returns.
• Outside of the City of Toronto, the utilization of Section 37 agreements has been somewhat limited, with some usage in the City of Mississauga, City of London, City of Burlington, City of Cambridge and the City of Ottawa. Community benefits attained include; affordable housing, public art, streetscape improvements and contributions towards community facilities. In the case of Mississauga, increased height allowances for a condominium development by FRAM in Port Credit resulted in roughly $1 million of funding towards an improved community park.
• Section 37 of the Planning Act must be used with care. An aggressive approach to these charges could easily deter development and counter intensification initiatives. They are also prone to negotiation which raises uncertainty which can also be harmful to a developer, especially in areas such as downtown Brampton where profit margins can be narrow.
• New provisions of Conditional Zoning in the Planning Act allow municipalities to zone lands with conditions similar in the way plans of subdivision or condominiums attach conditions of draft and final plan approval. While the detailed regulation that will prescribe the type of conditions that can be applied has yet to be released, the tool raises interesting opportunities and issues for municipalities. Conditional zoning might allow a developer to have a site pre-zoned subject to conditions such as design, payment of fees, and delivery of certain community benefits. The key benefits would seem to be as follows:
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 39 | Page
It would allow developers the opportunity to have sites zoned during weak market periods in anticipation of stronger periods without having to do all the detailed studies up-front;
• Allows owners of lands to improve land values without significant expense; • Gives developers greater certainty of height and density – but still subject to studies; • Takes pressure off municipal staff and Council to make quick decisions during strong market periods; • Might allow Council to achieve broader objectives.
However, the downsides of conditional zoning as a tool for intensification might be:
• Conditional zoning maybe irrelevant if during the satisfaction of conditions (through the course of the more detailed design studies for example) that the building form is proven to be impractical. – the zoning must consider that key issues, such as height and density, and ensure they are achievable; • It is very difficult to get height and density and establish other conditions without detailed studies; and, • Will this create a rush from land owners to designate sites that may never have the market demand – is it really going to make a significant difference given the near term market demand?
6.4 Financial Incentives
The majority of financial incentives that can be provided to developers by local and regional municipalities are typically part of Community Improvement Plans (Section 5.1). Outside of CIPs, two other financial tools that have proven to be very effective in encouraging development in targeted areas have been the reduction or elimination of regional and/or local municipal Development Charges (DCs), and separated brownfield programs.
• Of all financial programs, development charge rebates or grants are, by far, the most significant incentive offered. This is due to the magnitude of the grant and the ease of implementation. The reduction or elimination of DCs is often applied to properties in existing urban areas, with the view that the necessary infrastructure already exists and as a result DC revenue is not then required.
• The reduction or elimination of DCs can result in significant financial savings for a developer. For instance, the Region of Peel DC rate (Feb. 2009) for an apartment unit over 750 square feet is currently $12,609 per unit. The elimination of DCs for a 100 unit condominium would therefore equal $1.26 million.
• For an office building, the regional DC is $94.32 per m2. The elimination of DCs for a 5,000 square feet office building in Peel would therefore equal $471,600.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 40 | Page • As mentioned, the reduction of regional DCs is often done in conjunction with the elimination or reduction of DCs at the local municipal level.
• It is important to recognize that to compensate for DC incentives; these funds must be recovered through broader property tax base.
• At a regional level, both the Region of Waterloo and the Region of Niagara have programs that provide for development charge rebates based on set criteria in specified areas of the community. There are a number of municipalities that allow for development charge grants in certain areas, including the City of London, City of Hamilton, City of Brampton, City of Kitchener, City of Oshawa, City of Niagara Falls, City of Guelph, and the Town of Newmarket. Some specific successful examples include:
o Preston Meadows, Cambridge. DC charges were eliminated by both the Region of Waterloo and the City of Cambridge. This resulted in the redevelopment of an older industrial site close to downtown Preston for roughly 80 townhomes and 110 condominium units.
o City of Brampton, Development Charge Incentive Grant Program (eliminates DCs and is part of CIP) has resulted in the development of 2,000 residential units in downtown Brampton since inception.
o City of London. Since the inception of the Millennium Plan in 1998, which includes exemption of DCs for all new residential developments in downtown, there has been the development of over 1,100 new residential units in the core.
o Downtown Hamilton. Provided a number of DC exemptions to non-residential developments, primarily for new small office and commercial developments.
• The Town of Caledon provides for development charge rebates for commercial and industrial buildings that achieve LEED certification standards. Buildings that achieve LEED certification are eligible to receive up to a 27.5% discount in development charges. Given that an important LEED criteria is the reduction of water usage and sewage discharge, it may be appropriate for the Region to consider a complementary program where the reduced impact on regional services can be measured.
• Most brownfield financial tools are targeted towards environmental assessments and remediation costs, with the intention of equalizing the development costs of brownfield and greenfield sites.
Unlike most CIP programs, CIP and non-CIP brownfield programs sometimes allow for the administering municipality to take control of the land if there are unpaid taxes/liens on a property. By doing this, the municipality can take a more active role in ensuring that the property becomes redeveloped, at the risk of assuming its contingent liabilities.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 41 | Page 6.5 Development
A final method in which a region or local municipality can become actively involved in the encouragement of residential and non-residential intensification is to become a more active participant in the development process. Some participating roles for regions and municipalities include:
• Become active in the land market, such as buying and holding property until suitable development proposal comes along, or selling property at reduced rate to development proposals that adhere to intensification goals and objectives.
• Site preparation for intensification development, including servicing of land, demolition and/or remediation.
• Financing through rebating property taxes, construction of public parking facilities, transit or other amenities.
• Consolidate lands. Can utilize expropriation powers in order to assemble necessary land parcels for development.
• Develop affordable housing. Can initiate intensification through the development of affordable housing developments on publically or privately owned lands in intensification areas. • Direct Public investments in parks, cultural, education and institution facilities and programming to intensification areas.
• On-going municipal services that ensure a high level of maintenance and good management of parking resources.
Examples of municipalities that have become more active in intensification development include:
• City of Cambridge. Over 95% percent of employment land in City is owned by City. City buys land, readies land and sells at reduced market rate. Only small portion of employment land supply, however, is located in designated intensification areas.
• The City of Hamilton has the Municipal Partnership and Acquisition Program which allows the City to acquire strategic lands and participate in public-private partnerships.
• The City of Ottawa has a Brownfield Investment Program which allows the City to take control, remediate, dispose and/or develop sites that have accumulated unpaid taxes.
• The Region of Waterloo has developed a Regional Re-urbanization Community Improvement Plan that gives the Region the power to acquire and consolidate lands for redevelopment within their Central Transit Corridor. The program is designed to target brownfields, or underutilized lands that may not otherwise be redeveloped.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 42 | Page 7.0 CONCLUSION
Next to the City of Toronto, Peel Region has attracted the most significant levels of residential intensification in the Greater Golden Horseshoe over the last 20 years. This can be attributed to: its geographic proximity to the City of Toronto, Lester B. Pearson Airport, and US border crossings; its large employment base; highway and rail transportation access; excellent quality of life; as well as, numerous other advantages. The investment in public infrastructure being made by each local municipality has also made a positive contribution.
In Bolton, strong urban design controls and streetscape investments have helped create and support a small town character and walkable community. This character has helped attract a successful new condominium development. Similarly, Mississauga’s permissive planning environment in terms of density in the downtown area and investment in cultural and recreational services has helped attract significant amounts of new investment. A similar situation exists in downtown Brampton.
As such, the Region of Peel and its area municipalities are already doing a good job in encouraging the growth of their core areas. The issue going forward is what tools are most appropriate considering the nature of future planned infrastructure investments, such as the potential high order transit facility along Hurontario Street, and a slowing development industry.
The core conclusions of this Phase 1 Report include:
• The factors that drive intensification are market driven but are supported by municipal infrastructure; transit in particular.
• Relative to other GTA communities, Peel Region and its local municipalities have captured a significant amount of growth in townhouse, mid-rise and high-rise formats over the past 8 years. Most of this growth has been focused in the Urban Growth Centres and Port Credit Village. However, the factors driving growth in each of these areas is unique.
• The majority of all development within intensification areas has come in the form of residential condominium development, senior’s retirement residences and market rental buildings.
• Only modest amounts of high-density office development have occurred in the intensification areas of Peel. This is, in part, due to the cost of underground parking in the intensification areas.
• At this time, none of the “905” Regional governments offer comprehensive incentive programs. Most of the experience within upper-tier municipalities is within Niagara and Waterloo where a significant number of brownfield and market issues exist.
• Exemptions of development charges are, by far, the best method of incentifying intensification efforts in GTA communities, especially those that have significant market issues in their downtown cores.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 43 | Page • Demand for intensified development is not likely to be an issue in Peel Region. Directing and shaping the market to the intensification, however, is a major challenge, especially with respect to employment uses.
• A closer examination of development charges for projects in compact communities that are more efficient and sustainable than suburban development should be considered.
This work raises significant issues for consideration in Phase Two of the study. Perhaps the most significant is whether incentives are necessary to encourage development in intensification areas? And, if so, what is the appropriate policy framework for incentifying intensification for The Region of Peel? Phase Two will examine these questions and approaches to addressing the barriers identified in this report.
Intensification Incentives in Peel Region – Phase One: Issues and Opportunities Regional Municipality of Peel 44 | Page