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Enabling City Building in Canada: Barriers to Economic Growth

Posted By Michael Brooks, April-27-16

It is sometimes hard to square the rhetoric of senior level governments about enhancing productivity, attracting innovative new businesses, growing current businesses, and improving regional prosperity, with the cost and delays associated with local development. Planners and politicians are quick to take the credit for city building, and to be fair, the planners at least are looking long term. The politicians may just be looking to the next election. All of those new businesses of course need real estate: they need houses, apartments, offices, industrial buildings, and those employees need retail and a variety of municipal services. The construction and real estate sector generates some $63 billion in annual economic activity in Canada, including 340,000 jobs, and $32.4 billion in total net contribution to Canada’s GDP in 2011[1]. One would think municipalities in Canada would all want a piece of that.

So why does it take so long and cost so much to get approvals to build those houses, apartments, offices, and industrial buildings in many Canadian cities? Why would it take more than 12 months in Toronto, Winnipeg, Montréal, and Halifax to process an official plan amendment, when Edmonton, Regina, Saskatoon, and Ottawa can do it between 4 and 6 months? Why would it take more than 12 months in Toronto, and between 7 and 11 months in Calgary, Saskatoon, Winnipeg and Halifax to do a zoning bylaw amendment, when Vancouver, Edmonton, Regina, Ottawa and Montréal can all do it between 4 and 6 months? Why do 6 of 10 major Canadian cities not even have a target for the processing time of an official plan amendment or a zoning bylaw amendment, and 5 of 10 have no processing timeline target for a plan of subdivision or plan of condominium? [2]

Why does it cost between $38,000 and $115,000 (standalone retail $38,000, standalone office $81,000, standalone industrial $181,000 and Mixed Use $115,000) to get a zoning bylaw amendment in Toronto, when in Halifax it’s $330 across the board, in Winnipeg $1500 across the board, and in Edmonton from $2200-$5000? Even Ottawa seems an outlier at $15,000 across the board compared to Halifax, Montréal, Winnipeg, Saskatoon, Regina, and Edmonton.[3]

If cities and governments in Canada were truly interested in trying to attract new business to their jurisdictions, they ought to spend a lot more time looking at that “welcome” from the development approvals and cost point of view. This is particularly so in high cost cities such as Toronto and Vancouver. Developers and investors have real money at risk. Politicians and planners have no skin in the game, and no disincentive to overtax and delay development.

It is the developers and investors who are at the leading edge of attracting and retaining existing tenants, buyers of land, buyers of buildings and buyers of houses.

Only the developers and investors are talking to market participants on a daily basis and are sensitive to changes in demand. Often, developers and investors have a better idea of what economic participants in the city want than the planners and politicians. Greater collaboration is needed between those two camps.

Developers and investors need cost and timeline certainty to de-risk development. A slow or delayed process adds uncertainty and may cause developers to miss current markets. All municipalities in Canada need to set hard processing timelines with a view to enabling economic development in their community instead of restricting and adding risk to it.

The approval costs of development in certain Canadian cities are out of line and send a negative message to economic participants. The costs and delays are a silent economic drag: the city will never know what business it lost, or which constituents went elsewhere because it just takes too long and costs too much compared to alternatives. Ultimately, delays and high upfront fees drive up the costs of land, doing business, and living, in those cities.

A change in cost structures, if affected after a developer has committed to a project, can be the difference between profit and loss. Some costs are completely unbudgetable such as Toronto’s notorious Section 37 of the Planning Act charges, and Vancouver’s Community Amenity Contributions.

Canadian cities need to consult the development and investment community much more earnestly if they hope to continue to attract the business and activity the senior levels of government say they want. Expedite and streamline approvals, publish all criteria in advance, and drop fees to more modest levels, then maybe these prospective businesses will show more interest. 

[1] The Contribution of the Commercial Real Estate Sector to the Canadian Economy; REALpac and NAIOP Research Foundation, September 2012 (report prepared by the Altus Group)

[2] 2012 Canada wide development process survey report, REALpac, 2012

[3] Canada-Wide Key Performance Indicators: Survey Report on Planning and Development, REALpac 2015 (report prepared by The Planning Partnership)


Tags:  cdnpoli  city building  city planning  commercial real estate  development  REALPAC 

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