City staff want 6-storey apartment buildings in more Toronto neighbourhoods. But will developers build them?

‘A concrete 30-storey building is going to be way cheaper’ to build, says one developer.

Thestar.com
Oct. 2, 2023
May Warren

More midrise apartment buildings and townhouses could be coming to Toronto, with a new proposal to allow this type of development in neighbourhoods along major streets.

The big question is will anyone build them?

On Thursday, the city’s planning and housing committee approved opening public consultations on proposed zoning changes that would permit buildings up to six storeys and 30 units in neighbourhoods zoned for residential along these streets.

But whether the real estate industry will build these kinds of homes is uncertain. The proposal to increase density was widely praised by both developers and experts -- but the economics of it mean it may not make an immediate dent in the housing crisis.

“It’s a great idea to blanket the city with more density,” said Jared Menkes, executive vice-president of highrise residential at Menkes Developments Ltd., but he said a larger firm like his “needs the bigger buildings to keep the lights on.”

Things like excavation, underground parking garages and elevators take the biggest chunks out of budgets, not adding floors, he said.
“So a concrete 30-storey building is going to be way cheaper on a per-square-foot basis to build than a six-storey building,” he said.

Menkes does see the changes as an opportunity for smaller developers to take a “niche” in the market, and added that building six-storey structures made out of wood would reduce costs.

“But I don’t think it’s going to be just approved and all of a sudden they’re built overnight.”

Doug Hochglaube, president of Trolleybus Urban Development, said the math just doesn’t work for larger developers on smaller-scale projects, once they factor in things like land and construction costs, and development charges.

“It’s actually more expensive to do a smaller project than it is to do a larger project, relatively,” he said.

Hochglaube called the proposal a “great start,” but said the city should expand it if it really wants to tackle the housing crisis.

He favours opening up more of what he calls “remnant neighbourhoods” -- pockets of houses near transit that have been isolated by newer infrastructure such as laneways or roads -- where he says it doesn’t make sense to keep zoning as is. One example is a cluster of homes near Keele Street and Eglinton Avenue West that he called a “budding mixed-use community,” close to the promised Eglinton LRT.

“Let’s take it to the next stage,” he said.

The idea behind the city’s proposal is to have “a public conversation about expanding permissions so we can encourage more density inside the city, rather than urban sprawl,” said Coun. Gord Perks, chair of the planning and housing committee. This kind of housing, not a super tall skyscraper nor a single-family home, is sometimes called the “missing middle.”

Bylaws in the old city of Toronto are generally more permissive of density, so this would bring neighbourhoods along major streets in Scarborough, Etobicoke, North York and East York in line, Perks said.

The city defines major streets as “transportation corridors which support surface transportation, shipping and delivery routes, and provide connectivity,” added a city spokesperson. The proposed official plan and zoning bylaw changes would apply to all properties designated as neighbourhoods located along major streets.

The new units could be owned or rented, a spokesperson said. The composition and variety of major streets changes throughout the city because the time period and context in which neighbourhoods were developed needs to be taken into account, they added. For example, a 20-metre-wide right-of-way street downtown has a “different context” than a suburban one of the same size.

At the planning and housing committee, councillors Brad Bradford and Michael Thompson raised the question of whether developers would really build the type of smaller scale units the city is trying to encourage. A few residents argued for removing the six-storey and 30-unit caps. Public consultations should begin within a few weeks.

Valerie Preston, a professor emeritus in geography at York University, said that even before the pandemic, because of the high cost of land and construction, developers were more interested in building tall condo towers, and luxury townhouses. With the former there’s the potential to maximize units and profits on one lot, and the latter a lower cost of construction spread over more expensive units.

Now with interest rates soaring, even some highrise condo projects are being delayed.

The city could possibly entice non-profit developers into building midrise homes, Preston said, through incentives or subsidies such as discounts on land or reduced interest financing.

But of course, there’s no guarantee that smaller-scale units would be more affordable, as they’d still be largely at market rent or sale prices.

Pauline Lierman, vice-president of market research at Zonda Urban (formerly Urban Analytics), a housing data platform, called the proposed zoning change “an improvement as the city needs more of a variety of housing.”

But she noted there have not been many recent low- to midrise purpose-built rental projects in the city, only two since 2018, by her count.

“It’s a drop in the bucket,” she said. “It’s not come to the forefront at all.”

Karen Chapple, the director of the School of Cities at the University of Toronto, said the change is a “no-brainer” that will get Toronto closer to the pedestrian-friendly boulevards of great European cities like Paris.

It’s maybe the most important of recent city zoning changes, including legalizing garden suites and multiplexes, because it doesn’t put the onus on individual homeowners, she said.

Most of this land is owned or will be bought by developers or corporations that are “in a much better position to make a decision to reinvest and redevelop at higher densities.”

But Chapple shares Preston’s concerns about whether this type of housing will actually get built, especially in the high-interest rate environment.

For example, an owner may continue to hold on to a parcel of land, hoping for an individual zoning amendment, so they can put up a larger condo building.

“And they will make a lot more money that way.”