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Markham council grants developers 25% off parkland payment

City collects $7.2 million less in cash-in-lieu
Aug. 4, 2021
Irene Wong

With housing affordability top of mind across municipalities, Markham Council voted to provide a 25 per cent discount for real estate developers.

On July 27, councillors passed an interim strategy for Parkland Cash-in-Lieu, which provides a reduction of up to 25 per cent of the value of cash-in-lieu (CIL) of parkland dedication for medium and high density residential apartments with immediate effect for site plans submitted before March 2022.

In addition, there is a 35 per cent reduction for purpose built rental units, 50 per cent for affordable rental units; and CIL is waived for non-profit sector subsidized units.

In a report submitted to council, city staff anticipates approximately eight medium to high density residential developments comprised of apartments with CIL obligations to execute development agreements from now until fall 2022.

As a result, 810 units or 1.62 hectare of parkland obligations will be fulfilled by CIL payment.

The total CIL to be collected will be approximately $28.9 million. A 25 per cent reduction will be translated to approximately $7.2 million less in CIL collected by the city.

The city acted in response to concerns expressed by the development industry about Markham’s parkland dedication in recent years.

A study conducted for Building Industry and Land Development Association (BILD) in 2019, concluded that cash-in-lieu (CIL) policies are significant drivers of added costs on residential development in many municipalities.

Markham’s CIL rate was highlighted in the study, claiming in a high density development scenario, a high‐rise building built in Markham results in a developer paying $53,820 per unit, while CIL is $16,189 per unit in downtown Toronto.

City staff noted in the report, due to the increasing land values n recent years, the CIL rate for high density residential developments, such as those in intensification areas, can be approximately $60,000 per unit.

As land values continue to increase, it has been argued high-density residential developments would no longer be financially sustainable.

“A policy that results in higher per unit costs because of higher densities will discourage intensification and the transit supportive densities desired at many key locations in municipalities throughout the GTA,” the BILD study concluded.

Markham council approved the new housing strategy, The Housing Choices, June 14. One of the prioritized actions is reviewing permissions for additional residential units.

In Ontario, real estate developers are required to set aside parkland or public recreation space, which is often replaced by a cash-in-lieu payment. CIL rate is calculated at one hectare per 500 units based on a land value determined the day before a building permit is issued.

It's up to municipalities whether they take land or payments in lieu of land from developers. They also determine how those allotments are calculated, including whether they are capped.

Cash-in-Lieu rates in Markham are currently higher when compared to other municipalities in the Greater Toronto Area that have capped the maximum CIL rates for high-density developments. The caps range from $4,250 to $10,720 per unit.

However, the staff report noted some municipalities have indicated the per unit cap will impede their ability to acquire sufficient parkland to achieve the municipality’s parkland provision targets.

For example, in Richmond Hill, the motion to cap the CIL rate of up to $10,000 will lead to failure to fund parkland acquisition, park revitalization, park R&R, and new park projects needs in two years.

Instead of capping the CIL rate, Markham adopts a “Proximity Ring” approach which equally distribute parkland provisions on site or within a 500 metres radius, surrounding areas within a one-kilometre radius, and then the rest of Markham.

City staff said this approach allows Markham to achieve its parkland provision target, and provides a reduction in the overall cost of parkland acquisitions as the value of land decreases when moving away from the intensification areas.

The parks and open space study was initiated in 2016 and a new parkland bylaw will be in effect by fall 2022.