The OAA Reveals Another Key to Affordability

By Penny Munoz

Recently, the Ontario Association of Architects (OAA) released their first report estimating the cost of the site plan approval process in Ontario at a presentation at the Design Exchange. The report collected opinions from architects as well as other professionals in the development industry on how delays in the existing process financially impact homebuyers, commercial tenants, developers, municipalities, the local economy and jobs.

Having discovered serious concerns with regards to the timing, procedure and cost of the process, the OAA included Bousfields Inc. (Bousfields) and Altus Group Economic Consulting (Altus) in undertaking the study to highlight best practices and make recommendations for improvement.

The report is the first step in a series of discussions that aim to maximize the efficiency of the process. Change in the process will hopefully reduce unnecessary costs for both developers and homebuyers.

Currently, there is a basic framework for site plan approval across the province, however research indicated dramatic variations of application across the 31 reviewed municipalities. These variations often slow down communication between applicants and municipal agencies, increasing wait times from three to five months up to two years. The discrepancy can also lead to grey areas in what information is necessary to include on applications between municipalities, which also leads to delays.

Longer wait times in the submission and approval process mean additional taxes are charged on the vacant land, a cost which is immediately absorbed by the developer, but ultimately these costs are incorporated in the price of new homes and passed onto homebuyers.

In a press release the OAA stated that the added cost for every additional month in site plan review is:

• Residential developers $193,000 including additional taxes, financing, inflation on construction costs and materials for a 100 unit building. Over a 6-12 month period the additional cost of the delay can be $1.16 million – $2.3 million. These costs can be passed on to new homebuyers through higher prices.

• Individual new homebuyers roughly $2,375 including costs passed on through higher prices, lost equity by not beginning a mortgage sooner and additional rent costs.

•  Commercial developers $113,000 including additional taxes, financing, inflation on construction costs and materials for a 50,000 sf building.  Over a 6-12 month period the additional cost of the delay can be $680,000 - $1.36 million.

• Commercial tenants $2.50 to $2.70 sf including costs passed on by applicants through higher rents.

•  Local municipalities $159,900 to $241,600 in lost tax revenues and spending for a 100-unit residential building. Over a 6-12 month period the additional cost of the delay can be $959,000 – $2.9 million.

•  Local municipalities $4,100 to $16,000 in lost tax revenues and spending for a 50,000 sf commercial building and delays arrival of 250 new jobs and associated economic spinoffs.

Source: OAA press release

While each municipality upholds regionally specific common practices, there is no “standard” approach. One idea that was discussed was increasing the governmental role of the province to clarify requirements, impose legislated time frames and standardize the process. Sol Wassermuhl, Director of IBI Group and President of Page + Steele Architects supported this idea, recommending specifically that the province issue firm guidelines on best practises for a technical application.

However, this proposition was met with objections by industry professionals on the basis of application. CEO of MOD Development Inc., Gary Switzer said a standardized legislation would be unpractical. In taking each municipality’s needs into consideration, using Toronto in contrast to Lindsey, Switzer made it clear that there are incongruent conditions that need to be addressed; rendering a standard application inadequate for one or the other.

Other speakers included urban planner and author of Perverse Cities, Pamela Blais who said that composing a comprehensive development plan will positively influence the process without necessarily needing greater governmental involvement. She emphasized the importance of having skilled city planners and said that less regulation could make housing more affordable by reducing the amount of mandatory steps. Switzer agreed that strong city planners can help facilitate the process tremendously, referring to them as the “quarterbacks” of this market.

For laissez-faire economic thinkers, increasing government involvement will only produce further complications. Other members of the panel challenged these principles suggesting that interference will result in imprecise reflections of city needs; over-charging low-density cities in taxes or under-charging higher density cities.

Vaughan’s City Commissioner of Planning, John Mackenzie said that above all else, accessibility and sustainability are matters that need to remain a fundamental part of this discussion.

Overall, the review was a first step in the right direction, bringing industry professionals together to open a forum of discussion that will undoubtedly bring improvements to a growing industry.