There are as many as 2,000 surplus or underutilized government-owned properties which could be utilized to help ease Toronto’s housing and affordability issues, according to a new report from Ryerson University’s Centre for Urban Research and Land Development (CUR).
“We’re recommending that governments should look to see what they have and take advantage of it by doing inventories, which they haven’t done to a great extent,” CUR director David Amborski told RENX.
Amborski said with different agencies, departments and ministries overseeing properties at the municipal, provincial and federal levels, governments might not even be aware of what land could be developed, redeveloped or intensified in Toronto and across Ontario.
The report outlines three options for the properties:
* selling them at market value and using the proceeds as a source of revenue;
* selling them below market value in exchange for the provision of affordable housing units;
* or leasing them to developers and/or non-profit organizations, subject to the agreement that they’ll provide a number of affordable housing units.
“Every single piece of property is essential now that we have this ongoing housing crisis,” said Ben Myers, founder and president of Bullpen Research & Consulting Inc., a boutique real estate advisory firm focused on the residential housing market and new development.
The former Toronto military base that’s now the 571-acre Downsview Lands project is an example of surplus federal land being used to develop mixed-use communities.
The federal government has created a $200-million fund through its National Housing Strategy which supports the transfer of federal surplus lands to eligible proponents, including non-profit and community organizations as well as provincial and municipal governments.
This land has been designated for eligible affordable rental and ownership housing projects, including mixed-income, supportive and socially inclusive housing.
Program implementation will begin this year.
In 2017, the Ontario Liberal government released three parcels of land (almost 10 acres in total) through its Affordable Housing Program. The first phase included the West Don Lands and neighbouring properties at 27 Grosvenor St. and 26 Grenville St. in Toronto.
The West Don Lands sites have been allocated to Dream, Tricon and Kilmer Group on a 99-year leasehold basis to ensure the province maintains ownership. Plans are to build 2,000 residential units, 30 per cent of which will be dedicated to affordable housing.
The underutilized sites at 27 Grosvenor and 26 Grenville were sold at below market value to the former Canadian Real Estate Investment Trust (now Choice Properties REIT (CHP-UN-T)) and Greenwin Inc. They’ve been rezoned for 844 rental units – of which 257 will be affordable rentals – on just under an acre of land.
In December 2018, the Conservative Ontario government identified 243 pieces of land encompassing 14,600 acres to be sold at market value over a four-year period for the development of housing and long-term care facilities. Stage one kicked off last year, with Infrastructure Ontario listing 14 parcels of land for sale, for a total of 163 acres.
The report said that even if only low-rise developments were built on all 14,600 acres, this could add up to space for a minimum of 300,000 units, not accounting for the space needed for public amenities.
However, the properties being sold at market value lessens the probability that new units will be affordable. Amborski believes these sales represent a lost opportunity to provide below-market value housing.
School and LCBO properties
One recent example of a provincial agency using underutilized land to provide increased housing is the redevelopment of North Toronto Collegiate Institute. The school was in need of renovations, but also had some unused development potential.
The Toronto District School Board struck a deal with Tridel, which was given the unused space to build 472 condominium units in two towers. In exchange, the builder made a significant contribution to the rebuilding of the school and some joint facilities for the school and new residents.
School boards could be the source of other surplus site development opportunities that are going untapped, according to the report.
The sale of the Liquor Control Board of Ontario (LCBO) downtown Toronto headquarters and warehouse at 100 Queens Quay East to Menkes also put underutilized land to good use. The LCBO will lease back its space in the new mixed-use development, which will include housing for thousands.
The report said there are several low-rise LCBO stores which could be redeveloped to include a housing component.
CreateTO was established by the City of Toronto on Jan. 1, 2018 to manage its real estate portfolio. By CUR’s estimates, it has some 210 acres of land for sale or lease, 124 of which are already zoned for mixed-use or residential.
CreateTO projects have historically provided a density of between 100 and 200 units per acre, according to the report. This implies potential for 12,400 to 24,800 housing units on the available land. The majority of these properties are being sold at market value, however, with no provision for affordable housing.
Eleven properties (three that were already on the CreateTO list) have been approved by Toronto city council for inclusion as part of the recently approved Housing Now initiative to develop 40,000 affordable housing units over 12 years.
The city plans to develop 10,000 units on the first 11 sites being offered.
These lands will be developed on a leasehold basis in collaboration with the private sector to deliver 30 per cent below-market housing along with market-priced housing.
The program will also speed up the development process with faster approval timelines and exempt fees, such as development charges and building permit fees, to make the project viable.
A Toronto Region Board of Trade report looked at the development potential of 180 parking lots across Toronto. It showed that, by allowing air rights to be used for development, the city could generate more than 10 times the property tax revenue of parking lots.
CUR report recommendations
The report recommends identifying a way for municipalities to weigh the costs and benefits of selling land at market value versus selling the property at below market value in exchange for the provision of affordable housing.
While governments may lose capital gain on the sale of surplus lands at below-market prices, they could also generate affordable housing that could help trim down waiting lists.
“If a government feels that it has to provide subsidies for affordable housing, it’s easier to sell land for below cost rather than taking money out of the budget and having a budget expenditure for supporting affordable housing,” said Amborski.
The report also recommends earmarking some of the gains from market value land sales toward affordable housing projects. Amborski said CUR’s research hasn’t yet tracked what’s been done with the proceeds from these sales, but will likely do so in the future.
Amborski said some developers are more willing than others to build affordable housing, even if it’s not as lucrative, in order to build their profiles and demonstrate corporate social responsibility.
The numbers have to work
“Your numbers have to work,” Amborski explained. “You have to do your pro formas and see what you have to pay for it and what you can gain in terms of your lease rates.”
“I don’t know where that magic number is,” Myers told RENX. “If you mandate too many affordable units, less developers will be interested in the project.”
Myers believes buildings with a mix of market rate and affordable housing treat both lower-income tenants and developers fairly.
“There are always going to be detractors on the political side wanting buildings to be 100 per cent affordable, but someone has to pay for the time that goes into planning these projects and executing them, and construction companies aren’t working for free.
“It’s unfortunate that you see some of these stand-alone affordable projects not moving forward because of where construction costs are. I think mixed-income is the best way to go about it.”