Dear Urbaneer: Are More High-Rise Towers Coming To My Neighbourhood?

Dear Urbaneer, Real Estate

Welcome to this month’s installment of Dear Urbaneer, where I help my readers by answering their real estate questions. This month, I am responding to a query from a reader who is concerned about the amount of high-rise construction at the end of his residential street in a neighbourhood that is mostly Edwardian single family semi-detached and detached housing stock.

 


 

Dear Urbaneer:

I’ve lived north of Bloor Street, west of Dundas in the West Bend Neighbourhood for over 20 years. I love it because it’s close to transit, a leisurely stroll to High Park, and it’s home to a collection of pretty tree-lined streets and avenues dotted with character 2 and 3 storey century-old brick housing. Recently, to my horror, a developer began constructing a 36-floor condominium at the end of my street. This is wrong. This building will completely change the dynamic of my neighbourhood. There will be more people, more noise, and more traffic congestion.

I understand Toronto needs more housing, but I think new developments like this one will ruin my neighbourhood. And there is talk that there are more developments in the pipeline. I hear developers are reportedly paying above-market prices to purchase houses in the area that they will tear down and build on. Is this inevitable or can I stop it? How is it determined where high-density developments are built?

Signed,

Worried About Highrise Housing 

 

 

Here is my reply:

Dear Worried:

Creating more housing in supply-strapped Toronto has become a political priority, and is occurring today in many forms, whether that’s constructing new mid and high-rise condominiums, converting a single-family home into as many as 4 units, or adding a laneway home or garden suite to an existing property. Municipal urban planning and policy departments are getting directions from all three levels of government to fast-track land intensification and densification. This means matters involving zoning, approvals, and development criteria are being changed to meet these objectives.

Why?  In a nutshell, Canada has aggressive immigration targets to aid our impending labour force gaps as the Canadian population ages. This objective requires our housing supply to be increased quickly in order to shelter a rapidly expanding population. Nineteen months ago, Premier Ford’s Progressive Conservative Party established the objective of building 1.5 million new homes in Ontario over the course of a decade by setting specific housing targets for 29 of the province’s largest and fastest-growing municipalities.

This is an impossible task to accomplish, given there are as many as 20,000 unfilled construction jobs in Ontario and around one in five construction workers in Canada are due to retire within 10 years, even though Toronto has been leading the way compared to other jurisdictions (per this CBC piece): “Here’s How Each Ontario City Is Doing On Hitting Provincial Targets For Building New Homes.”

Given this circumstance, it’s going to strain anyone struggling with high shelter costs and force many to locate outside the GTA where rents are cheaper, therein obliging them to allocate their leisure time driving bumper to bumper into our congested metropolis on a regular basis. Furthermore, the real costs of owning a car and commuting on a daily basis are metaphysically draining. The solution? Build higher-density urban housing in proximity to public transit. Of course, because land is scarce, this means building up instead of out – hence why a high-rise is being constructed at the end of your street on an arterial road that for decades has been home to manufacturers and light industry. (As a point of interest, I’d like to mention that this report released by Environmental Defence claims that Ontario has enough land to build more than two million homes by 2031 without developing the Greenbelt. But, again, they are speaking of the Greater Golden Horseshoe – stretching out as far as Barrie, Brantford, and Peterborough – not just the GTA, where land is the most scarce. So our problem remains!)

No matter whether a new dwelling is being created from an existing structure, as a secondary structure, by severing one lot into more, as a new urban infill, or as one of a low-rise, mid-rise, or high-rise multi-unit project, all urban planning and real estate development in the City of Toronto is governed under The Official Plan. The Official Plan is a legal document approved by the city council that describes the strategic objectives and policies to ensure that “the City of Toronto evolves, improves, and realizes its full potential in areas such as transit, land use development, and the environment.” This includes designating the locations where people live, work, study, shop, dine, relax (green spaces), and play (entertainment, recreation & culture), as well as how they get from point A to B. It’s implemented by a series of zoning policies, by-laws, and amendments established by the municipality and the Ontario Land Tribunal (2021) that also addresses environmental concerns and whether the existing infrastructure – like utilities, schools, transit, and green space – can accommodate a growing population or must be upgraded. Two examples of policies in the Official Plan include the inclusionary zoning amendment for affordable housing and bylaws for buildings with a heritage designation.

The intent, in theory, is to allow more housing units to be built according to the urban planning and policy objectives of the municipality in partnership with the Province of Ontario’s Building Faster Fund without destroying the existing residential fabric of the city. In your circumstance, high-rises will not be constructed within the pocket of residential streets where you reside but on the major arterial roads bordering your neighbourhood, specifically Dundas Street West and Bloor Street West will inevitably see more high-rises being constructed.

I empathize with the shock and dismay you felt discovering a 36-storey tower was being constructed at the end of your street. However, this new complex is simply following in the footsteps of the twin 29-storey triangular towers called The Crossways located two properties south. Built in the brutalist style on the northeast corner of Bloor and (2340-2360) Dundas West in 1974, it’s surprising that nearly 50 years have passed and The Crossways is only just now serving as the precedent for more high-density housing. However, the imminent arrival of change to your local environment is a lot to absorb, especially when multiple projects come onto your radar all at once. In your circumstance, you’ve also got LNX Residence – a 27-storey mixed-use rental building – under construction at 2376 Dundas West (393 units) just one door north of The Crossways – plus another three mixed-use residential buildings being 18, 25 and 36-stories tall at 2400 Dundas West (873 units) under construction beside LNX. Total number of new units = 1266.

 

2376 Dundas Street West

 

2400 Dundas Street West

 

And then there’s the block of Bloor Street West to Keele Street just south of your residence, where on the northwest corner of Dundas West is another 27-storey mixed-use rental building at 1540 Bloor West (354 units), with a proposal for new construction at 1630 Bloor West (19 units), a new 12-storey condo under construction at 1660 Bloor Street West (174 units) and a proposed 19-storey condo at 1728 Bloor West (99 units). Total number of new units = 646 units.

 

1540 Bloor Street West

 

1630 Bloor Street West

 

1660 Bloor Street West

 

1728 Bloor Street West

 

And, you’ve also got to absorb the idea that the 10-acre site on the southeast corner of Bloor and Dundas owned by Choice Properties – where the Loblaws currently is located – is getting redeveloped. When this substantial parcel of land redevelopment was first announced I deemed the architecturally resplendent collection of exclusively commercial edifices to be excellent. However, it’s since been watered down to an equally-large mass of 7 banal commercial residential crackerjack towers that are 6, 8, 10, 22, 24, 28, 32, and 38 stories tall and one day containing a total of 1890 residential units. What a shame.

 

2280 Dundas Street West

 

The truth is this: established residential neighbourhoods located in proximity to transit lines are going to see their major arterial roads transform into mid and high-density mixed-use corridors. Nowhere feels this more right now than midtown Toronto’s Yonge & Eglinton area when, in June 2019, the provincial government intervened and – without warning – removed the city’s proposed 15 to 20-storey height limit for future high-rises in its Midtown in Focus plan. In the four years since developers “have applied to build about 700 more storeys than the city would have allowed.” This is the new reality to accommodate Toronto’s ever-increasing workforce.

In your situation, it’s reasonable to presume that within the decade – if all of these buildings are constructed as outlined – you’ll have 3800 more dwellings and about 6000 more neighbours loving, like you, being close to transit, strolling to High Park, and admiring the original pretty tree-lined streets and avenues with character 2 and 3-storey century-old brick houses. Although you, like most long-time homeowners, tend to fear any change they believe will negatively impact the value of their property or their quality of life, once the high-rises are complete I think you’ll appreciate having more local purveyors and greater opportunities for community engagement. Furthermore, although property values may flatline during the construction period due to delays, traffic congestion, and the uncertainty that accompanies a changing environment, once the high-rises are complete the real estate values of the century homes in your pocket are likely to spike higher. Why? Because many of your new high-rise neighbours will look down from their sky perch and envy the size of your dwelling and your private outdoor paradise. Already sold on the Triple-A location, the ones who are suitably affluent will make it their quest to purchase a neighbourhood property like yours.

 

* Image courtesy of GoodHousekeeping

 

End Users Pay The Most, Typically

I want to address your concerns about developers swooping in and paying huge premiums to entice your neighbours to sell. Although you may have heard something different through the grapevine, this typically doesn’t occur from my experience in the real estate development industry.

First, there is no mandate by city planners or politicians to rezone our existing urban residential fabric of 2 and 3-storey houses in order to accommodate mid and high-rise towers.  Instead, it is the mixed-use commercial residential arterial roads throughout the original City of Toronto that will see higher density, as well as the 40 hectares of development that surround the new transit hubs along the Yonge North Subway Extension in Richmond Hill and Markham will bring to, particularly those on major public transportation routes, that are slated to have mid and high-rise density. Here’s a CBC post called “They’re called ‘transit-oriented communities.’ But to some GTA residents, they’re a ‘condo wasteland”.

And if the location has multiple transit connections then the density gets supercharged. This is where developers keen to build larger projects are focusing.

As desirable as any parcel of land may be, every dollar that developers spend on their real estate projects ultimately reduces the profit margin. With material costs increasing during the pandemic and not substantially decreasing since, the unpredictability of the supply chain making development completion dates uncertain, interest rates spiking (which is expensive for financing construction), and labour costs going up in response to inflation (yup, don’t forget inflation), the likelihood of a developer overpaying at the outset to acquire a development site isn’t likely. It’s simply not good business. Complicating matters further is the fact that all of this is happening at a time when the pool of pre-construction buyers has been shrinking, and the demand for shelter is coming less from the premium-paying luxe-condo-seekers (where developers stand to make the most profit), and more from those in need of affordable suites.

People often make assumptions that shelter developers are super rich and flush with cash, but the truth is… they’re not. They’re more likely to be financially comfortable and flush with other people’s cash, often in the form of investors. And because they are obliged to be accountable, they operate rationally, pragmatically, and cautiously to ensure they can extract the highest return on investment in order to impress their patrons and preserve their good standing. As a result, they do not offer sums that are based on desire or emotion like <drum roll, please> Buyers who are purchasing a primary residence.

As a realtor who represents singles, couples, and nuclear & multigenerational families buying Toronto real estate, it is the ‘end user’ household profiles – meaning they will personally occupy the property – who typically pay the most to secure a dwelling. This is often because no matter how much money one has, when it comes to Toronto housing stock, finding a dwelling that meets all of one’s housing wishes, wants, and needs is surprisingly as rare as finding a residence that ‘feels like home’ (I call these the Prince Charmings of bricks & mortar). So when end users do find one of these, it is sheer desire that compels these folks to offer an emotional premium in the form of more dollars.

I have a great example to share with you, which happened when we listed A Stately Edwardian Duplex With Lower Level Suite, Steps To High Park during the pandemic. Coming to market using the List Low Holdback Approach, after exposing the property for seven days, on the scheduled Offer Sate we received a total of 12 offers from 4 different Buyer profiles. Here’s how it shook down:

The highest prices were submitted by ‘Multigenerational Families’ who found the spacious 12+3 room purpose-built duplex elegant, well-renovated, and with sufficient private space for all members of the household. Furthermore, this dwelling type is quite rare in the downtown core, so when one comes to market this Buyer profile has to be aggressive in locking it down, otherwise they may be waiting a long time before a similar dwelling comes to market for sale.

The buyer profile that ranked second was the ‘End Users Seeking An Income Supplement’. Their offering sums reflected the highest sum they could personally pay to occupy one of the units (which was more than what it would rent for on the open market) plus the highest market rents they believed could be charged for the two units they would rent to tenants once the property purchase closed.

Because of this, their bids surpassed the ‘Investor Buyer’ profile which ranked third. At the time this property was offered for sale, the cap rate investors were willing to pay was in the range of 3.8% to 4%. It didn’t much matter what the condition of the property was (this amazes me still to this day, which I write about in Turning A Blind Eye To The Real Costs Of Toronto Real Estate Investment Properties) but if one could demonstrate the market rents similar units garnered, you could confidently assure your Seller they you could anticipate a bid with that cap rate.

And the Buyer Profile offering the lowest amounts? It was the ‘Single-Family End User’. These were the Buyers who were keen to secure a property in the area and, because there wasn’t much available to purchase, were willing to deconvert this purpose-built duplex into a single-family residence for their nuclear household. However, because the multi-unit property had to be modified to accommodate their single-use requirements, they offered lower sums that took into account the renovation costs they would have to incur to make the property their own.

This is a very good illustration of how different Buyer Profiles establish their own barometer of value on a case-by-case basis. The optics are entirely their own. It also attests to the fact that in the central core of the city – even in flat-lining conditions – we have reached a point of population saturation where there will always be more Buyers than there are houses to buy, particularly in MLS Districts C01 to C11, W01 to W03 & Eo1 t0 E03.

 

 

So What Do Flippers & Developers Buy?

If a dwelling is in poor condition, nearing obsolescence, or has suffered wind, water, or fire damage – meaning that it requires significant time, energy, and capital investment in order to bring it to the standards of the Ontario building code, the base requirements of most insurers and the taste preferences of the specific market baseline then I’m inclined to say most Buyers (particularly consumers seek, to comply with the building code and/or the minimum requirements set by lenders in order to secure a mortgage (if the property isn’t habitable one cannot register a mortgage and therefore the buyer must pay cash) most end users (who may not have the time, money, interest, or skill set to undertake a project of such magnitude) will not submit an offer to purchase. In many instances, because Toronto’s housing stock in the original City of Toronto is predominantly 70 to 160 years old it is more economical to tear it down and replace it with a new larger shelter that offers more utility. This, however, only occurs if the dwelling is not designated heritage.

I do want to acknowledge that as cities expand and commuting times increase, freehold properties in the central core become more coveted and therefore more valuable. However, it’s important to understand that the value of the property is the total of two sums: the value of the dwelling + the value of the land.

Much like when a new automobile is driven off the dealer’s lot, a newly constructed building is at its highest value and depreciates as it ages. Meanwhile, the older a building gets, the more it costs to maintain, while the structure simultaneously goes from ‘new’ to ‘used’.  The structure’s countdown to obsolescence begins as soon as it’s built and required maintenance and repairs become more frequent and expensive as time passes. In fact, in the central core of the City, as soon as an existing structure reaches an age of 70 years or more and has had limited capital improvements, its real value only accounts for about 5 to 12 percent of its selling price. Crazy, eh?

Meanwhile, even as an aging dwelling goes from decent to dilapidated, the land it sits on continues to escalate in value. About 85 to 95 percent of the total value of a property is in the value of the land when the existing structures are 70 years old or older. This is because structures begin depreciating the moment they are built, much like when an automobile is driven off the new car lot. From that moment the built form begins aging and will require maintenance and repairs for the rest of its economic life.

Like all products, it is constructed with a predetermined lifecycle and with planned obsolescence. In these situations, the land the fixer-upper is situated on will command a higher sum than what end users are willing to pay for the fixer-upper. In this post, I illustrate that every neighbourhood regardless of income is subject to gentrification: Gaudy Or Grand: Behind The Doors Of Multi-Million Dollar Mansions In Bridle Path & St Andrews-Windfields (Plus Lessons On The Lifecycles Of Neighbourhoods & Houses.

 

 

 

High-Density Transit-Oriented Communities

The construction of high-density housing is limited to specific locations that are mostly along major arterial roads and areas with transit hubs like subway stations and LRT lines.

This underscores the pivotal role that transit plays in housing development, and also in infrastructure. With high-rises come pockets of dense population, so having a transit hub is an essential part of urban planning, failing which there will be or there is spillover effects with traffic and services, as well as various environmental impacts.

Have you seen my post, entitled, The True Value Of Public Transportation In Toronto?

And then there is the issue of land upon which to build high-rises; it’s a commodity that’s not easy to find in Toronto. We should be looking to former brownfields or other non-residential uses are contenders for high-rise construction.

I wrote about the significant role that transit plays in construction in this blog:  All Aboard The Eglinton Crosstown LRT

 

 

 

So What Can Be Built Beside My Single-Family Dwelling?

Although the avenue of Edwardian residences you live on may have a high-rise being constructed at the end of the street, you don’t have to worry it will be blockbusted and redeveloped into high-density housing. Yellowbelt zones – the areas that comprise Toronto’s single-family neighbourhoods are not seeing any radical changes to the size and setbacks that one can build, other than those neighbourhoods that had a building height limit of 8 meters now have as-of-right to 10 meters. A modest change, compared to a high-rise tower.

It’s not completely cut-and-dried though. Areas designated with Yellowbelt zoning  (i.e. ‘single-family’ residences), since the year 2000 have been legally allowed to have an accessory suite, which technically increases the residential opportunity in a single lot. Unfortunately, at the moment the majority of these do not comply with the province’s building or fire codes which can increase one’s liability while diminishing one’s return on investment.

I wrote about the development possibilities of the Yellowbelt, and how they might assist with the housing supply, particularly for the much-needed missing middle housing in Toronto Real Estate, Yellowbelt Zoning & The Missing Middle: Part One and Part Two.

 

 

* Image of laneway suite courtesy of sustainable.to

 

Laneway Housing, & Garden Suites Give Homeowners More Options And More Space

There have recently been changes to what one can construct in a Yellowbelt neighbourhood, with changes to zoning and as-of-right policies over the last few years to permit homeowners and investors to add residential opportunities to their properties.

In 2018, properties with laneway access that met the size and setback requirements were granted the as-of-right to construct a laneway home. Here’s my post About Laneway Housing In Toronto, By Sustainable And Urbaneer. With these amendments, laneway housing has presented an opportunity for homeowners to tap into their existing property footprint, to create an additional living suite.

Similarly, and more recently, in 2022, approval for garden suites was granted.  In 2022, as-of-right garden suites were approved for properties that meet certain criteria. Here is my post called Building A Garden Suite – On A Now Sold Property In East York, Toronto – By Lanescape.

The main difference between the laneway suite and the garden suite is access. A laneway suite is located on a lot that abuts a publicly designated laneway, whereas a garden suite doesn’t have laneway access.

Both are subject to zoning and bylaws around size, structure, footprint, setbacks, and accessibility for public services, and both represent excellent opportunities for homeowners to create more ‘housing’ on their existing footprint while keeping the streetscapes generally consistent.

They are income-generating spaces, for those looking to rent out part (or all) of their property. They are also an excellent option for Multi-generational or blended families, wanting to live together, but maintain some privacy. It’s also a great option for aging in place, with being able to be close at hand to the main house, but still maintain independence.

 

And Now Four Units As-Of-Right

The most recent development in zoning that allows for the creation of multiple homes on a single lot, is the as-of-right for multiplexes. As of earlier this summer, a single-family property is now allowed to contain as many as four units, with the approval of as-of-right to create up to four units in a location that previously was zoned for single-family homes. I wrote about this in As-Of-Right Multiplexes Create Missing Middle Options For Toronto Real Estate.

The introduction of this as-of-right policy is significant, in that it represents a valid opportunity to meaningfully create more housing in areas that benefit from sought-after urban amenities, and where supply is notoriously lacking. Within this as-of-right,  homes cannot be any larger than the majority of single-family houses that have been built over the past three decades and received approvals from the Committee of Adjustment.

These are typically one times the lot coverage. In other words, the new large dwellings in single-family areas that have been built since the 1990s will now be able to contain four suites, but they can’t be larger. One can build this + a laneway suite or garden suite if it meets all the requirements, too.

Recently I had a listing in East York that comprised a 100-year-old wood frame bungalow on a 31×103 foot lot with a private drive. In as much as I anticipated it would go to a developer, I tried several different approaches, focusing primarily on keeping the existing bungalow that someone could occupy as they age in place.

Here’s that post:  A Cottage To Age In Place In Downtown Toronto, Ontario, Canada. I also posted this piece because I would rather see a multiunit dwelling be constructed rather than a monster home for one family. It’s about preserving architectural continuity, but also about making maximum use of a property to house multiple residents. This explains my own desire to see a mix of housing for Torontonians –> Build A New Multi-Generational Family Residence, Co-Housing For 4 Friends, An Income Property Or Small Condominium In East York, Toronto

The creation of new housing is a challenge that Toronto will continue to face, with policies in place that will prop up demand significantly.

Thank you for taking the time to write; we’ll keep you apprised of new changes in zoning or policies that might directly impact the neighbourhoods many Torontonians hold so dear.  Despite the ongoing housing crisis, we can understand the desire to preserve the fabric of what they’ve enjoyed for so long, but change is inevitable – particularly in a City like ours that has become perhaps Canada’s most important commercial, distribution, financial, and industrial centre.

Whether you are a Buyer or a Seller, it can be helpful to understand where and when that supply will come from, and how that development may affect you as a homeowner. Furthermore, it is helpful to know what options you have as a homeowner, if you want to add to your current (or future) residence in the context of creating more homes in one place.

 


 

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Thanks for reading!

 

-The Urbaneer Team

Steven Fudge, Sales Representative
& The Innovative Urbaneer Team
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