Construction Cost - Association of Ontario Land Economists

PROFESSIONAL JOURNAL OF THE ASSOCIATION OF ONTARIO LAND ECONOMISTS
WINTER 1995
Volume 24, No. 3
Construction Cost
by Michael Barker PLE, PQS
Niall Finnegan A R K S , PQS, PLE
Lookking back to 1983
In order to appreciate where costs have seqled since the peaks of
1989, Helyar & Associates has analyzed both labour costs and
material costs (if.input costs), as well as the ourput cost (i.e. cost to
buyer) over the pa& six years.
120
t
Labour Costs
The labourcost graph jndicates a “grocery bag” of various unim
labbur rates (carpenter, electriCian, plumber, etc.) which have been
weighted to reflect the blended labour compoqent in bdding costs.
This graph depicts how union contract rates have, on average,
increased by some 20% since 1989. The bulk of this increase wm
achieved d u i q the 1990 and 1991 contractsettleme~~ts
at which
time the full effectofthe recession was still urlknown.Labour rates
have essentially been flatsince 1992.
80
70
--
a
1989
1990
lWl
1992
1993
1994
This graph, however, does not Eflwt the impact of union local rate
discounting OT non-union labour.
Material Costs
The maberial cost graph also indicates a “grocery bag” of various
materials (concrete, steel,lumber, drywall, mechanical and electrical) which have been weighted to reflect the blended materid
component of building costs.
Intmstiugly enough,despite merit mcreases insome materials
costs, blended material costs have droppsd by some 17% since
1989. If you use the mugh rule of thumb that buildings require a
50/50 labourbterials mix, this approximately canoels the labour
increase.
Tlae largest m
a
wprice ductions occurred in w n c m and steel
(reinf’iug
and structural members).
(continued overleafl
output costs
The line depicting output costs proves
very interesting in light of the labour and
materials trends. Output costs represent
the cost to build quoted by a general contractor or construction manager/developer.
These costs invariably include overhead
and profit which, as we all are aware,
are dictated by the economics of supply
and demand and certain administrative
efficiencies.
Output costs, on average, have fallen some
25% since 1989. Analyzed in the context of
the labour and material graphs, this reflects
the absolute shrinkage of profit and, most
likely, the majority of overhead costs
formerly attached to a project. Also, as can
be seen from all the building graphs, output
costs have remained flat since mid 1991.
Input Costs
These two lines representing the Canadata
index (Southam Construction Data) and the
ENR Index reflect the trends of input costs,
being material and labour, tracked by these
companies. These indices reflect an average
increase of some 15% since 1989.
It is our understanding that these costs
reflect quoted wholesale/retail material
prices prior to any discounts. To put this
into context, the discount on concrete material supply and blockbrick supply has
reached as much as 50% off the list price in
recent years.
The Inflation Monster
Will It Stay Sleeping?
The construction industry is the last market
to emerge from the recession. Realistically,
given the depth to which it fell, construction was for all intents and purposes in a
depression. The Toronto Dominion Bank’s
economic department shows how far this
industry’s recovery lagged behind manufacturing, mining, utilities and services at this
time last year.
Furthermore, although extraordinary
profit taking was recorded in all areas of
the construction industry throughout the
mid and late eighties, the last five years
have erased the vast majority of these
profits. Therefore, the companies which
remain in business today have done so
solely because they have made fundamental business decisions with regard to
downsizing, market diversion and cost
cutting. These same companies are in a
position to capitalize on an industry
which is just now beginning to show
some signs of life.
The following forces are
going to impact construction costs over the
next year and, depending
on the extent, they will
undoubtedly fuel
inflation:
130.0
Cost Index Comparison
120.0
1. The ability of major
industry suppliers
1 10.0
such as steel, plastic,
copper pipe and
lumber to pass along
substantial price
100.0
increases to the
market:
Reinforcing steel
has increased +/90.0
30% over the last 12
Projected for 1994
months.
Concrete suppliers’
price lists have
80.0
remained stable;
HELYAR
however, the key
(output)
indicator is the discount rate. Current
70.0
discounts could
shrink considerably
if demand increases,
which we project
will be the case:
drywallers, painters, plumbers and elece.g., Highway 407 is concrete hightricians all have scheduled increases of
way. An attempt by suppliers to reduce
between
0 - 2% due in May/June 1995.
discounts in 1993 and 1994 didn’t hold
It remains to be seen what impact these
and another attempt is likely in 1995.
increases, as well as the contracts expirMasonry suppliers did not increase
ing
in 1995, will have on the output
price lists for 1994. However, recent
cost.
discounts have been in the 20% to 25%
range -down from the 50% discounts
3. Supply and demand -the U.S.
offered in 1992 and 1993. As with conEffect:
crete supply, the discounts may shrink
Currently the United States is experishould demand support this. We predict
encing strong growth in its housing and
marginal changes to masonry supply
construction market (particularly states
prices for 1995 with premium pricing
bordering Canada). This, together with
for the most popular brick.
our low dollar, allows Canadian suppli0 Lumber suppliers’ prices have seen
ers of steel, gypsum board, lumber, etc.
increases of some 40% to 45% in the
to deliver large quantities of goods at
past year. More increases are anticifair prices to the U.S. Given the impact
pated in late springlearly summer if
of NAFTA and ‘3ust in time” inventory
demand is sustainable.
levels, this extra demand may cause
Gypsum board costs have increased by
additional price pressures for a growing
some 20% over the past year.
Canadian market.
0 Aluminum and copper prices have
4. Profit Recapturing
escalated by significant amounts causUnquestionably, the margin between
ing window and plumbing prices to
input costs (i.e. the cost to the builder)
escalate considerably.
and
output costs (i.e. the cost to the
Plastic prices have increased, thereby
buyer) is the most difficult factor to
increasing plastic piping costs for land
predict in the construction industry.
servicing.
Tiered pricing to different clients
2. The impact of wage increases sched(public versus private), productivity
uled under previous collective
differentials between same-trade work
bargaining agreements:
crews, and recapturing of lost profit
Under the terms of previous collective
will return; however, the question is
bargaining agreements, labourers, formwhen. Furthermore, Toronto is witworkers, bricklayers, carpenters,
nessing the simultaneous construction
\
2
\
Residential High Rise
Canadian Industries:
Recovered Since the Recession:
As at 1993-Q4
We are beginning to experience the return
of high rise condominiums to the GTA area
after a very long absence. Construction
costs currently range from $70 per square
foot (medium quality) to $98 per square
foot (luxury quality), depending on site
specifics and whether the project is in an
urban or suburban location.
YES
NO
TOTAL ECONOMY
Manufacturing
M
i
n
i
n
g
1
1
1
Utilities
Other Primary
Construction
I
-1
Services
80
90
100
110
1 20
indexes of real GDP at factor cost: 1 990-Q1 =I 00
Source: Statistics Canada and TD Dept. of Economic Research
of two subway lines, the convention
centre expansion, the trade centre at
exhibition stadium, Highway 407,
and numerous federally funded projects under the infrastructure program.
Price increases will most definitely
occur.
Given the foregoing factors, we feel the
“inflation monster” will arise and, depending on the amount of stimulus, the
construction market could see double digit
increases. We are particularly concerned
with increases in the high rise housing
sector, which historically pre-sells homes
up to 20 months prior to occupancy thereby retyning the cost/price inflation
spiral to the industry.
Summary of Greater
Toronto Area Markets
Commercial High Rise Of‘fice
This market remains flat with very tight
pticing of any new work by the key
general contractors. Public or institutional
clients are witnessing slightly higher
pricing levels than the private sector and
are targets for excessive claims.
Downtown class B space costs +/- $80 to
$90 to construct per square foot while
Class A space still commands between
$90 and $175 per square foot depending
on size, location and quality. (Costs
assume 30% underground parking
components.)
Low Rise Of‘fice
(2 to 5 floors)
This area has seen slightly more activity as
“build to suit” projects have proven desirable to clients wishing to take advantage of
low construction costs. However, the multitude of design-build contractors has kept
price levels competitive. Suburban base
building office costs are remaining in the
range of $58 to $73 per square foot.
Conversion of Office to
Residential
We have witnessed the emergence of this
“new” market thanks to the City’s decision
to process applications under Committee of
Adjustment rather than a rezoning application. We caution all comers in this market,
however, as costs can range from $40 to
$90 per square foot of gross floor area,
depending on the extent of retrofitting
required.
Residential Low Rise
Construction of single family houses, townhouses and low rise clusters dominates the
housing market today. Furthermore, the
majority of the projected +/- 35,000 unit
starts will take this form. Due to the
increase in lumber prices (+/- 40% in the
past year) and the building code changes
which took place in the fall of 1993 (+/$3,000 perhome), costs have risen by some
8% over the past year. Detached singles
range from $41 to $49 per square foot and
townhouses range from $45 to $57 per
square foot depending on size, location and
quality.
Industrial
The industrial market is the busiest, next to
the housing market. However, an oversupply
of qualified contractors and designbuild companies has kept costs in this
market as low as +/- $29 per square foot.
Shopping Plaza
The construction of small shopping plazas
(i.e. under 50,000 square feet) has returned
to new subdivisions which are currently
under construction. Also, specialty plazas
have emerged. Construction costs remain
flat around the $48 to $58 per-square-foot
range; however, they can reach more than
$100 per square foot on specialty plazas.
3
Conclusions
Based on the foregoing factors, we believe
close attention must be paid to market indicators which will lead to inflation in the
construction industry. Although many factors could push costs upward, the ultimate
extinguisher is the inability of the market to
pass these increases on to the end
userbuyer in the form of price increases.
For clients planning future construction
projects relying on cost stability, we stress
caution.
Michael Barker and N i d Finnegan are
both directors of the Toronto-based cost
consulting and development management
firm, Helyar & Associates.
Valuing Environmentally
Impaired Real Estate
by Peter Fodor B.Sc., B.Comm., FRI
1. Lower Rental Rates
The achievable rental rate for
a stigmatized property would
be less than for the same
property unstigmatized.
Few people would disagree
with the assertion that environmental contamination
diminishes a property’s value,
yet measuring this diminution
is a nascent area of specialh t i o n within the appraisal
profession. Almost everyone
is valuing impaired real estate
too high.
2. Reduced Occupancy
Levels
Occupancy levels over the
long term would be expected
to be less as a result of the
stigma. Existing tenants are
more likely to vacate at the
termination of their leases
and it often takes longer than
normal to find a replacement
tenant. This results in a
higher loss of rental revenue
during that extended absorption period, as well as
slippage in the recovery of
operating costs and realty
taxes in net lease situations.
Exactly how do contaminants
or pollutants impair property
values? How does one measure this impairment in
value? In this short article,
I will attempt to address the
salient issues behind these
questions in a qualitative
fashion.
Why Is Value
Impaired?
0
0
Remediation Costs
The cost to remove, clean
up and “remediate” the
contamination is most
often an explicit cost.
With the assistance of environmental
and remediation engineers to identify
and measure the type and extent of contamination, the cost to remediate the site
can be estimated. This factor in the
impairment of property values is now
well recognized.
The Stigma Effect
This is the second, and far less understood, factor in value impairment. Even
after remediation, the property is quite
literally “branded” as problematic and
risky. In part, this perception is based on
the fear that the remediation was not
completely done or was unsuccessful.
With changing environmental standards,
there might also be some concern that
the remediation could be classified as
incomplete at some future date. The
more uncertainty there is about the precise nature and extent of the
contamination, the greater the likely
negative effect on the property value.
How Stigma Decreases
Market Value
0
Reduced Marketability
Reduced marketability is a reflection of
a decrease in demand there are a
reduced number or range of buyers
making offers and those offers are often
at substantially reduced offering prices.
These circumstances result in fewer
sales of environmentally impaired properties.
Reduced Net Operating Income
The identification of contamination or
pollution on a property almost always
impairs the ability to generate net operating income. In the direct capitalization
method of the income approach to value,
reduced net operating income results in
less income to capitalize and, hence,
diminished property value. The stigma
of environmental contamination can
reduce net operating income in some of
the following ways:
4
3. Higher Operating
Expenses
Marketing expenses to maintain rents and occupancy
levels could be expected to be
higher. Ongoing professional
services may be required, to
determine whether contamination persists. Monitoring the cleanup and
ensuring that the property is maintained
at an uncontaminated level also adds to
the ongoing costs. Both the availability
of insurance (including non-availability
of environmental impairment liability
insurance) and the extent of coverage
will probably be reduced. Insurance premiums are much higher than for
unimpaired properties.
Other Factors
In this short article, there is barely sufficient space to deal with the fundamental
concepts of valuing environmentally
impaired real estate. Some additional
topics that are germane to this issue
include:
a) lack of mortgageability
b) deferred utility during remediation
c) fear of hidden remediation costs
d) the “trouble” factor and opportunity
cost
Direct Comparison
Approach Won’t
Work
In order to measure the amount of impairment to the property value, one must first
value the property as if uncontaminated,
using normal approaches and procedures.
Then the property must be valued taking
into account all the factors caused by the
contamination.
Unfoytunately, the direct comparison
approach to value is of little assistance in
the second part of this exercise, for
virtually no reliable market data exist that
can be applied directly to contaminated
properties. This is because properties
generally cannot be sold, rented or
conveyed in a contaminated condition. In
addition, the degree and kind of contamination is often so unique to a property that
it would be almost impossible to make a
meaningful comparative analysis between
a sale of any other contaminated property
and the subject property. Transactions that
involve contaminated properties are, therefore, suspect and tend to be unusable for
direct comparison analysis.
Valuing Stigma Effects
Instead, the appraiser must use subjective
or relative analysis to modify capitalization rates, discount rates, and/or
reversionary capitalization rates. The
actual numbers chosen will reflect the
appraiser’s understanding of risk for a
large number of factors. For example,
how does the buying public perceive the
risk of the contaminants? One has only to
look at the ongoing evolution of the perception of risk for urea formaldehyde
foam insulation (UFFI) to see how this
can work. UFFI has gone from zero premium, to a “good thing” supported by
government grants, to unmarketable, and
now is perceived as not really all that dangerous. On the other hand, some
substances which were perceived until
recently as having little or no risk now are
known to be very dangerous.
To estimate the influence of contaminants
on future operating income and property
values, the appraiser must be comfortable
with several different scientific disciplines
and with translating risk perceptions into
financial terms. The following are three
possible ways of applying a risk premium:
Overall Capitalization Rates
One of the valuation techniques of the
income approach to value is direct capitalization of a stabilized net operating
income. The capitalization rate is dependent on equity-yield requirements,
mortgage terms available and anticipated
future appreciation or depreciation of the
property. For properties with impaired
marketability, these three components of
the capitalization rate remain intact, but
each is altered by the change in risk as
perceived by the investor.
Discount Rates
Discounted cash flow analysis takes into
account the time value of money, to arrive
at a net present value for future cash
flows, discounted to the date of valuation.
Everything else being the same, an environmentally contaminated property would
have a higher discount rate than an uncontaminated property -and, therefore, a
lower value.
Reversionary Capitalization
Rates
A reversionary capitalization rate is used
to derive an indication of the selling
price of the property at the end of the
deemed investment horizon, discounted
to the valuation date. Depending on the
unique circumstances of each contaminated property, the reversionary value
may range widely. For example, at the
end of its economic life, one contami5
nated property may not be redevelopable,
in which case the reversionary value may
approach zero. For other properties, marketability may still be impaired, in which
case reversionary capitalization rates
would be lower than those for similar
uncontaminated properties.
Conclusions
Measuring the stigma effects of environmental contamination on property value is
both an art and a science. Most effects,
unfortunately, can only be measured
indirectly because participants in the
market perceive the attendant risks
differently. With the passage of time, those
perceptions may change. With increased
market awareness, data is being gathered
to prove conclusively that stigma does
exist. If the general perception in the
market is that contamination creates a
hazard, a loss in value may result whether
the perception is rational or not. The task
of the appraiser is to translate the current
market’s perceptions of environmental risk
into an indication of value.
Peter Fodor is a senior environmental consultant and appraiser with Drivers Jonas,
chartered surveyors and international real
estate consultants in Toronto.He has academic training in science, environmental
studies and business.
Whither the GTA?
by Julius Gorys,MCIP, PLE
In late November, concern over the negative impacts of recent economic changes in
Metropolitan Toronto resulted in the holding of an Economic Forum on the future of
the entire Greater Toronto Area. The forum
was sponsored by business, industry and
labour groups, the regional governments in
the GTA, the Ontario Ministries of
Municipal Affairs and Transportation, and
the Municipality of Metropolitan Toronto.
All sessions were open to the public and
about 500 people participated in the event.
This forum has already spurred considerable interest in the media. The Toronto Star,
in a front page editorial, has announced its
intention to lead the crusade for a vision for
our “supercity”. They intend to open up
their pages for feature articles on the subject, hold special seminars and invite the
provincial leaders to debate. It should provide for a most interesting 1995.
the 1990s also happened in the agricultural
sector in the 1930s. In addition, the GTA’s
older population profile now resembles that
of European cities; the loss in manufacturing jobs is permanent; the traditional
two-income family is gone, and the type
and education of our new immigrants has
also profoundly changed.
Camille Bamett, former city manager of
Austin, Texas, discussed key lessons from
international experience in the growth of
citystates: recognize that cities and suburbs
are one economic unit and that they rise and
fall together (“work together or wither
together”); find a profitable niche in the
new world economy (“think globally but
act locally”); have a vision but remember
quality of life issues (“plan and measure
your progress”); and make governance
work by building a sense of regional citizenship and developing strategic alliances
(“reinvent governance”).
Here are some of the Forum highlights:
Round Table
John Carbone, chief executive of the
Dalerose Corporation and Chairman of the
Forum’s Executive Committee, noted that
the GTA has more jobs than six provinces
combined, but is not treated by politicians
with the same kind of reverence. Many
people have expressed concern that the
GTA, Canada’s economic engine, is “running on empty”.
Ian Bromley, senior economist with Metro
Toronto, identified a number of reasons
why the last recession was much harder on
the GTA compared to the rest of the country. Firstly, revolutionary productivity gains
in the office sector since 1989 wiped out
tens of thousands of clerical jobs. Second,
Toronto is one of the major North
American cities that priced themselves out
of the market in the 1980s, through capacity constraints and resulting cost increases
in housing, office and labour markets.
Third, inflation in Toronto ran a full percentage point higher than in the rest of
Canada. Lastly, some $100 billion of real
estate equity was wiped off personal and
corporate balance sheets in Toronto over
the past five years, curtailing further spending and investment.
Michael Murphy, president of Global
Demographics, pointed out that the turmoil
being experienced in the industrial sector in
Katie Burdoff, a site location specialist
from Wadely Donovan, indicated that
Toronto is still viewed very positively in the
United States as a place to do business,
because of its labour pool and international
reputation. Ontario, however is not, because
of its NDP government, and the perception
that it is over-taxed and over-regulated. Just
to stay even, government has to provide
top-notch infrastructure, be open to partnerships, ease regulations and cut red tape.
John Bossons, professor at the University
of Toronto, identified a number of ways
that government could increase economic
growth, especially private sector growth, in
the GTA. A few examples include: supporting Toronto’s cultural industries, improving
transportation linkages within the region via
new revenue sources, and enhancing the
skills of the workforce through our immigration policy and education system.
William Goldsmith, a noted urbanist from
Cornell University, provided us with a reality check. South of the border, where
savage capitalism is being practiced, the
U.S. metropolis is a mess, with more social
disparity, racial discrimination, crime,
severe environmental decay and broad hostility, he warned. The GTA has a long way
to go to get equally messed up.
David Crombie, head of the Waterfront
Regeneration Trust, stipulated that we
should not allow artificial political borders
6
to forge our economic hinterland, and that
our economic health is very much dependent on our willingness to save our
environment. Government reform is viewed
as being especially necessary. Lastly, any
solution should be Toronto driven: this is
not New York, Paris or Shanghai.
Recommendations
Airports Group
undertake a greater marketing effort for
Toronto airports
impmve facilities to,h m and at the airpoas
develop a new vision and a master plan
for Pearson, ensuring its world competitiveness and financial viability but
without a prohibitive cost structure.
Edge Cities Group
reform the tax system particularly for
business because of the education burden
change provincial and federal regulations
on sites that are environmentally or functionally challenged, to permit
redevelopment
identify locations where the existing
use/zoning is functionally obsolete, and
change them.
Ground Transportation Group
develop a sustainable GTA transportation
plan and priorities
remove the right of way property tax for
rail lands
dedicate lanes for goods movement
champion intensification projects
expand the inter-regional bus network
implement transit-supportiveland use
planning guidelines as provincial policies
Information Technology Group
develop a shared vision and a champion
for information technology
support local industries that compete in
the local and global markets
build awareness and skills to take advantage of emerging technologies
ensure easy and equitable access to government information and services
support improved citizen participation.
Sewer and Water Group
empower regional governments to fund
and implement joint infrastructure projects
deliver water and wastewater services on
a user-pay basis
perform sewer planning a watershed basis
and in the context of a regional vision
Provincial Election
Countdown
develop innovative fiiancing and treatment solutions
develop an environmental index to monitor progress, through the OGTA.
Small Business Group
create a networking summit to promote
and investigate new ideas that will drive
economic growth
streamline business reporting and compliance requirements
increase privatization of government services
promote niche industries which have a
competitive advantage
make government more responsive to the
needs and concerns of small business.
Bob Rae’s NDP government must go to the polls this year. No matter which party wins, the
results will be significant for Ontario. Last fall, the Ontario Home Builders’ Association
prepared the following list of 10 questions that could be asked of candidates. (The questions
are intended to help members start a dialogue with their candidates; to ‘Ynd out the position of the candidates as well as to get the home building industry’s positions across” .)
1) Home builders attempt to provide
affordable ownership housing to a range
of potential purchasers. A whole array
of fees, levies and development charges
add considerably to the cost of housing.
What is your position?
There was a widespread desire among participants that the Forum’s momentum be
sustained and expanded to cover those sectors that were not adequately represented.
To this end, John Carbone announced the
intention of establishing an apolitical
“Centre for GTA Affairs”, to act as a
resource, an advocacy body and an advisory agency. This centre would seek
participation of all -labour, business,
industry, community, environmental, social
and cultural agencies, academic institutions, media and government.
2) The provincial government has downloaded many of its fiiancial
responsibilities onto the backs of municipalities. This has created a situation
where, in effect, new home buyers end
up paying for the provision of “growthrelated” municipal services. If elected,
what would you do to bring greater fairness into the taxation system?
3) Non-profit housing, according to
Ontario’s Provincial Auditor, is often
built in areas with high vacancy rates
and little demand for “market rent”
units. Studies have shown that a shelter
allowance program is a more effective
way of housing those in need than construction of non-profit housing. Do you
agree?
Julius Gorys is a senior planner with the
Ontario Ministry of Transportation.
4) The province recently passed legislation
to reform the planning and development
system. Implementation guidelines have
not yet been finalized, but there are indications that the cumbersome approvals
process will not be streamlined. What is
you opinion and do you have any specific suggestions to improve the system?
5) Environmental interests seem to have
taken on greater importance than a
healthy economy. New housing development applications are subject to a
great number of restrictions and our
membership recognizes the value of protecting valuable environmental features.
But when one tallies the amount of land
that must be set aside for green space
and other issues, the economic viability
of a project is diminished significantly.
Where do you stand on this issue?
Spring Seminar
will take place
Friday, June 2,1995
The
1
6) The new home building and renovation
sectors are very quick to respond to
market demand. For example, many
contractors have incorporated environmentally and energy efficient features
7
into their projects (e.g. low flush toilets
and greater air tightness). Unfortunately,
the Ontario Building Code introduced
new requirements in 1993 which called
for full-height basement insulation. We
believe these changes were introduced
to facilitate a misguided housing policy
relating to possible future accessory
basement apartments. Would you allow
market preferences to prevail as opposed
to the regulation-dominated approach?
7) Rent controls, introduced in Ontario in
1975, have led to a dramatic reduction
in the construction of new rental housing buildings. With an average
provincial vacancy rate of 2.9 per cent,
we believe that the system of rent controls could be abolished. What is your
position?
8) There is too much duplication between
the various levels of government in
Ontario. This system adds unnecessarily
to the costs of running government and
providing services. Businesses are running leaner and government must do the
same. What would you do to reduce this
duplication and provide services more
efficiently?
9) Waste disposal and inadequate landfill
capacity have become problems in a
number of municipalities. Builders and
renovators have adjusted to the 3Rs
approach (reduce, reuse and recycle)
and have dramatically reduced the
amount of waste going to the dumps.
However, more centres are required
where we can send materials to either be
reused or recycled. The building industry would like to work jointly with
government to develop solutions. Will
you help us?
10)Contaminated soils are a fact of life in
urban areas. While the province tells us
that we should intensify our existing
urban areas, the cost of clean-up is prohibitively expensive -and there are
liabilities attached to the purchase of
certain sites. Who should be responsible
for the clean-up of contaminated sites?
@
The Legislative Beat
by Andy Morpurgo MCIP, OPPI, PLE
Renovations Outpace New Home Building
Land For Housing
Develo ment
v
!?
A survey con ucted by the Ontario Ministry
of Housing and Canada Mortgage and
Housing Corp., with regional and local
municipalities, indicates an adequate supply
of land exists in the Greater Toronto Area.
The slowdown in housing construction
during the 1990-93recession accounts for
the accumulation of land inventories in many
regions. In total, land for nearly 232,000
units was in the planning process as on
January 1,1994. Depending on the rate of
building, the total is adequate to meet needs
for 6.5 to 12.5 years, the survey concludes.
Largest inventories were recorded in Peel,
York and Durham regions. More details,
statistics and projections are available from
Bill Johnston, market analyst, CMHC
Toronto branch (416) 781-2451, ext. 7031.
Bill 163
...
The Planning Amendment Act got third
reading November 28. It will be proclaimed
this year, probably in stages. Some interest
groups believe that the new Bill will make
things more complicated and onerous, so
changes are being sought before implementation. The Committee of 15 (province/
municipalities/developers/environmentalists)
will work on finalizing guidelines. Planning
policies are now firm, and will be released at
proclamation.
...Training and
Education Program
The Ministry of Municipal Affairs, with
other provincial agencies and municipalities,
is designing a training program for the new
standards, practices and responsibilities covered in Bill 163. One particular target group
is counties that will now be responsible for
planning.
Bill 120
This bill, which allows as-of-right creation
of a second unit in detached, semi-detached
and row housing units, has been given Royal
Assent. The bill also allows garden suites,
defined as “a one-unit detached residential
structure containing bathroom and kitchen
facilities that is ancillary to an existing residential structure and that is designed to be
portable”. Could that be a trailer or mobile
home in the backyard?
It is interesting to note that
the value of renovations is
Billions of dollon scent
still outpacing the value of
new home constructionatrendthatbeganin 1991.
Canada Mortgage and
Housing Corp. estimates
the value of home renovations across Canada in 1994
reached about $19 billion,
compared to $17 billion for
new home construction.
The gap is expected to
lpBl
widen this year, with home
Source: CMHC
improvements expected to
rise to almost $21 billion v
$17.5 billion for new homes. Ontario figures
for 1995 are $9 billion for renovations and $6
billion for new housing.
Renovation figures may actually be higher as
they can be carried out in the “black market
economy”. CMHC surveys show that 68% of
home owners said they would renovate to
make their homes more attractive; 27% would
enlarge their homes. The increase in five-year
mortgage rates last year has had some influence on this market.
GTA Mayors’
Committke
This committee has been meeting under the
chairmanship of Mayor Hazel McCallion of
Mississauga. Last November’s municipal
election has changed the scene somewhat,
with new Mayors in Toronto, York,
Scarborough and other surrounding municipalities. Barbara Hall offered to hold the first
post-election meeting at Toronto City Hall. It
will be interesting to see how things develop,
considering the political stripes of some of
the new players. There is little doubt that the
GTA has the potential to exert a lot of influence at the provincial level -something
Queen’s Park is painfully aware of.
North Bay
Pre-Consulting
In an attempt to shorten delay and smooth
out the processing of subdivision applications, North Bay has adopted a
“pre-consulting” stage, where developers
will meet with planning staff, community
groups and other agencies to iron out potential problems before a formal application is
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1950
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92
93
94
95
received at North Bay City Hall. North Ba!
has a six-page guide for applicants. The
time frame for a formal application to the
point where Council makes its decision is
60 days for a subdivision and 90 days for a
rezoning.
Building Code
Training Program
The training program is funded by the
Ministry of Housing, the Ontario Building
offcials Association and the Ontario Home
Builders’ Association. The Ministry of
Housing has a computer bulletin board to
deal with questions from building inspectors
(200 per day!) The building code is also
available on CD ROM disk from the
Buildings Branch of the Ministry of
Housing.
City of Toronto
Official Plan
In case you missed it, “Cityplan” was
approved by the Minister of Municipal
Affairs in September, but some major policies were referred to the Ontario Municipal
Board. Hearings are expected this year.
Haldimand-Norfolk
Review
You may recall that Doug Barnes was
appointed in the spring to effect a study of the
form of government in the county. His report
was presented to the Hon. Ed Philip, who
released it in October. The minister will amend
the legislation soon: he favours a regional
municipal system in Haldimand-Norfolk, following the recommendations in the report.
Association of Ontario Land Economists
Administrative Offices: 144/146 Front Street West, Suite 650, Toronto, Ontario M5J 1G2
Phone: (416) 340-7818
Fax: (416) 340-9779