The high cost of building a box in Toronto

Density, in the form of a cube. This idea drives a series of four-storey apartment buildings designed to fit into in a postwar apartment neighbourhood in the German city of Bremen. The architects, Lin, won a design competition in 2011 with their concept for these buildings, dubbed Bremer Punkt. Two have now been built.

In 2019, SvN Architects + Planners included the Bremer Punkt buildings in a report commissioned by the Ontario Association of Architects, Housing Affordability in Growing Urban Areas. They’re smallish and elegant: boxes 14 metres (45 feet) on a side, packing up to 11 apartments per building onto less land than a single suburban house in Toronto would occupy. Their external stairs, while unconventional, make them efficient in their use of space. They include accessible units and potentially a wide range of suite configurations, all well-lit and close to the ground, all with outdoor space.

They make good neighbours. So why not build them in Toronto? Why does Toronto not see development projects such as this?

As it turns out, there are many reasons and they have to do with regulation and taxation.

Let’s take a logical site in a North York neighbourhood ripe for development: a single-family house at 1 Trophy Dr. It’s a bungalow on a corner lot, facing a group of four-storey apartment buildings across the street. And the property is less than a 200-metre walk from a new Crosstown LRT station at Sloane Avenue and Eglinton Avenue East.

The neighbourhood has an aging population and a middling population density, despite the presence of apartment and condo buildings nearby. It has lots of green space, parks, public schools and a library within walking distance. This community could take more people.

While the actual examples in Bremen are built with prefabricated mass timber structure, you could do a simpler version out of conventional wood framing. Technically and logistically, such a project would be simple; the contractor could buy everything at Home Depot.

In urban design terms, it would be defensible; if you built a Bremer Punkt building here, it would have a comparable footprint to the house that’s here now. It would be no taller than the neighbouring apartment buildings. To a casual observer, it wouldn’t look dramatically different in scale from the existing houses.

But the difference, in planning terms, is enormous. This lot falls within an “RD” zone on the city’s Official Plan. A Bremer Punkt would break rules with its form (too tall, at four storeys), as well as its “set-backs,” or distance, from the street and lot line, which would probably be slightly too small. The Punkt’s lack of parking spaces would also violate rules.

But first and most importantly, as an apartment building, it would be explicitly forbidden. In an RD zone, the only type of dwelling permitted is a detached house, with a small secondary unit.

To put an apartment building here – even a four-storey one – a builder or owner would require a zoning bylaw amendment and probably an Official Plan amendment, each of them an expensive, complex and contentious legal process. In this location, the developer would be almost certain to lose.

Let’s imagine, however, that such a change was possible. Say the city wanted modest apartment buildings on sites such as this. In that case, a zoning bylaw amendment would still be required. The developer would need to hire a planner and lawyer to start this process, incurring considerable cost.

Then the fees would start stacking up: about $43,000 for an application for rezoning and plan amendment and $23,000 for a Site Plan Approval application, another step in the process. If the developer somehow won permission to build, the building-permit fees would come in around $15,000. That’s $81,000 in city fees.

But by approving development permits, the city could expect to receive big cheques. Under the new development charges in effect as of 2020, this theoretical building of six two-bedroom units would have to pay $289,320 in development charges, as well as another “parkland dedication,” which would be in the six-figure range, as much as $200,000. The fees to the city could easily reach $600,000.

That enormous number demands a commercial justification. So look at the business model, making generous assumptions. Construction costs, using typical methods, would total about $2.5-million, and a developer could sell eight large two-bedroom units for perhaps $700,000 each, or $5.5-million total. Allowing $1 million for land costs, the builder could expect $2-million to cover “soft costs” (including design and planning and city fees), contingency and profit. After city fees, that’s as much as a $1.4-million return on a $3.5-million investment, over roughly four years.

Such a development could make sense, if it were allowed – which, again, it absolutely is not.

Instead, what is permitted here is a new single-family house. As a developer, you could plausibly tear down the existing bungalow and get permission to build a much larger 21/2-storey house.

That dwelling, of about 3,000 square feet for a single family, would be cheaper to build and easy to sell. It would generate a similar profit margin with much less risk and much less time. And such a project would face almost no city fees and charges.

This second scenario, the sprouting of McMansions, is exactly what’s happening across the city; right now, in more desirable affluent neighbourhoods, but increasingly in less posh ones, too. If current policies continue, the mansions will come to Trophy Drive, as well – brought here by business logic, retrograde ideas about what a “neighbourhood” should look like and public policy that taxes dense, small-scale development to death.

Adapted from House Divided: How the Missing Middle will Solve Toronto’s Affordability Crisis © 2019 by John Lorinc, Alex Bozikovic, Cheryll Case and Annabel Vaughan. Reprinted with permission from Coach House Books. All rights reserved.