The City of Toronto has an ambitious policy that requires all new buildings constructed after 2028 meet a net-zero greenhouse gas emissions goal. But critics say recent bylaw changes to the program’s deadlines and increases in developer fees could undermine its near-term climate goals.
“Now more than ever, policy-makers need to double down on sustainable building policies, not introduce uncertainty or remove incentives,” said Stephen Job, an urban planner with Tenblock, a high-density developer with multiple projects pursuing Toronto Green Standards (TGS) certification.
There are thousands of apartments in Tenblock’s pipeline that could be affected by the recent changes.
“It would serve the public interest for our municipal policy-makers to say: If you develop a building that is more sustainable than is required, at significant additional cost and effort, we will help you get there because this is an important shared goal for our society.”
Toronto incentivizes some energy-efficient buildings by offering rebates on the municipal development fees it charges. But while development charges have risen 300 per cent since 2015, for some housing types, the green rebate rate has barely budged.
“The rates have not kept pace with where the market’s at,” said Paul De Berardis, director of building science and innovation with the Residential Construction Council of Ontario. “And the way the rebates are going, there’s going to be less and less incentive to pursue [higher standards].”
The TGS policy was first introduced in 2006 as a voluntary program, but it has evolved into a somewhat complicated chart of versions and tiers where, over time, the lowest tiers disappear and more stringent tiers form the new minimum standard to progressively raise the city’s energy efficiency goals. In 2010, the program began setting a floor for emissions reductions as part of the planning approval process and offered financial incentives in the form of development fee rebates for projects that performed better than certain minimums.
Toronto’s largest source of greenhouse gas emissions is buildings, primarily from the natural gas used to heat them, accounting for 57 per cent of emissions in 2019 (far more than the 36 per cent from vehicles.)
The City’s recent changes to the program aren’t just about money thought, they are also about time.
When the City updated its development fees bylaw in August it included a new sunset clause for the energy efficiency rebates that appears to cut off incentives for any project not approved within one year of the latest TGS update (the most recent of which was approved in May, 2022). That’s problematic when the best-case timeline for the typical multi-family rental or condominium project is upwards of two years to make its way through planning and council approvals.
There are thousands of apartments and other housing units in the development pipeline that suddenly have less than a year to get planning approvals or lose access to the TGS rebate program.
“All financial incentive programs have rules and deadlines,” said Bruce Hawkins, spokesperson for Toronto’s city planning division. “The reason for the sunset date is to ensure applicants are incentivized to build new development to the current higher performance standards in accordance with the latest version of the TGS (following that one year grace period of the in effect date).” Mr. Hawkins argued the changes in the bylaw (which is being appealed) would accelerate the uptake in constructing the lowest-emission buildings.
According to Mr. De Berardis it’s more likely the opposite will occur: the shorter time horizon serves as a disincentive to reach for voluntary emissions standards if even the small amount of cost recovery the rebates promised disappears. “If you were going to go for tier three [the current highest standard] it was going to cost you a lot more, now you might dial back to tier one.”
The record so far, before the incentives were clawed back, were not encouraging. According to the city’s own data more than 2,500 developments have met its minimum green standards, but the number of projects that reached for the more difficult and more expensive tiers and so qualified for a rebate numbered about 150. That means only 6 per cent of projects responded to the old incentives.
In August, the city also raised the rate of the fee rebates by 25 per cent and 50 per cent for tiers two and three. But an analysis by construction cost consultants at Altus Group found that by 2023 the new rebate might only add up to a $6,000 refund on the more than $80,000 in development fees the city will charge for a two-bedroom apartment (about 7.5 per cent off). Using the same example of a two-bedroom apartment, Altus calculates that when the first green rebates arrived in 2015 a $2,900 refund was a more generous 14 per cent cost savings on about $20,000 in development fees.
Over the past decade construction industry lobbyists have decried Toronto’s rapidly escalating development charges for new housing units. “It looks like the builders and developers are paying for it, in reality it’s not the case, it’s a horribly regressive tax,” said Richard Lyall, president of Rescon, which represents some of the largest-scale builders in the country. “Think of it this way: A flat tax or charge per two-bedroom unit is not income-tested as to who is buying or renting that apartment … builders and developers don’t pay for that stuff, it’s included in the end-price of that product.”
And it’s also not cheap to build a low-emission building. While there are many techniques to achieve greener projects – through everything from upgrading windows from double- to triple-pane to installing geothermal heating and cooling systems – the costs can vary widely. According to Mr. De Berardis, industry consensus was that voluntarily moving from TGS basic to the next-highest second-tier standard represented between 8 per cent and 10 per cent in total cost increases.
The highest costs may be to the City’s climate agenda however: every building that saves money by skimping on voluntary green standards in the next decade adds up to housing that for decades to come will perform worse for the environment, and in terms of energy costs borne by future residents.