Densely calculated density

If public meetings to discuss the municipality’s Centre Plan were episodes of Sesame Street, they would be “brought to you by the number 15.”

The Centre Plan would chart development for the next 15 years. But that same number keeps getting raised in pointed questions from citizens who want to know why there’s a 15-year time limit on the affordable housing units which developers would have to provide in return for being allowed to erect buildings that exceed a certain square footage (Floor Area Ratio).

Another option for developers who’d like to Supersize their proposals is cash-in-lieu. For example, if seven storeys is the maximum allowed in a neighbourhood and a developer wanted permission to put up a 12-storey building, a dollar value would be calculated based on the five storeys of additional space. The draft Centre Plan says that 75 per cent of that dollar amount must be spent on affordable housing units for a period of 15 years, while the remaining 25 per cent can be allocated to other public benefits, such as public art and heritage preservation.

HRM currently defines affordable housing as 40 per cent below the market rent. What speakers at almost every public meeting have asked can be summarized as follows: “If a developer can make money off a building for the length of its life, why would the municipality impose a 15-year limit on the affordable housing portion?”

“There’s no logic to it, they are just mimicking the format that has been used by the province [Housing NS] in the past,” said Ross Cantwell. Cantwell is a Halifax developer (he owns Cantwell & Co and HRM Apartments) who also heads the Housing Trust of Nova Scotia, a non-profit group working to create affordable housing.

Cantwell indicates that the 15-year limit has traditionally been used by Canada Mortgage and Housing Corporation (CMHC) and Housing NS to implement some affordable housing programs. The province has been unable to come up with any explanation for the 15-year term, and HRM’s planning manager Carl Purvis readily admits the Centre Plan “mirrors” the language in the province’s policy.

But the lack of explanation for the 15-year limit makes it seem arbitrary. Furthermore, when HRM hired TEAL Architects to prepare a study on how “bonus density” works, one of the recommendations (on p. 36) in its 2015 report states:

If the density granted is permanent, the public benefit should in most cases be permanent, too.

Why proponents of the Centre Plan would have ignored that recommendation — which directly addressed the chronic need for affordable housing — and instead give a developer both (a) several storeys that exceed the maximum to lease immediately at market rates, and (b) the right to lease the affordable units at full market rate after a brief 15 years for the remaining lifespan of the building, is not explained.

Cantwell says another option the Centre Plan might consider is to take the amount of money the developer “pays back” and place it in a Housing Fund. “Instead of using the bonus money from the developer to provide X number of units for Y number of years, you would use that money as a down payment. Take the cash, put it in a housing fund, and you could lever federal/provincial funds to build more affordable units.”

But one of the stumbling blocks to that approach is finding a level of government willing to take ownership of making bonus density work. Cantwell recalls a situation a half a dozen years ago when Banc Developments was negotiating a bonus density agreement for the Mary Ann site off Spring Garden Road (immediately west of the new library) and offered to build affordable housing units in return for council approving a taller building. When neither HRM nor the province was willing to take on the business of confirming the annual income of tenants, the developer used the $150,000 worth of bonus density to provide seven parking spaces.

“Despite efforts by the developer and municipal and provincial government departments, the density bonusing program at that time did not enable a smooth and predictable process for pursuing that particular benefit category,” the TEAL study reported. “Public parking represented an option for the developer that presented fewer barriers and reduced costs in terms of time and financial resources.”

Cantwell suggests one possibility might be to pay a yearly fee to non-profit housing groups such as the Affordable Housing Association or Metro Community Housing to certify that the tenants in the units still qualify for affordable housing. He says it’s important that the city have a streamlined approval process around bonus density because “if it costs developers too much time or money, it will become a recipe for disaster.”

The TEAL study also exposed some of the weaknesses in the model HRM was using to extract public benefits from developers in the downtown area where bonus density has been in place for several years. The 2015 study estimated the payback to the public at $1.4 million a year, mostly through heritage preservation and LEED-certified buildings, since not a single affordable housing unit was created.

The study found most North American cities calculated the value of the extra square footage based on one-half or two-thirds percentage of the market price for the land. In Halifax, planners allowed developers of the downtown TD Bank expansion and The Maple to pay a flat rate of $4 per 0.1 square meter, when the market rate for land was at least five to six times that. On six projects downtown, the TEAL study calculated the difference amounted to $4-6 million in bonus density benefits the public never received — clearly a missed opportunity.

[You can find the chart on p. 75 of the Density Bonus Study listed under Technical Reports on the Centre Plan website. Or look at it here:      https://www.shapeyourcityhalifax.ca/1041/documents/2547 ]

The Municipality appears to have learned an important lesson. The Centre Plan governing the next phase of building outside the downtown core will not assign one flat price to land value but has instead developed (with an outside real estate appraiser and consultants) a series of prices that recognize the cost of buying land in the North End of Halifax is different from the cost in the North End of Dartmouth.

The market price of land is an important variable in determining how much the developer should pay back in return for a bigger building footprint.

The TEAL study also looked at bonus density in Calgary, Ottawa, and Vancouver. Vancouver has recently become the first Canadian city to create 1,000 units through a pilot project which requires developers of new rental housing to set aside 20 per cent as affordable housing.This type of inclusionary zoning is popular in many American cities and the province of Ontario has been wrestling with regulations to introduce it.

The Centre Plan will replace planning regulations that go back 40 years, and Ross Cantwell blames those outdated and inconsistent rules for creating a familiar and long-running scenario in which developers regularly beg for — and receive — Council’s approval to build higher and higher in the urban Centre. This hasn’t gone unnoticed by land owners and real estate brokers, who in return have asked more and more for their property, anticipating that the developer will be asking for more height or density.

If well-implemented, the bonus density model could change that dynamic and might provide real public benefits such as housing or space for public art or recreation. We currently don’t see much of that.

“So here is the rub with the bonus density thing,” says Cantwell. “If you have market value for your land, or worse yet, overpaid, and you are hoping that you can get additional height to overcome your problem, now the municipality is stepping in and saying there’s a new sheriff in town and we need a piece of the action. This is not an equitable situation for the developer. There will likely have to be a phase-in period for this bonus density charge because, unfortunately, some of this over-paying for land will need to work its way through the system.”

This Episode Is Brought To You By 1%

One of the key assumptions underlying the Centre Plan is that the City is growing at one per cent a year. At that rate, it will need to create 18,000 new residential units to accommodate 33,000 people by 2031. City Council has set a target of 40 per cent of that growth to be in the city centre (peninsular Halifax and Dartmouth inside the Circumferential Highway) rather than in suburban and outlying areas. Until more high-rises started pushing skyward three years ago, only 16 per cent of the city’s growth was happening in the Centre.

But that assumption of one per cent annual population growth inspires the second most frequently-raised question at public consultations: “Is the Centre Plan promoting ‘over-building’ and putting established neighbourhoods at risk of too much development pressure?”

“Why would we tear down perfectly good buildings to build new ones simply to make more money?” asked engineer Graham Reid at a meeting that attracted 60 people to the Halifax Forum last week. “That’s a lot of waste.”

Reid was referring to the Plan’s proposed changes to zoning and height along busy bus routes next to residential neighbourhoods — what the Plan calls “Corridors.” Examples include Gottingen Street, Windsor Street, and part of Chebucto Road, as well as Victoria and Prince Albert Roads in Dartmouth. Homes and businesses along those streets are restricted to two to three storeys today. Proposed changes would encourage putting up mixed use buildings four to eight storeys high that would “bump up” density in corridor areas to absorb an estimated 21 per cent of the assumed population growth.

Steve Parcell is an architecture professor at Dalhousie University who also attended the meeting at the Forum. He isn’t convinced all the added density will be necessary. Parcell noticed HRM’s “Population” figures are higher than the “Census” numbers (both come from Statistics Canada).

Census figures show if the population continued to grow at about one per cent a year for the next 15 years (and assuming 40 per cent move to the Centre Plan area), new accommodation would be needed for only 25,959 people (about 7,000 fewer than the city projects).

However, HRM’s urban design program manager, Jacob Ritchie, says the city is no longer using Census data, but opted instead to use annual population figures, which include births and deaths. Here’s the basis of their population assumption.

The difference between Parcell’s and HRM’s population estimates can be explained by their reliance on different sources. Ritchie says yearly population figures show Halifax had 424,950 people in 2016, but Census numbers yields 403,131. And even if the City’s projection turns out to be overly optimistic and vacancy rates increase, citizens would benefit from lower rents, says Ritchie.

Steve Parcell says the bigger question is how many more people could be housed by the amount of new building in the neighbourhoods covered by the Centre Plan.

“The Centre Plan starts with this population projection, but then switches to Building Volume (form-based planning). That’s a big gap in logic; it’s apples and oranges,” Parcell wrote in an email to www.centreplan.ca. (He had planned to ask the question at the public meeting but Planning manager Carl Purvis shut down the question and answer session after 20 minutes, encouraging people to email their feedback and engage in one-on-one conversations).

“How can we tell if all of the building volumes in the centres, corridors, etc. are too little or too much for 33,000 people? If all those areas are up-zoned, those of us who live on those streets or on adjacent properties would live with a 15-year threat of being driven out by construction. Please show us the numbers to demonstrate that all of this up-zoning is necessary.”

Urban design manager Jacob Ritchie says those calculations weren’t made and are not available because the planning department is taking a different approach. Determining the maximum amount of area that could be built up under existing regulations would translate into a huge and impractical number allowing for as many as one million people, said Ritchie.

“Under the present rules every house in the city centre has the right to be 35 feet tall but very few of them are,” explained Ritchie. “What we did in 2016 with the help of a real estate appraiser and two consulting firms is analyze the likelihood of different lands being built out. Someone who had just invested in a piece of commercial property was not likely to tear that down and build something else. We did that sensitivity analysis on all of the areas that are corridors and centres to arrive at our best guess about much would be built over the next 15 years.”

The best guess is a projected 18,000 units over the next 15 years in the City Centre. (You can find some information about the method HRM used here.)

What that will mean for some residential neighbourhoods is a frequent topic.

Cantwell says the irony is that until the development process in the urban core becomes more efficient and predictable, the likelihood is developers will continue to spend their money in areas such as Bedford West, where there are no reviews or bonus density requirements and the time to get building permits is measured in months rather than years.

Public consultation on this phase of the Centre Plan wraps up online at the end of the month. The Plan could go to City Council for approval this fall or wait another year until the second part of the Plan including parks is completed.