BALTZ: Section 37 loopholes now big enough to drive a bus through

And not just any bus, either.

In a previous post here last May , I talked about the City’s plans to finally implement the powers granted by “Section 37” of the Ontario Planning Act, which have been on the books in Ottawa since 2003 but never put into practice. As described in the previous post:

“The way it works is this:  A developer proposes to have a property rezoned, say from 6 to 12 stories.  Without Section 37, the increased value of the rezoned property goes to the developer alone. Instead, under [Section 37], the increase in value is calculated, and an agreement put in place for a percentage (usually about 20-30%) of the increase to be provided for benefits that must be in the nearby community. … Possible benefits include tangibles like renovating a park, public art, conserving a heritage building, public streetscape improvements, artist live-work space, affordable housing, daycare space, and specific projects listed in a Community Design Plan for the area.”

At least, that’s the way it has worked for a decade in Toronto and was originally also proposed for Ottawa.

The guidelines for implementing this were supposed to have gone to Planning Committee of City Council last June 14 to be approved, and residents were to be reaping “community benefits” by now.  No such luck.  The report was pulled, and city planning staff went into private consultations with the development community all summer.  The results were finally revealed to the public at large on December 6.  The new draft guidelines were not made available beforehand, but only handed out at the meeting (and are still not posted under the public consultation section of the City’s website). Anyone who wanted to provide comments at the public session had to read pretty quickly to analyze the nine pages of text, and then line up to ask questions or make comments.  Instead of a whole summer, the public got less than 3 hours.

So, what happened behind closed doors over the summer?  The guidelines appear to have been pretty thoroughly gutted.

The amount of Section 37 benefits that are required when a rezoning happens is a portion of the “uplift,” which is the term for the amount the value of a piece of land is increased because of rezoning.  The previous draft of the City guidelines mandated that this uplift be based on the actual increase in value, assessed at arm’s length.  Now?  There are to be uniform uplift values applied uniformly across each of two broad areas of the city—an inner area that includes Kitchissippi, Somerset, Rideau-Vanier, Rideau-Rockcliffe, Capital, and Alta Vista Wards, and an area outside of this that stretches from Eagelson to Anderson, and down to Leitrim/Fallowfield.  There are two big problems with this.  First, huge amounts of much less valuable land outside the central core and high-development main street corridors that stretch east-west from Westboro to Vanier are included in the inner area.  This means that the average land value that will presumably be used to calculate the uplift will seriously undervalue the real profit gained by rezoning in the very high-value areas where development is actually occurring.  Second, since the uplift values will be set annually by Council for both inner zones, the inevitable intense lobbying of a receptive Council by the development industry will virtually guarantee values that only are a fraction of the actual profit realized in a rezoning.

Another big loophole in the draft guidelines?  This would be all the cases in which community benefits under Section 37 can be reduced.  These include any case where Planning staff considers the current zoning to be out of date or not conforming to the Official Plan. Anyone who thinks that the Planning Department often thinks zoning is up-to-date and implements the Official Plan has not read many Planning staff reports on rezoning applications.  Another exemption is if the developer rearranges the total volume allowed under the current zoning into a different shape, even if that results in a building much taller than the zoning would allow.  One catch here is that it is rarely possible to actually build a building that fills the zoning envelope.  Details like the building code and the need to provide windows in each unit get in the way.  So these “rearrangements” almost always result in much greater buildable volume than could be achieved under the zoning, but they would be free of having to provide Section 37 benefits.  Not to mention that units on higher floors are much more valuable, and hence the uplift should be greater, even for the same total volume as a lower building.  Other exemptions include cases where the developer includes a “plaza” or “pathways.”

The initial, relatively strong Section 37 document of last Spring is now just a memory, victim of a summer of behind-closed-doors discussions between City Planning Staff and developers with influence.  What we are almost certainly going to get when these guidelines go before a compliant Planning Committee for approval on February 14th is essentially this watered-down version full of loopholes.  Inevitably, there will be some small change made in the final report (due to be posted as part of the February 14 Planning Committee agenda on the City’s website on February 6th) to deflect criticism—possibly including somewhat different boundaries for the zones in which uplift values will be calculated.  But overall, Section 37 in Ottawa will end up being simply a very small fee for developers to buy cover for major changes in zoning.  There will be lots of hype and back-patting by Council and staff when this is passed, but what we are really getting out of this will likely not amount to much at all.

photo by Mike Gifford

6 comments

  1. Why should anyone subsidize an “artist live-work” space?  Or subsidize daycare for your child?  Pay for your personal wants and desires yourself.  Leave me, developers and the customers of developers out of the equation.

  2. Normally, I don’t respond to comments that make statements without providing any reasoned argument, but I think it is reasonable to explain why section 37 may be required. Developers have it within their power to be “left out of the equation.” They can simply build what is permitted under current law. However, by applying for a rezoning, they are asking for more than they are due as owner of the property. At least in theory, zoning is set to reflect what is appropriate for a given area. If a property owner wants more, they have to show that this is in the public interest (i.e., falls under the description of “good planning”). The public owns this extra development potential, not you, the developer, and their customers. A substantial rezoning provides a substantial benefit in terms of increased land value, which goes only to the landowner. It also can come with a cost to the community, in terms of increased pressure on infrastructure and more traffic, for examples. Public funds will be required to deal with this. Section 37 is one tool to get direct public benefit as a portion of the profit that has been given by the public to a private landowner in the form of increased zoning. There is a long list of possible “community benefits” that are permitted to be section 37 benefits, which do include daycare and artist spaces. This list exists because it was determined in a public process (the official plan, and community design plans) that these were desirable for communities. Daycare, because of the increased pressure put on existing facilities by large increases in population. Art spaces, because many desirable neighbourhoods under development pressure (like Hintonburg, West Wellington) are desirable to developers precisely because of the presence of arts, which is often used as a selling point. It is counterproductive, and detrimental to the community, to drive this out as cheaper properties are redeveloped. So, in short, you, developers, and customers of developers can indeed be left out of the equation. You do this by accepting the zoning that came with the property you bought. If you want the public to grant you more, then they have the right, under the Ontario planning act and accepted legal precedents, to require a portion of the profit from a rezoning be turned back to provide direct benefits also to the existing community, and not just to you, the developers, and their customers.

  3. Excellent article Jay and a good comment by Joan. I am offended by the process used to develop these guidelines and also by the apparent outcome. Section 37 was brilliant and recognized that neighbourhoods/City deserved a reasonable portion of the capital gain created by taxpayer-elected officials approving an upzoning. The averaging process for calculating uplift value makes no sense at all. What are the City Planning staff thinking?

  4. A great article, Jay, be it a sad one — yet another example of how our municipal governing process is corrupt.

  5. Joan Toogo: We all end up “customers of developers”, whether we want to be or not. That being so, we’d prefer some protections of our own interests.

  6. As population density increases, the cost to construct and provide services per dwelling unit decreases. The municipality should upzone all properties to five storeys, eliminate minimum setback requirements, decrease development charges to zero for medium- and high-density housing and increase for low-density housing. This would eliminate sprawl for the foreseeable future, ensure fiscal sustainability of the municipality, permit property taxes to decrease (because most properties would immediately increase in value) and drastically increase the supply of housing which is affordable (because a lower proportion of the cost of the dwelling unit is due to the value of the land and due to demand becoming close to supply).

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