Patience, Communication Needed As GTA Works To Trim Construction Red Tape

It is a tale of two headlines in the greater Toronto area, where a follower of the city’s commercial real estate scene might experience a slight case of cognitive whiplash if they read the news regularly. 

One day, they might see a headline like this one from April, attesting to the city’s long-running building boom: Toronto Continues to Lead Crane Index.

“The study cited in that article counted just over 220 construction cranes on the Toronto skyline, compared to five in New York,” said Diana Hoang, managing director of brokerage Spear Realty. A longtime player in the GTA CRE scene, Hoang has had an up-close view of the city’s growing commercial and industrial real estate scene.

Opening the news on another day, however, a reader might encounter a very different headline, such as Toronto Red Tape Adds Tens of Thousands to Building Costs, New Study Suggests.

What’s going on in Canada’s biggest city? While construction sites rival the number of Tim Hortons restaurants in town, builders still complain that a tedious and costly approval process is holding back construction, particularly of much-needed affordable housing. 

It is partly a factor of the area’s own success. Prior to the pandemic, provincial and local government officials were trying to keep up with a large volume of construction permit applications. And, of course, there is always a disconnect between how quickly a developer wants to take a project vertical versus how fast the local bureaucracy can move, Hoang said.

Then came 2020, when the uncertainties of the coronavirus “threw a big wrench” in the process, said Sandy Minuk, vice president of Minuk Development Corp., a GTA developer and property manager that works with Spear Realty.

“I’m certainly not blaming local officials for all the delays in the system,” Minuk said. “But it’s become a very time-consuming process, which adds cost to these projects.”

Local governments are taking steps to improve the process, and Hoang and Minuk said there are simple measures CRE professionals can take to help keep projects on schedule and minimize stress.

“Everybody has to be patient,” Hoang said. “Local governments at the provincial, regional and municipal levels are working to minimize the steps involved in the permitting process, but that takes time.”

Government officials have pledged to address bureaucratic bottlenecks through zoning reforms and other measures, and they say the situation is improving.

In a statement released after the local Building Industry and Land Development Association said that approval delays can increase construction-related costs by 8% to 14%, Toronto’s planning division acknowledged that long waits to get a hearing before the city’s committee of adjustment, which reviews zoning change requests, “have impacted many residents and builders.” 

However, the city said the situation has “improved significantly in the past two years,” with more applications getting a hearing rather than sitting in limbo.

The Ontario provincial government has also pledged to continue making improvements, recently introducing the Cutting Red Tape to Build More Homes Act of 2024. It contains several measures meant to expedite project approvals and calls for the creation of service standards so that businesses understand how long they can expect to wait for a permit decision.

“These proposed measures would get more homes built faster by ending needless delays and cutting red tape to get shovels in the ground sooner,” Rob Flack, then the Ontario associate minister of housing, said in a statement.

As those and other reforms work through the system, Hoang and Minuk urged developers, contractors and others to remain patient and vigilant. Minuk pointed out that the relationship between builders and regulators is “codependent” to a degree, which means both parties need to demonstrate trust and respect.

“As long as they are aware that you're working in good faith and doing exactly what you said as far as your drawings are concerned, they'll work with you,” he said. “These officials are trying to push projects forward, too, and they're reachable if you get stuck in the mud of the planning approval or building permit process.”

Hoang, who said she still foresees “upward momentum” in GTA’s construction and development scene by the third quarter, said she expected that some of the reforms will help in CRE’s recovery as more projects get the go-ahead. That would be good news for the region's developers and property owners. 

“We're getting mixed messages from different clients, with some saying we’re going further down the hole and others who are optimistic,” she said. “We are already starting to see interest rates go down, which, combined with other factors like the current efforts at reforming the approval process, will help the market to improve.”

This article was produced in collaboration between Spear Realty and Studio B. Bisnow news staff was not involved in the production of this content.

Studio B is Bisnow’s in-house content and design studio. To learn more about how Studio B can help your team, reach out to studio@bisnow.com.