A preliminary rendering shows the first building in Regent Park phase 4, which is breaking ground this fall. Toronto Community Housing has not been hurt by the condo market slowdown, in part because it can secure funding from the city.architects—Alliance/Cobe Architects
So, a funny thing happened on the way to the meltdown of the condo presale market.
About a year ago, with dark clouds gathering over dozens of large development ventures, officials at Dream Unlimited and Great Gulf decided to take a hard look at one of their marquee waterfront projects, with an eye to executing a rapid reboot.
The 4.85-hectare (12-acre) Queens Quay East site in Toronto, now known as Quayside, became infamous for its role as ground-zero in the battle over Google’s smart city gamble. Since then, Dream and Great Gulf were picked by Waterfront Toronto to erect three mixed-use towers and several mid-rise buildings, with 2,353 condo apartments, including 458 units set aside as affordable rentals.
“They came back to us and said, ‘We can’t make condo work in this market,’” recounts Meg Davis, Waterfront Toronto’s chief development officer. “So they proposed a pivot to purpose-built rental largely.”
The revised plan will have 1,250 market-rate rentals and 550 affordable units – about 100 more than originally envisioned; these will be managed by the city and a non-profit. Dream and Great Gulf still intend to sell condos for the third tower, whenever the market shows signs of life.
By contrast to the previous phasing strategy, which began with the condo towers, Ms. Davis says all the rentals will now go up first, with construction set to commence next year.
Key to executing this high-speed U-turn was bringing all the players involved in the project together and quickly finding pragmatic solutions.
They took advantage of the city’s new development charge waiver for rental, a complementary apartment construction loan program offered by Canada Mortgage and Housing Corp. (CMHC), grant funding and financial incentives from the City of Toronto through the Rental Housing Supply Program and concessions from Waterfront Toronto on land sales revenues for the property itself.
Tridel won a long-term deal to build several high-density towers on the south side of Gerrard Street East as part of Regent Park.architects—Alliance/Cobe Architects
“It’s a good news story in a time that is really, really difficult for real estate and affordability in our city,” says Ana Bailão, Dream’s head of affordable housing and a former deputy mayor. “It’s the power of partnership, of being nimble and [having] everybody around the table. We’re working at being creative to make the math work.”
Set against the backdrop of an increasingly despondent condo industry and its growing list of cancelled projects, the Quayside story reveals how the slowdown is presenting an unexpected opening for builders willing to seize the moment, especially those involved in the region’s large-scale public-sector-led development strategies. These include:
- Toronto Community Housing’s numerous revitalization plans;
- Infrastructure Ontario’s 14 “transit-oriented communities” proposed high-density developments around future Ontario Line stations, as well as the provincially mandated up-zonings around 120 rapid transit stops across the region;
- the Downsview redevelopment by Northcrest, owned by a federal pension plan;
- Toronto’s portfolio of 14 approved Housing Now projects, as well as municipally-backed co-ops, on numerous city-owned sites, with development managed by CreateTO.
This planetary realignment turns on substantial capital pools that private equity and pension funds have earmarked for purpose-built housing, as well as the growing slack in the Greater Toronto Area construction sector – skilled trades, suppliers and heavy-equipment operators, all of whom are scrambling for work once the current project pipeline runs dry.
“In terms of construction, the market is actually favourable,” says Yves Cheung, TCH’s chief development officer. “Trades [and] contractors are looking for the next job. Construction costs have been increasing 10 to 15 per cent a year, so we’re actually seeing a return to normal.”
Toronto Community Housing is accelerating the redevelopment of rent-geared-to-income sites like Regent Park, shown here in a preliminary rendering.architects—Alliance/Cobe Architects
TCH’s revitalization strategy has been premised for almost two decades on intensifying older sites such as Regent Park or Lawrence Heights by taking advantage of the perennially frothy condo market to underwrite the replacement of older rent-geared-to-income (RGI) apartments.
The slowdown hasn’t derailed that transformation. But on some projects, the agency, which operates 60,000 apartments, is accelerating the redevelopment of its RGI sites. In the case of Regent Park, Tridel won a long-term deal to build several high-density towers on the south side of Gerrard Street East, blocks known at TCH as phases four and five of the revitalization.
The first project now will be a 26-storey TCH apartment with 271 subsidized units, set to break ground later this fall and open in three years. “We have slightly pushed up the timeline with the assistance from the city, as well as we are doing some construction innovations to compress the timeline,” Mr. Cheung says.
TCH, he adds, is better positioned than private developers to secure funding for such projects because it can use the city’s balance sheet and capital reserves, and thus is less exposed to lenders who have grown skittish about market uncertainty.
Elsewhere, purpose-built rental projects have taken on a more significant role because they’re not exposed to the collapse of the condo presale market while also qualifying for CMHC programs and other policies designed to prime the city’s rental housing pump.
According to a spokesperson, the city recently redesignated 11 of the yet-to-commence Housing Now sites, which will comprise thousands of new apartments, as 100-per-cent purpose-built rental projects, to be operated either by non-profits or private property management companies. Two of those parcels – one in Parkdale, the other on Kipling Avenue near the former Six Points intersection – went out to tender this summer.
Waterfront Toronto is looking at a similar set of tactics for accelerating development on Ookwemin Minising, in the Portlands, says Ms. Davis. “We’re thinking purpose-built right off the start line.”
The outlook for such turnarounds isn’t entirely upbeat. Ms. Davis says Waterfront Toronto officials are revisiting the anticipated densities on the Portlands, which reflected a 2017 precinct plan conceived when no one worried about selling condos. “We’re in a different world now.”
As well, some large rental developers, including RioCan, have pulled back, citing the high cost of such projects and the downward drift of rents, which have squeezed margins.
While industry insiders laud the city’s move last winter to waive development charges on up to 8,000 purpose-built rentals – an estimated $210 million boost – they stress that CMHC’s much sought-after apartment construction financing program shouldn’t run dry.
Ms. Bailão adds that these opportunities aren’t just limited to the public-sector-led projects. Dream was able to keep a rental project on one of its privately owned sites moving forward due to the availability of these particular incentives.
Developers, non-profit housing providers and governments, she says, “need to be working together to put shovels in the ground. If we don’t get creative, if we don’t get to seize this opportunity to produce what we desperately need, which is the rental and the affordable housing, the situation is going to be ten times worse.”
Editor’s note: A previous version of this article incorrectly stated that the project received grants from Ottawa's Housing Accelerator Fund. It received grant funding and financial incentives from the City of Toronto through the Rental Housing Supply Program.