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Illustration by Benoit Tardif

In an urban landscape punctuated by glass condos and gleaming offices, the four city-owned parcels that have bobbed to the surface of Toronto’s anxious conversation about housing affordability are nothing to look at . . . for now. They are mainly parking lots with a few desultory municipal buildings, located within steps of suburban or downtown transit stops – all choice examples of “lazy land” in a city struggling mightily with real estate speculation and crushingly low apartment vacancy rates.

These sites represent the beginning of a concerted drive by the City of Toronto to develop thousands of units of affordable rental apartments on publicly owned land – a program known as Housing Now that grew from a campaign pledge by Mayor John Tory to build 10,000 residential units on 11 swaths of vacant municipal land, including 3,700 that will be designated “deeply affordable.”

In many European cities, large segments of the population live in rental buildings that sit on public land. Indeed, the so-called Vienna model – a system for building affordable rental apartments on public land that goes back to the 1920s and is lauded for its accessibility – offers compelling proof that quality urban housing isn’t just the product of market forces.

Toronto’s plan has echoes of the Vienna model. The city will leverage its own real estate to attract apartment developers, both for-profit firms and non-profits. But they must be willing to sign on to unusual terms: the city will offer builders prime locations, financial incentives (reduced development charges, for instance) and 99-year lease agreements instead of outright land sales, as normally happens when public land is redeveloped. The quid pro quo is that property managers must guarantee affordable rents for a century. The builders that win the right to develop these first four sites will be made public this spring. CreateTO, the city agency responsible for these projects, expects construction to begin by late 2020 and will soon make other sites available.

While city officials are attaching all sorts of planning conditions to these deals, one in particular stands out: they must satisfy a set of demanding environmental performance benchmarks set out in the 2018 version of the “Toronto Green Standard” (TGS), which lays out the sustainable design requirements for new private and city-owned developments. That should translate into features such as better-insulated walls, less exterior window space, improved heating and ventilation systems and other measures meant to reduce a building’s carbon footprint.

“It’s important that if we have an environmental emergency and we have a homelessness and housing crisis, there’s a way to leverage these sites and [address] both,” says Mark Richardson, spokesperson for HousingNowTO, an advocacy group tracking the rollout of the program.

“The upfront costs may be high for creating more sustainable buildings, but in the long term, the operating costs will be lower.”

 

Forking out for sustainable affordable housing

Like a growing number of cities, Toronto last fall declared a climate emergency and is developing an ambitious plan to slash building-related emissions by 65% (from 1990 levels) over the next decade. But given mounting public concern about escalating real estate, condo and rental costs, it’s also clear that sustainably designed affordable housing projects, such as those envisioned for the Housing Now sites, have become increasingly critical in meeting the city’s climate and social-inclusion goals.

“Climate change and housing affordability are the two most difficult challenges facing communities and the country,” says Jake Stacey, vice-president of impact banking at Vancity Community Investment Bank (VCIB), which is launching a “green commercial mortgage” this spring to finance projects that combine both objectives.

Older buildings will also have to pull their weight. Hundreds of slab apartment towers constructed in the 1960s and ’70s will require deep energy retrofits (new windows, insulation, LED lights, airtight building envelopes, high-efficiency mechanical systems, etc.) to meet council’s carbon reduction targets. But in the past, financing for such undertakings was elusive. Some of the capital costs can be recouped by reductions in operating costs related to energy efficiency retrofits, but property owners need other sources of financing if they hope to make these fixes without hiking rents.

At various times, public funding programs have helped make the math work, but mostly on the margins. Case in point: since 2000, the Federation of Canadian Municipalities’ Green Municipal Fund has provided $5.1 million in grants and $31.3 million in loans to a handful of social housing complexes looking to cut emissions.

The Atmospheric Fund (TAF) has provided $10 million in financing for 22 energy-efficiency retrofit projects around the Greater Toronto Area, mostly older apartments, using a profit-sharing formula that sees TAF finance the capital expenditures and keep about 90% of the energy savings. The organization invests from an endowment established by the City of Toronto in the 1990s.

There are also a few sources of private sector financing. VCIB’s lending program has underwritten more than 1,200 rooftop solar and geothermal energy projects for residential buildings. The bank also recently acquired CoPower, which sells green bonds that have financed about 400 energy-efficiency retrofits. VCIB’s commercial green mortgages, says Stacey, will allow property owners to borrow against long-term value growth created in their buildings by energy-efficiency capital upgrades, such as tighter building envelopes, new mechanical systems and LED lighting conversion projects.

Yet new public dollars will likely deliver most of the needed investment. This spring, Ottawa will begin flowing about $300 million from a 2019 federal budget commitment for a sustainable affordable housing program. Toronto Community Housing will receive $1.3 billion from the $55 billion National Housing Strategy for overdue repairs to its portfolio, with a portion of those funds earmarked for energy retrofits. A further $300 million from the federal government will help municipalities offer retrofit financing for low-rise homes, and it seems likely that governments will add even more to these pots of funding to counter the recessionary impact of the coronavirus pandemic.

The Housing Now philosophy offers a variation on the theme. The city is aiming to entice developers by leasing prime land and providing breaks on development charges and property taxes in exchange for more sustainably designed projects.
This latest version of the TGS, according to one city estimate, will add about 3.5% to overall construction costs. Yet advocates say that such buildings in the long run are financially attractive because they slash energy expen-ses over decades. They also tend to be better constructed, meaning they require less age-related maintenance.

As it turns out, the implicit formula – additional upfront investment in sustainable design in anticipation of lower long-term operating and maintenance costs – is exceptionally well suited to companies and non-profits that own multi-unit residential buildings and don’t intend to sell them any time soon. Yet it remains to be seen how hard Toronto officials will push the Housing Now developers to maximize the sustainability features of their plans. Richardson says CreateTO’s evaluation rubric doesn’t assign enough weight to the green design aspects of the proposals submitted by the development groups vying to build on these four pieces of land. In late February, CreateTO spokesperson Susan O’Neill said it was too soon to comment.

Greening building codes

For many years, sustainable-design activists, especially in North America, complained that building codes were far too lenient and set minimum standards that allowed developers to erect structures that leaked energy in the form of heat. Many of the condo towers that have sprung up in Toronto in recent years fit the critique. Their perfunctory concrete balconies jettison heat, while the wall-sized windows are so cheaply made and shoddily installed that they either radiate cold or transform small apartments into convection ovens, depending on the season and time of day.

Voluntary green building certifications such as the Leadership in Energy and Environmental Design (LEED) system have historically been taken up by only a small percentage of builders. (Since 2004, only 4,350 buildings have been LEED certified in Canada, according to the Canada Green Building Council, which oversees the certification process. To put that figure in context, the country erected nearly 20,000 new buildings in December 2019 alone.) In the meantime, other, less demanding, voluntary standards have come on the market, such as Energy Star, which rates residential dwellings for energy efficiency.

But in the past decade or so, provincial governments in Ontario and BC have revised their building codes to make them more demanding in terms of energy efficiency and performance. Vancouver and Toronto have gone even further with their own municipal codes, joining a growing cohort of cities pushing to achieve or surpass 80% reductions in carbon emissions by 2050.

The TGS aspires to ensure that all new buildings will attain “near zero” emissions by 2030. The code offers builders more stringent voluntary features and then sets out an aggressive timetable for making those optional elements mandatory – a system known as a “step code.” One such change in Toronto’s green building standard: much tougher rules for the so-called wall-to-window ratio, a shift that will effectively end the practice of building towers clad almost entirely in glass.

According to Lisa King, the senior policy planner who oversees the TGS, the 2018 rules have attracted all sorts of builders interested in developing projects that satisfy the code’s tougher voluntary requirements. “What’s exciting, under [the newest version], which is difficult [to satisfy] because it has absolute targets, is that we’re seeing a quick adjustment in the market.” She says numerous proposals have come in from firms developing smaller commercial or office buildings as well as rental buildings.

Passive houses pass on cost savings

One public agency has decided to aim even higher. Toronto Community Housing Corporation (TCHC) has embarked on an ambitious plan to build 21 townhouses in Alexandra Park, a downtown affordable-housing complex, that meet the most demanding voluntary targets in the TGS – a set of benchmarks that are virtually the same as “passive house,” a German certification method associated with draft-free structures that have, among other things, thickly insulated walls, state-of-the-art windows and extremely low energy bills.

After an unusual competitive bidding process was completed last year, a consortium led by Tridel and Diamond Schmitt Architects won the contract, estimated to be worth about $10 million. The tender process was out of the ordinary because the two finalists had to present their plans to community members, who voted on the one they wanted.
TCHC architect Michael Lam, who will be the senior construction manager, says the project will be the first of its kind in Greater Toronto.

While residential passive-house developments, both for-profit and non-profit, have gone up in Vancouver, Ottawa and Hamilton, none have been completed in Toronto. “We don’t have a lot of experience with this,” Lam says.

Officials with TCHC, which is in the process of redeveloping and intensifying a number of its housing complexes, looked ahead five or six years and realized that more demanding green building codes, especially for city-owned projects, were inevitable as the TGS evolves. So Lam and his team decided to get ahead of the curve. “We thought, ‘We’ve got an incredible opportunity in our own revitalization projects,’ and this [the townhouses] was a fairly well-delineated project.”

Because certified passive-house projects feature extremely airtight designs, smart heating/cooling and humidity-control systems, natural interior materials that don’t cast off chemical smells, and all sorts of devices tasked with capturing and recycling waste energy (from hot water going down drains or from bathroom ventilation fans, for instance), the design process is far from conventional, Lam explains. The team’s architects, engineers, energy consultants and constructors must all work together to figure out how they’ll create structures that satisfy a demanding set of performance standards. “The objective of the building is so different that it requires a different design process and a different way of thinking about how architect, engineering and energy modelling work together,” says Lam. Detailed designs will be unveiled later this spring, and construction is expected to begin in about a year

An Ottawa non-profit supportive-housing provider, Salus, went down this road a few years ago, with a 40-unit apartment complex for people with mental health issues. The project consists of 300-square-foot apartments with small kitchenettes, about a fifth of which are barrier-free. “At the time, [passive house] was not something that was on the landscape,” says Salus executive director Lisa Ker.

In 2013, Salus was trying to figure out what to do with a piece of donated land when a manager with a national affordable-housing umbrella group suggested they try developing a passive house project. Ker’s advisors predicted that the costs would be 6 to 9% above a more typical building. But, as she points out, Salus was the first in the market, so they had no real basis to evaluate. “We were very much an experiment.”

However, Salus’s donors were very interested, and not just because of the environmental features. As Ker points out, Salus’s clients live on the fringes of society and are generally seen to be contributing little. Living in a cutting-edge project, she says, “was a great opportunity to show they could bring something to the equation.”

Salus’s architect, CSV principal Anthony Leaning, adds that passive house projects are notably comfortable to be in, and so the design could improve clients’ health and well-being. And, he says, the durability of the building materials means such projects “will last a long time.”

CSV is now working on numerous other passive house affordable-housing projects, and Leaning points out that Ottawa’s public housing agency has also begun to promote aggressive environmental standards in its newest projects. Some of the federal government’s $55 billion 10-year National Housing Strategy funding will pay for large-scale energy-efficiency retrofits of older affordable-housing projects that need everything from new boilers to proper windows (in addition to funding 125,000 new housing units). “There’s a shift happening,” Leaning says of the affordable-housing sector’s growing embrace of energy-efficiency design.

Building on lessons learned

This story, of course, isn’t just about the performance of individual buildings. HousingNowTO’s Mark Richardson points out that the best strategy for reducing the emissions associated with any apartment building is to situate it close to a transit stop. Such locational decisions also bring financial dividends because the developer may not need to build a giant, expensive underground parking lot in such projects, provided municipal planning officials waive those requirements.

TCHC’s Michael Lam hopes that as for-profit builders like Tridel gain experience with more environmentally ambitious projects, such as the townhouses in Alexandra Park, they’ll begin to incorporate those energy- and cost-saving features in more market-oriented apartment building projects. “They’re seeing the writing on the wall: ‘Sooner or later, we’ll be asked to do this.’”

Anthony Leaning says municipal governments should be promoting the case for green affordable housing by offering to fast-track the approvals of such projects and waiving development fees.

The Housing Now program that is attracting so much attention certainly has deployed all available carrots and sticks – more demanding minimum-energy and ecological-performance standards, but also breaks on a range of charges, including property taxes. And as with TCHC’s Alexandra Park venture, the eventual winning Housing Now bidders will include both for-profit and non-profit developers, meaning there’s an opportunity for the design lessons to find their way into the private development sector.

VCIB’s Jake Stacey adds that as recently as two years ago, few builders or agencies would have had the chops or the courage to attempt a net-zero or near-zero building, of any sort. But as more organizations gain experience in building or rebuilding affordable housing that meets the ambitious emission-reduction standards we’ll need in the near future, other agencies, developers and financing sources will fall into line.

“There’s a way to do it,” she says. “I want to be out in front of this.”

 

Toronto journalist John Lorinc writes about cities, sustainability and business.

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