Transit Oriented Development; Where it Occurs and Why it Does Not
August 2024
Executive Summary
Governments are recognizing that housing and public transit are in short supply in the GTA. One solution to this problem is to ensure that the conditions for new development exist adjacent to major transit stations, especially near new investment in rapid transit.
Conditions surrounding transit intersections are not always conducive to building real estate projects either commercial or residential. Changing the conditions to suit development has been left, in the past, to the private sector and when those changes are not possible development does not follow transit.
Governments recently have recognized that low density allowances near transit stops should be increased, yet density is only a part of the problem. This paper identifies those conditions necessary for successful new development and provides case studies of both successful and unsuccessful outcomes.
In this study e examined development patterns around Toronto’s subway stations over the past 75 years, looking for the conditions which explain why intensified development occurred at some stations but not at others. Recognizing what works and what does not will help inform future policy change and put an end to the misguided assumption that a new major transit project -- rapid bus way, light rail, or subway -- will, just by its existence, attract real estate improvement.
Understanding development risk is not self-evident to political, administrative, and planning professionals. This is not a criticism, rather it is a realization that the norms, assumptions, and operating procedures in the public sector differ from those in the private sector.
To help better understand the conditions which drive development, SRRA has organized these conditions into three categories for analysis:
1. Land Conditions
2. Economic Conditions
3. Public Policy Conditions
Land Conditions
a) Parcel configuration and especially the size of available lots
b) The type(s) of existing built form
c) The adequacy and capacity of existing public infrastructure.
When there is adequate public infrastructure, the neighbourhood is ready for intensification and parcel configurations are suitable for large scale projects the probability of TOD is greatly enhanced.
Economic Conditions
The economics of land development are straight forward. Land cost, building cost, an allowance for risk, and profit must add up to a price that the market will bear. This equation is what developers refer to as a proforma. TOD is no exception, the proforma has to work. Typically, at transit locations the land is more costly, but markets tend to like transit as a value add. The cost to construct can be more where access is restricted but it is not usually an adverse factor. Risk and profit are always factors, but the two economic conditions impacting the proforma most are:
a) Land Value Accretion
b) Market Demand
When new transit services become a reality land close to new stations in most cases increases in value, a phenomenon called Land Value Accretion (LVA)[1]. The owners of property adjacent to transit prior to the decision to upgrade always benefit from the value increase that a transit upgrade brings.
Because transit projects take so long to move from the planning phase to completion, there is always a possibility that market conditions could radically change by the time a new transit line is operational.
Changing markets are unpredictable for most people, they spark booms or busts, they are difficult to forecast accurately, as a result markets can foil the best laid plans of both developers and governments alike. Preserving options for different market conditions is desirable and possible and should be part of policy for TOD.
Public Policy Conditions
Public policy too can impact the location of property investment. Zoning, regional taxation policy, and the location of government services all influence developers and their market interest. When new public policy is out of line with TOD interests, it usually falls on developer to initiate change.
The time and risk of adapting policy to markets, even when land and economic conditions are optimal, drives the cost of a proforma up and usually forces a project beyond the investment horizon of most investors. If public transit is to benefit from TOD some argue that policy should lead to development ready sites. The public policy areas most important to the TOD are.
a) Land-use policy, zoning
b) Non-Land-use policy
c) Location of Public and Private Institutional and cultural buildings
Collectively, these conditions impact a development proforma and determine the risk and reward of potential TOD. They are identified here to provide all stakeholders – public and private alike – with a clear understanding of what is needed to induce TOD. The conclusions from this analysis will form the basis for future SRRA reports that will detail specific strategies for ensuring that TOD is successful and provide direction that can be usefully applied to existing, planned, and proposed stations. These strategies will provide a basis for proactively creating and implementing effective policies and establishing public-private development partnerships across the region’s steadily expanding transit network.
Transit planners can no longer afford to have a deaf ear to the risk that development will not follow a major transit improvement. Equally as important, private developers must assist in the process of creating more intensified commercial and residential development. Getting this right is good for both private investors and the public sector which plans, funds, and delivers mobility infrastructure.
To achieve this objective there will need to be a higher level of collaboration between the private sector creators of housing and commercial development and policy makers at Municipal, Provincial and Federal levels. The nature of these changes and the quantum of opportunity that can be realized will be the twin focus of SRRA’s next study building upon principles in this paper.
Introduction
For more than a decade SRRA has published widely on the relationship between where people live and work and transit investment, usually with a focus on the value of new transit projects. This paper explores intensified transit-oriented development (TOD)[2] focusing on the conditions under which developers have built or chosen not to build near Toronto Transit Commission (TTC) subway stations.
Congestion on roads has reached a tipping point. Growth is outpacing infrastructure investment. New residential and commercial development must be located near intersections with rapid transit to provide people with acceptable mobility options.
Transit planners can no longer afford to have a deaf ear to the risk that development will not follow a major transit improvement. Equally as important, private developers must assist in the process of creating more intensified commercial and residential development. Getting this right is good for both private investors and the public sector which plans, funds, and delivers mobility infrastructure.
There is an unrealized opportunity to intensify land use at most of the 237 transit stations on the TTC subway system, the subway expansions now under construction, and the network of GO rail stations many of which are being reimagined as part of the major investment to expand two-way all-day operations. However, to maximize the opportunity for such property intensification new policy approaches are required.
For most of the past 75 years, transit project after transit project has failed to stimulate further real estate investment especially in low density areas.
“Hoped for” Transit Oriented Development (TOD) [3] has been either non-existent or very slow to appear. This is not surprising to anyone in the development industry because they know that a transit investment by itself is insufficient because many other conditions for improving property are necessary.
The failure to attract intensified TOD represents a significant lost opportunity for all concerned because both the transit operator and the property owner benefit when TOD does occur. Owners of real estate surrounding transit always enjoy a property up lift. Transit operators benefit from increased fare paying customers when homes and non-residential uses are created within a short and acceptable walk. Increased ridership and related revenue can be seen as a TOD dividend that provides recurring and growing value to the public.
Political and government proponents of new transit projects almost always assume that user-friendly transit intensification will happen but rarely acknowledge the risk that it may not. Yet much of the investment in the subway network in Toronto has not directly led to new development with the exception of the downtown financial district. This represents a failure of public policy that can be avoided with future transit expansions by recognizing and mitigating the risk factors that determine the extent to which development does or does not occur.
Understanding development risk is not self-evident to political, administrative, and planning professionals. This is not a criticism, rather it is a realization that the norms, assumptions, and operating procedures in the public sector differ from those in the private sector. Where the value and opportunity in a transit project may seem self-evident to a professional in the public sector, it often is not investment worthy to someone in the private sector.
Property values increase near new transit stations when new stations are created. But this can inhibit further investment by driving up the cost of further improvement beyond what the market will bare. Many other conditions are necessary before the private sector can profitably act on the initial value uplift.
When the planners of transit rely on property development to create new ridership revenue to support a new transit project, they must also ensure that the conditions for that development are there or can be created with policy change. It simply is not good enough to leave it solely to the marketplace or investor preference to decide whether to pursue changes needed to make development commercially viable.
In other major cities similar general principles have defined “intensification risk” and are included in the initial risk analysis undertaken as part of the evaluation of proposed new transit investments. The hoped for intensification to augment ridership of any new service will fall short of the amount anticipated by its public sector proponents unless proven markets exist and conditions attractive for development also exist. In Toronto and the wider Greater Toronto Area (GTA) understanding the elements of intensification risk should be a standard part of the evaluation of every new transit proposal especially when the location of stations is undertaken.
Analysis Overview
In this study we examined development patterns around Toronto’s subway stations over the past 75 years, looking for the conditions which explain why intensified development occurred at some stations but not at others. Recognizing what works and what does not will help inform future policy change and put an end to the misguided assumption that a new major transit project -- rapid bus way, light rail, or subway -- will, just by its existence, attract real estate improvement.
No public investment in a transit project, is in itself sufficient to induce development. Instead, it is necessary to understand that desired development outcomes only materialize when other supporting conditions coexist with the planned transit improvement.
A review of the history of TOD around Toronto’s subway stations shows that when the right combination of conditions exist real estate improvements and intensification have taken place. In the absence of these conditions, however, development has either not occurred at all or it has failed to occur in a timely manner.
Regardless of the type of land use -- residential, employment, institutional, cultural, or even educational -- a combination of some if not all of these conditions must be present. Many of these conditions can be identified in the transit planning stage. Doing so can help identify changes that will be needed to create favorable conditions to support intensification and the resulting increase in ridership revenue available to the transit service. This can serve to mitigate the risk of lower ridership resulting from underperforming TOD.
The conventional transit operator’s historical focus has been on the daily journey to work. This over-arching concern with the “peak hour” demand was tied to an assumed office-based 9 to 5 workday and five-day work week. This work pattern may no longer be as predictable and will create challenges for future transit network design and service level estimation and planning.
Toronto Skyline 1960
Downtown Toronto’s employment destinations have almost exclusively driven transit planning. However, as detailed extensively in previous SRRA papers, there are now three significant districts with substantial office jobs across the GTA and only one -- the Toronto downtown central business district -- can be said to be well serviced by transit.
The Region’s residential form has also evolved. Single family homes in a dispersed suburban built form gradually shifted to the creation of multi-residential property, first in apartments in single purpose areas then to condominium projects located within pre-existing areas with established and varied land uses. Until recently very little of the multi-residential development was located at transit intersections. That is gradually beginning to change in some markets.
The COVID experience, especially the changes to commuting and the location of work and the work from home phenomenon will have an impact of where new development will occur. Regardless of how travel patterns evolve, there will always be a need to locate new homes and employment within close proximity to transit stations.
Public Transit Post-COVID: The Case for More TOD
COVID -19 forced most office-based employees to work remotely and avoid transit. Governments stepped up emergency operating subsidies that helped to maintain transit service levels between 2020 and 2022 to not discourage the eventual return of commuters to transit. As the pandemic has receded ridership has slowly returned but system wide it has yet to return to the levels seen in 2019 let alone the pre-COVID projections of ridership. As emergency subsidies from the Provincial and Federal orders of government have ended municipal transit operators face significant revenue shortfalls. To mitigate the impact of lower ridership revenue, services such as the TTC have reduced service levels.
Travel on subways, street cars and buses -- even when full -- is no longer seen as a significant health risk by the majority of people. But keeping service levels high without the full return of peak hour commuting is a challenge. Remote work has created uncertainty for transit planners. The traditional peak hour 5 day a week ridership model may never return making the planning of service levels challenging. When and where people travel is becoming less certain, but simply cutting service will handicap operators’ ability to adjust effectively.
Policy change to increase ridership and decrease subsidies is critical. Generating more TOD is one solution with substantial upside to transit operators especially if the new residential properties at transit are affordable.
In the early days of COVID there was considerable speculation that transit would permanently suffer. However, transit use by early 2023 is showing signs of returning to pre-pandemic levels for many types of ridership and it is even increasing for some types as travel patterns have changed. The extreme levels of transit subsidy required to keep the lights on during COVID will, over the longer term, be reduced by several factors:
· People are using transit more off peak.
· Transit operators are managing operating more efficiently.
· Population growth will by default generate transit use.
· TOD will provide more opportunities to use transit.
By early 2023, transit users were returning to transit use despite the high levels of remote work. Weekend and off peak ridership for non-work related travel is up not only in Toronto but similar cities like New York, San Francisco, Chicago, London UK, and Paris.
The reason for this is not clear. It suggests that people are more likely to use transit for other activities as long as they are not commuting 5 days a week. We are unaware of research on this point.
Should this behavior continue, however, the argument for more intensification around transit hubs gains increased validity and urgency.
Rationalizing fares and service levels to entice more users is difficult with the governance structure currently in place in the region. Seven transit agencies, despite their efforts to create a more user friendly environment, are held back by municipal borders and jurisdiction. This is a tough political problem which needs to be addressed.
The past three Provincial governments have recognized the need for new capacity and multiple subway, LRT and BRT projects are underway, but investing in new projects takes a great deal of time before services are operational. The current investment in the region’s transit system, which is estimated to create capacity for an additional 750,000 new transit users per day, will not be enough to meet the expected demand from population growth. More importantly the impact of this new investment in capacity will not show results for at least a decade.
Building new subway and transit capacity is a long-term undertaking. Maximizing the usage of the existing networks by intensifying around stations will produce more ridership in the shorter term and for decades to come.
Population growth forecasts for the region are returning to pre-pandemic levels. Recent forecasts by the provincial government and StatsCan anticipate an additional three million people arriving in the GTA by 2041, bringing the population close to 10 million and requiring the addition of 1 million jobs. Adding to these estimates will be the newly increased immigration targets announced by the Federal Government are greater than those that informed earlier Government plans and estimates.
As the GTA has long been the main destination for new Canadians there is every reason to believe that the population growth in the decades to come will be even greater than before COVID. As the region ‘s population continues to grow, the capacity of its roads is reaching the breaking point. This underscores the need to address effective intensification at transit nodes. Shifting an increasing proportion of new growth to locations served by existing rapid transit as well as new stations under construction and in the planning, stages is the only significant way to relieve current road congestion.
Remote work during COVID created revenue shortfalls for transit operators and put an unusual burden on roads as commuters increased auto use. Those that stayed at home also increased demand for more delivery vehicles in residential areas. The challenge for policy makers is understanding the long term impact of remote work on road congestion and reduced transit use.
Remote work shifted the burden of mobility onto roads at least for the short term. Anticipating how much remote work survives in the short term is critical to successful planning of the peak hour commute and mobility patterns in general.
Where the bulk of office workers will ultimately work is up for debate, but regardless of the outcome TOD will provide much needed permanent revenue source required to sustain transit operations. TOD may be the best way to optimize the use of transit in the short and medium term if the barriers to TOD can be reduced.
Office Employment and Transit Oriented Development
The symbiotic relationship between office jobs and transit is well established in urban transportation circles. Servicing peak hour travel from home to the office is the hall mark of transit planning worldwide. Toronto is no exception. Almost all of the office jobs in the Region were wrapped around the Yonge University subway line until the 1980s when companies began to relocate to the suburban belt around the City of Toronto commonly referred to as the “905”.
Downtown Toronto underwrote peak hour transit post WW2. Politicians and planners came to conclude that constructing higher order transit would automatically attract property development, but which came first the jobs and buildings or transit?
The first ever passenger train departure in Upper Canada originated from a wooden shed opposite the Queen’s Hotel on Front Street on May 16, 1853, almost exactly 100 years before the first subway in Toronto. By 1911, the (old) Union Station handled some 40,000 passengers on more than 130 trains daily. By 1927, when the current Union Station opened for business, Bay Street had become the centre of the city.
Before the 1st World War there were few buildings in Toronto dedicated to employment in offices. That changed after the war when construction of office buildings to accommodate the rapid growth of banks, insurance and investment business began in earnest in the 1920s, followed by the opening of a new stock exchange in 1937. The Royal York and Union Station anchored a bustling commercial, retail, and government district.
‘Bay Street’ was becoming more than the name of a street, it was gaining iconic status as the epicentre of commerce, first in the Province and then ultimately as a symbol of commercial power in Canada. The conditions for the success of the first subway were already in place in 1947 when Toronto Council approved the Yonge Street Line to Eglinton.
Prior to that decision the tram lines on Yonge Street were jam packed with passengers heading downtown. Over 16,500 people used the Yonge tram per hour in peak hours. Virtually all government offices, commercial buildings and retail activity was in Toronto’s central district.
Yonge and Queen Street circa 1911
The evidence for the new subway was in plain sight for all to see. There was nothing complicated about the decision to build the subway. It was simple: the demand for new capacity on the existing transit line was underscored by the constant investment in the downtown jobs and cultural markets of the downtown district.
The transit investment of the 1950s and 1960s provided the infrastructure underpinning for the extraordinary growth of the office market. When external factors such as the election of the Parti Quebecois in 1976 in Quebec accelerated the shift of migration and commercial development from Montreal to Toronto, the infrastructure to move people was already in place.[4]
Toronto’s stock of office space went from 50 million sq. ft. to 130 million sq. ft. in the 1970s and 1980s, surpassing Montreal as the office headquarters of Canada. In the same period of time office space in Montreal only expanded from 60 to 70 million sq. ft..[5] All five major banks and several insurance companies built signature new office complexes to support consolidation and international expansion, competing with each other to make the boldest architectural statements, the first example of which was the Toronto-Dominion Centre in 1967.
Bank Towers downtown Toronto circa 1988
The public sector also grew at an unprecedented rate during this period. The seat of provincial government at Queen’s Park was already surrounded by a cluster of classic government office buildings constructed in the 1930s to which was added the four office towers of the MacDonald Block Complex at the end of the 1960s. The federal government and municipal sectors, however, grew in the downtown core centred at Queen and University. The New City Hall, with one tower devoted to the newly formed Metro Government, opened to great fanfare in 1964.
Mowat Block at Queen’s
Not only office space but cultural activity in the GTA was focused on Toronto’s Downtown. Most of the region’s significant retail in this period was located in downtown Toronto. Department store icons Eaton’s and Simpsons at Queen and Yonge provided the majority of the retail business in the region. That cluster reimagined itself as the Eaton Centre in 1977 which is still one of a few large-scale retail facilities in the world with almost no parking. The value to shoppers of stepping off the subway and entering either store from two subway stops without going outside foreshadowed the vast network of shops connected to the transit system now known as the PATH.
The idea of extending indoor shopping connected below grade was the brainchild of the City’s Planning Commissioner, Matt Lawson (1954-1967). Following construction of the University leg of the subway in 1962 and the opening of the Bloor-Danforth subway in 1963, Lawson noticed a large uptick in the number of TTC commuters walking north from Union to their newly built offices. He correctly anticipated that the impending introduction of GO Transit – bringing additional commuters from Oakville and Pickering starting in 1967 – would overwhelm the city’s narrow streets.
The PATH is an excellent example of how innovative public policy complemented transit-oriented high intensity development.
Lawson was also concerned about the loss of service retail stores being removed to make room for major new buildings. His solution was to launch a network of below-grade pedestrian tunnels linking retail stores and food courts in the base of major buildings.
As an incentive to experiment with these retail concourses, below-grade commercial space was not counted in the density calculations. Framed by the two legs of the subway, the steady expansion of the PATH played a significant role in establishing the downtown core as a compact concentration of commercial (and later, residential) buildings. By the time Lawson retired, the PATH concept was well established.
Cultural and sporting attractions, Maple leaf Gardens, the ROM, the Art Gallery, Massey Hall, The O’Keefe Centre, which opened in 1960, even the CN tower were all well served by the subway and its supporting network of street cars. Before York University, the suburban campuses of the U of T and the emergence of community colleges in the region in the late 1960s and 1970s, nearly all the higher order educational institutions were also in arms length of the core network of public transit.
The University of Toronto, with more than a dozen major buildings, and Ryerson University (now known as Toronto Metropolitan University)[6] enjoyed a period of major expansion, The two universities, together with community colleges, currently have more than 150,000 students enrolled in downtown campuses.
Queen’s Park and the University of Toronto.
A Region In Transition
Throughout the 1970s, pockets of commercial office development took place along the Yonge subway as it was extended towards North York. The visible presence of these high-rise office buildings in the Yonge corridor helped promote the notion that transit inevitably begets development. But, in the mid eighties this began to change.
SRRA has published extensively on what happened to office development in the Region from 1980. The growth of suburban office campuses adjacent to the Don Valley expressway, the 427, along the 401 from the Airport to Meadowvale and the construction of over 20 million sq. ft. in the Markham/Richmond Hill area changed a great deal. It has been documented extensively by SRRA and graphically laid out in SRRA’s video, “A Region in Transition.[7].” Today, approximately 35% of the total office market is now located in the 905 parts of the GTA.
The principal reason was the low cost of office space. The value of locating office space near public transit networks was undercut by the low cost of land, lower realty taxes and availability of free parking. The office market shift was facilitated as well by access provided by the 400 series of highways which enjoyed considerable expansion during this period.
This phenomenon, known as locating back office functionality in low cost areas, was popular in many other cities. The good news for the Greater Toronto Area is that it stayed in the GTA. Many cities lost back office functionality to other cities or even countries.[8]
Highway investment in the nineties helped to facilitate the spread of office clusters.
While early TTC transit planning was focused on the core of the city the emergence of two new clusters of office buildings in Markham Richmond Hill and the Airport district with a few smaller nodes in the 905, now house office jobs without any rapid transit. SRRA has published widely on this subject which continues to be a major challenge for mobility planners.
From Single Family to Multi-Residential Built Form & Its Impact on Transit
The Post World War Two era of subway building focused primarily on delivering people from low-density single-family homes to the downtown business and retail district where zoning was restricted to non-residential use. The apartment boom of the 1950s, 1960s and 1970s for the most part landed in parks or precincts dedicated to residential use creating “Tower Communities” that today provide 25% of all rental housing in the City. Virtually none of this residential intensification occurred on the new network of subway stops.
The legacy from this era is the many apartment tower neighbourhoods that until the recent condominium boom provided most of the purpose-built rental stock in the region. The vast majority of these buildings are not located near subway stations and instead are served by bus lines. In short, a residential form that is largely the opposite of that which is envisioned by approaches to Transit Oriented Development today.
Flemingdon Park, North America’s first “Newtown.”
The apartment building era ended abruptly in the 1970s and for the next 30 years the focus of home building was on subdivisions made attractive by access to new and expanding highway construction. At the same time transit operators made do with little or no new capacity other than new equipment to operate on existing routes.
The widespread impact of sprawl on congestion did not go unnoticed by politicians and planners. To offset the high cost of infrastructure to serve these communities legislators became more actively and directly involved in influencing the form and location of development in the region. The first Provincial Transit Oriented Development Guideline was published in 1992, along with new Provincially led initiatives starting with a vision for establishing nodes and corridors in 1992[9], followed by an even more comprehensive analysis in the late 1990s influenced by Smart Growth.
All of these efforts attempted to address the challenge of promoting development in a form and at densities that could support public transit. Policy changes designed to stop spawl in the region and reduce the high cost of providing low density residential development with needed infrastructure led to the creation of the Greenbelt in 2005, followed by the first Growth Plan in 2006. The objective was to align new homes and businesses with public infrastructure investments, schools, municipal services, and public transit more productively.
The new millennium brought on the era of ‘up” rather than ‘out’. The condominium boom began in earnest in 2000 and, as with previous patterns, very little of this development took place on transit. While some of the new development aligned with existing transit networks, most of it did not.
Prior to 2000, few in the planning world anticipated the explosion of high rise condominium development in downtown Toronto. From virtually no condominium projects prior to 2000 to over 330 completed in just 20 years. It was an unexpected transformation of primarily an employment area to a greater mix of uses. While some benefited from the streetcar network most it was located in non-transit hubs.
Spadina and Lakeshore is a prime example of the condominium.
boom in downtown Toronto not waiting for transit.
Many of the multi-story buildings built around subway stations in the 1950s and 1960s when transit first opened were built on land already owned by development interests prior to the transit improvement. As detailed more fully below, a major precondition of successful TOD has been when ownership of suitable development property sites was in place prior to a transit investment being initiated.
This lesson is validated and remains true today as seen by the fact that all of the new TOD projects that have been announced under the auspices of the Transit Oriented Communities Act of 2020 have been on sites that already were in place with suitable conditions before new transit was announced. Indeed, the Act authorizes the Province to enter into development agreements with existing landowners located along new transit lines. It is not truly legislation designed to create de novo the conditions needed for new TOD.
Every location is different and weighting drivers as preconditions for success is not a uniform exercise. Elements of each of the following five conditions, in different degrees, usually need to be present when anticipating the probability of property improvement. In some cases, the absence of one condition can void further improvement for many years even when all other conditions exist.
Necessary Conditions for TOD
The assumption that development followed transit was a reasonable one when the bulk of travel was from low density housing to a single point of concentrated employment, shopping, and entertainment in downtown Toronto. As the region became more complex with employment expanding into the 905, the advent of major shopping centres throughout the region and population growth exploding from the 1970s on, planning transit became more complicated.
The TTC, in the 1980s, was thriving with its primary purpose of servicing the Downtown. It was the envy of transit buffs throughout North America partly because it operated a network of bus, light rail, and subways service without subsidy until the late 1970s. More importantly, the Region in the heyday of profitable public transit was still within the boundaries of the City of Toronto.
There was also little motivation to look seriously at TOD during this period, its causes, and effects, prior to the 21st Century. But as the region matures into one interrelated regional economy, where agglomeration provides synergies for continued prosperity, the necessity of aligning infrastructure with development becomes even more important. The challenge of creating transit oriented development can no longer be ignored.
To better understand where intensification will occur or will not occur, we have divided the conditions under which developers choose to build into three areas of study which, to varying degrees, are all required, they are:
1) Land Conditions
2) Economics of Development and
3) Public Policy
Having a better understanding of these prerequisites for TOD can help usher in a new era of partnership between the needs of the public and the process of creating new homes, businesses and other locations served by multiple mobility options.
1) Land Conditions
The pre-existing land uses of properties surrounding a new transit station is one of the most important indicators of the potential for improvement and intensification. To help understand the risks and benefits for the creation of new intensification there are three conditions to review:
d) Parcel configuration and especially the size of available lots
e) The type(s) of existing built form
f) The adequacy and capacity of existing public infrastructure.
When there is adequate public infrastructure, the neighbourhood is ready for intensification and parcel configurations are suitable for large scale projects there is a very good chance that development will occur.
If land conditions are not present, it is usually the job of private interests to attempt to alter those conditions and when difficult or costly minor change occurs.
As highlighted earlier in this study, favourable land conditions existed in downtown Toronto long before the first subway was built on Yonge Street. Indeed, the ridership success of Line One and the continued intensification in the core was, and remains, possible because the conditions for intensified development existed before, and for many years after, the new subway service was constructed.
Any policy change contemplated to induce TOD where the land conditions are unfavourable must recognize how parcel size, existing built form and service infrastructure can impact development decisions. Developers usually do not seek policy changes such as changes to zoning when there is a substantial risk that such attempts may not succeed. In the rare cases where those risks can be eliminated, the cost of seeking and securing such changes, in terms of both actual costs and the opportunity cost associated with lost time – are built into and passed along to the end user in the form of higher prices.
a) Parcel Configuration
It is difficult to construct anything of scale on less than an acre of land. The size, shape, and depth of properties is critical for development. If a single parcel is neither pre-owned by development interests nor available to acquire, then the cost, both in time and money, of assembling multiple properties to achieve the right parcel size often discourages development.
This risk to TOD is easily predictable before transit is improved because all major projects always require parcels of size. This reality, however, is rarely acknowledged in the business cases that form the rationale for new transit. That said, after a new transit project is complete and operating the economic costs often change, and the risks associated with the costs of land assembly may be reduced. This is driven by changes in markets and changes in land availability.
An examination of successful TOD projects throughout the TTC’s subway network shows that they almost always start with an appropriately sized parcel owned by a single entity.
Yonge and Eglinton District 1960 after the subway was completed and
before construction of The Yonge Eglinton Centre (1973 to 1976).
For example, parcel size in the Yonge Eglinton area was always ripe for predictable real estate development and this has remained so for decades of transit-oriented development. The addition of the new Crosstown LRT has not had any impact on the intensification process at this major intersection which has been driven by other variables.
Risk increases substantially when assembly of multiple properties is necessary to create a lot suitable for development. First on the list of risk factors a developer considers is not being able to complete the assembly because of a hold-out owner or owners. Second is the cost.
Sellers often seek unrealistic valuations which do not align with the development pro forma. These two risk factors are why land assemblies often occur well before transit is improved but rarely afterward at least in the short to mid-term.
When major developments were being created in downtown Toronto early in the history of the subway most properties were already commercial in nature and large in configuration. When land assembly was required, it was often the case that the value of selling land to developers was greater than the value of continuing the operations of the businesses occupying the lands. Because there was limited risk to land assembly developers were able to create development size parcels suitable for large office buildings and, more recently, residential condominiums[10].
A corridor with large property parcels owned by a few owners often with uses like auto dealerships or strip malls it is more likely to attract redevelopment interest than a corridor made up of small, narrow retail properties that back onto roads, laneways, or mature residential neighbourhoods.
The dimensions of land parcels is another good indicator of the probability of future development. The cost of lots with narrow frontages is higher proportionately to its size and becomes more challenging to acquire for redevelopment when current uses are still delivering good returns for their owners. For example, properties fronting on Yonge Street from Dundas to north of Bloor were for decades too valuable as on-going businesses and too shallow and small in size to allow for affordable land assembly.
The time needed to assemble a development parcel can be a factor depending on the objectives of the investor. If parcel assembly takes too long most developers will pass on the opportunity. The southeast corner of Yonge and Bloor is an example of investors who took decades to assemble multiple lots for development, but that is an exception to the rule. The assembly of small lots is possible as and when the land economics are sufficiently favourable, and the probability of owner hold outs is minimal.
The Islington Subway Station
The Islington subway station in Etobicoke is a good example of how parcel configuration was both a positive and a negative contributor to TOD. Not long after the subway was extended to Islington in 1968 three large office buildings were built on the north side of Bloor Street on lots that were formerly car dealerships. The property was owned by a single businessman. Those three office buildings and a few apartment buildings have been used as examples of successful early-stage TOD.
Yet too often forgotten is the south side of Bloor Street east of Islington where there were numerous narrow properties with multiple owners.
Redevelopment failed to take place on that strip because the developer who began to assemble the land was unable to get planning permission in place before land prices for the remaining properties skyrocketed and the assembly became prohibitively expensive.
The developer halted the assembly, sold the properties already acquired and abandoned the project. It remains a collection of narrow two storey retail properties. No further TOD of any kind has taken place in the past 60 years, despite being directly across from a subway station.
The Eglinton Crosstown LRT
Entire transit projects can have many areas with wildly different parcel configurations. The new 19 km Crosstown LRT being built at and below street level along Eglinton Avenue from Black Creek in the west to Kennedy in the east provides both positive and negative examples of how parcel configuration impacts TOD and how entirely predictable the ultimate locations of TOD were long before the project began.
The corridor is made up of several distinct districts each with unique land use characteristics. Predictably, TOD has and will happen east of Yonge in three districts with suitable lot configurations: between Mt. Pleasant and Bayview, in the valley area north of Eglinton to the west of the DVP, and in the Golden Mile District and east to Kennedy in Scarborough.
Golden Mile District pictured in 1962.
Once the LRT was announced developers focused on these areas for one very obvious reason: lot size.
These three sub-markets will see substantial TOD.
And as noted above, at Yonge and Eglinton TOD was already happening long before the Crosstown project turned into a reality.
What was completely predictable is the lack of intensification west of Yonge Street all the way west to Black Creek. If development conditions, and parcel conditions, had been acceptable for development, TOD projects would have already been proposed and constructed.
During the time between the suggestion that there would be transit improvement on this corridor and today, over three hundred high rise condominiums have been built in Toronto but none of them have happened on this 8 km stretch of transit enhanced corridor. The absence of cranes associated with intensified high-rise development is striking and in plain sight to anyone driving along this portion of the project and proof positive that parcel configuration is critical to the development proforma.
Bloor Street West of Spadina
The TOD that has occurred on the corridor serviced by Line Two has quite predictably occurred on parcels already meeting the criteria for development size and ownership.
Honest Ed’s a landmark for decades, shown to the left in 1970.
This site is now a series of high-rise condominiums which will create more demand on the Bloor subway.
From the early days of apartment building era to the condominium boom of today, Bloor Street from Spadina west to the end of Line Two is a prime example of how land conditions are critical to enabling or delaying intensified development. Apartment buildings near High Park, the condominium development of the former Honest Ed’s department store at Bathurst and the Loblaws/ Catholic School Board site at Dundas West are the only intensified areas on this subway line after over 50 years of operation underscoring the importance of lot configuration size and ownership.
When parcels are configured in a shape conducive to a new development it is reasonable to assume that the lot could be improved if other conditions are present.
b) Neighbourhood Built Form
The type and extent of existing buildings in the neighbourhoods served by transit has a great deal to do with the market for new development and the risks to successful TOD. Existing built form comes in three different configurations. Each has varying degrees of attractiveness for property improvement and/or intensification.
1. Mature Mixed-Use neighbourhoods with developed commercial and residential properties and room for growth, i.e., Downtown Markham, North York City Centre, Mississauga City Centre, Scarborough Town Centre, and the Toronto downtown Core.
2. Neighborhoods with predominantly low-density residential properties with some street-related commercial and retail. These nodes include most of the subway stops in the TTC system.
3. Greenfields or undeveloped areas which often require far more than transit improvement to stimulate development of any kind. Even when rapid transit exists TOD is not assured. Downsview Park, for example, where despite subway stops on three sides of the property still remains underdeveloped.
Mixed-Use Centres
Scarborough Town Centre, North York Centre and Etobicoke Centre in the City of Toronto are examples of political policy inspired mixed-use developments. Many favourable conditions exist in these centres. Inspired by the creation of Metropolitan Toronto, future “city centres” were planned for each of the communities that formed “Metro.” These centres, along with the city centres of the regional governments in the 905 border cities have the most opportunity to be intensified and attract a mix of uses. Each of these Centres has a variety of building types from retail to commercial office buildings and public investment in institutional government buildings.
When these areas are adequately provided with transit such as North York, one can safely expect TOD to occur provided that markets for homes and businesses also align with the advantages of lot size and institutional attractions.
Parcel configuration, public investment in institutional buildings, land values adjusted to markets and favorable zoning by and large create an opportunity for intensification but without markets no amount of transit will change the neighbourhood in these centres.
Low Density Neighborhoods.
Toronto’s expansion of the subway system was built almost without exception through low-density neighbourhoods attracting very little TOD over 50 years. Some intersections on Line One from Bloor to North York and the section of Bloor between the DVP and Spadina have become reasonably intensified and continue to attract TOD. But the low-density intersections present few opportunities without significant policy changes which has being left entirely to the private sector to change. The occasional project can and does occur but not to the potential scale required to optimize the ridership in the transit network.
NIMBYism (Not In My Back Yard) is also often blamed for the lack of development and intensification in low rise neighbourhoods. Attempts to rezone or assemble lots large enough frequently generate community resistance. The time and cost to create change adds to the cost of a project even when the developer ultimately proceeds.
Parcel size and dimensions are rarely available.
to begin with at most stations on Line 2.
Notwithstanding objections by existing property owners, intensification pressure is still problematic for developers without supportive public policy. If zoning amendment is left entirely up to investors, even when other conditions are present, the risk and cost often make other non-transit locations more conducive to development,, Addressing this issue by proactively eliminating private investor cost could allow for more social value, such as affordable housing to occur at transit intersections as an outcome of TOD policy amendment.
Undeveloped Land (Greenfield)
Throughout the world, building higher order transit in greenfield areas as an inducement for economic development rarely succeeds in triggering TOD in a timely manner. Transit improvement should follow once development of undeveloped land is improved[11].
When greenfield areas have higher orders of transit, but few of the other conditions for TOD, it is not surprising that little development occurs. The public investment in transit around Downsview has been met with underwhelming levels of development despite the proximity of the Barrie GO and two stations on the Line 1 subway extension into Vaughan.
TOD may follow but not without satisfying conditions beyond parcel dimension and transit. Public investment in infrastructure, institutional buildings, zoning, and tax policy are all necessary to generate market interest.
It is too risky for the public sector to invest in transit without an assurance that the conditions for sustaining ridership are in place before building new transit. Transit by itself is not a stimulator of development it supports development and is a beneficiary of proven TOD,
c) Public Infrastructure (Sewers, Water, and Hydro)
Developers require sites to have public services like sewage, water, and hydro. Where parcel and neighbourhood conditions are suitable for TOD development there still needs to be adequate public service infrastructure. In developed areas a lack of capacity can slow down new projects, but it does not necessarily prevent intensification except in greenfield locations.
Several projects in midtown Toronto have experienced exhausted public infrastructure capacity. When projects require additional services, Municipalities tend to rectify that problem in mature areas where there is negligible risk that the project will not go ahead. The expense is justified by the reasonable expectation of increased property tax revenue.
However, that is not the case with “greenfield” development. The decision to build the infrastructure for new greenfield development is more complicated. Municipalities must first decide what type of development will be permitted and then determine the cost benefit of investing in services.
When transit projects are proposed to stimulate underdeveloped areas the question for developers becomes: “When will the necessary services be built?” Placing higher order transit capacity into underdeveloped areas before municipalities have made the key decisions to expand infrastructure is placing the cart before the horse.
2) Economic Conditions for Development
The economics of land development are straight forward. Land cost, building cost, an allowance for risk, and profit must add up to a price that the market will bear. This equation is what developers refer to as a proforma. Proformas have to work and typically at transit locations the land is more costly, but markets tend to like transit as a value add. The cost to construct can be more where access is restricted but it is not usually a factor in whether to build or not. Risk and profit are always factors, but the two economic conditions impacting the proforma most are:
c) Land Value Accretion
d) Market Demand
When new transit services become a reality land close to new stations in most cases increases in value, a phenomenon called Land Value Accretion (LVA)[12]. The owners of property adjacent to transit prior to the decision to upgrade always benefit from the value increase that a transit upgrade brings.
Most transit-oriented property is not owned by development interests prior to the approval of a transit upgrade. When the non-developer owner’s perception of value exceeds a property’s value for TOD there is a very good chance new development will not occur or not for a very long time.
Property taxes also go up near new transit usually at rates faster than for non-transit located property. Assessments increase in line with the increase in value driven by LVA. This increased tax value accrues to the public account and becomes a de facto indirect benefit to the public sector transit operator subsidized through tax revenue.
The initial increase in the land value often leads to a cost in the proforma which the market will not bare. Forecasting the risks posed by land value accretion (LVA) prior to initiating a transit project and mitigating those risks is important but reacting to changing market conditions is more difficult.
When new transit projects are announced the market usually responds favourably. Ensuring that those favourable market trends are captured while they last is very important to generating transit revenue.
The preferred location of new homes, businesses and other uses will change over time and may shift to or away from a transit location. These market changes have very little to do with the transit itself but will impact future development.
Recognizing and adapting to changing markets around mature transit is vitally important to transit operations. Understanding the relationship between LVA and market forces is essential if transit operators are to realize the ridership TOD brings to a network throughout the life of a project.
a) Land Value Accretion
Once a transit improvement is approved, owners of adjacent properties typically enjoy an immediate property value increase. Land Value Accretion is most prevalent at the outset of a new transit project but often continues to impact development for many years to come. Pre-transit owners are usually homeowners or businesses who have little development interest. Their motivation is not to create TOD but to maximize the potential return for their own existing asset.
Developers looking to create TOD may acquire sites in anticipation of a forthcoming transit project, hoping to benefit from subsequent increases in value when a project proceeds. Purchasing land post-transit improvement will typically be more expensive than purchasing properties not as close to the transit improvement.
The most extreme example of the impact of LVA, changing markets and an opportunity long delayed and almost lost is the intersection of Bloor and Yonge. Land Value Accretion is the principal reason the south-east corner of Yonge and Bloor -- the intersection of the region’s two principal subway lines -- remained undeveloped for over 60 years. The reason, land value accretion and business opportunity for the existing owners.
The Bloor Street office market in the 1960s was booming. Buildings were built between Sherbourne and Avenue Road to house the flourishing advertising business. Two tall office towers were built on the north side of Bloor and Yonge. One improved the Northwest corner for the benefit of the CIBC, and the northeast corner was built as part of the Hudson’s Bay Company’s new retail/hotel/office complex.
The southwest corner was the location of a successful clothing business whose owners had no interest in selling the property after the subways were complete. At right is a picture of the property in the early 1960s.
The original CIBC branch is also pictured here and was immediately turned into a large office building once the Bloor line was completed.
The southeast corner was made up of many small properties. Assembling the properties was the objective of one business owner who patiently bought up many of the remaining properties. The assembly took 25 years and when it was complete it was repeatedly offered for sale at unrealistic prices. After 60 years form the completion of the subway the site was finally acquired and is presently being developed into a new high-rise condominium.
The lost ridership revenue and realty taxes over 60 years is never projected in the business case to build the transit in the first place. In the case of the Yonge/Bloor intersection of Line 1 & 2, the cost of delayed intensification to the public sector far exceeds the inflated value of the land when the subway first opened.
Southeast corner of Yonge and Bloor was.
owned by many small property owners.
Ironically, governments also fall victim to LVA. At the outset of a new project, governments acquire land for several reasons including new rights-of-way and staging areas to facilitate transit construction. When doing so the transit authority incurs higher land acquisition costs because the property along the proposed transit route has already increased due to LVA.
b) Changing Markets
Property markets change. What was once commercial may change to other uses, but rarely back again to commercial. What was industrial may change to office buildings and then occasionally they become residential but never back again to industrial. What was low rise residential may change from single family homes into multi-residential apartments or condominiums. We see many examples of these changes and they are usually related to the value of the land.
Because transit projects take so long to move from the planning phase to completion, there is always a possibility that market conditions could radically change by the time a new transit line is operational.
Changing markets are unpredictable for most people, they spark booms or busts, they are difficult to forecast accurately, as a result markets can foil the best laid plans of both developers and governments alike. Preserving options for different market conditions is desirable and possible and should be part of policy for TOD.
Office Market Change
Office building clusters have historically been anchors for transit networks and exist as a component of most of Toronto’s intensified destination nodes. In the Greater Toronto Region until the mid 1970s there was only one office cluster of consequence located in Downtown Toronto. Planning transit networks for peak hour travel was straight forward. Like many other large cities, however, growth, markets and economics have generated new clusters of both office and residential and made planning transit networks and related intensification of real estate far more complex.
Changes in the location and concentration of commercial office space, and to an extent the residential condominium market across the region, illustrate how challenging it can be to predict the future of a particular node.
At present, only three principal concentrations of offices show signs of continued growth, and even these areas may see future growth further challenged as remote work patterns continue to challenge prevailing orthodoxies and approaches to planning.
Today there is more than 75 million square feet of office space in the 905 which is equivalent to all the office space in downtown Montreal. The explosion of suburban office markets from the mid 1980s to today has had a significant impact on TOD at the TTC’s subways stations.
Starting in the late 1980s, Meadowvale and the Airport Corporate Centre in Mississauga and Markham/Richmond Hill in York Region all became significant clusters of employment both for office buildings and pre-existing industrial jobs. The growth of these new employment nodes was fueled by many factors, most notably cost due to low taxes, free parking, cheap land, and a brief time to construct the buildings.
The emergence of these office employment parks beyond the reach of the TTC’s subway network had a direct impact on existing office nodes notably in North York and the Eglinton/Yonge node where employment development stopped abruptly in the early 1990s.
The Yonge and Eglinton district provides an excellent example of how changing markets impact TOD.
The intersection of Yonge and Eglinton was the original terminus of the first leg of the Yonge subway. During the 1960s and 1970s this market attracted the next wave of office space as development sought to leave the financial district while staying on the subway[13].
Over four million sq feet of office buildings were built in Yonge Eglinton in this era, the last of which was completed in 1989. Since 1995 well over 1,000,000 sq ft of office buildings have been torn down and replaced by condominiums. Yet in the eyes of public policy, it is still designated as an office employment growth node.
North York City Centre experienced the same initial flurry of office building when the Yonge Street subway extension was completed. But since 1995 only one office building has been completed while suburban office parks have flourished. Sites in North York which were once zoned for employment have been converted to residential uses.
Mississauga City Centre’s employment intensification has experienced the same fate. While Square One was coming out of the ground more than a dozen substantial office buildings appeared, signifying a new major cluster of high value employment mixed with residential, retail, and civic buildings.
But again, lower land costs and free parking in office parks along the 401 from Meadowvale to the Airport Corporate Centre deprived the Mississauga City Centre of the opportunity to attract some of the 100,000 jobs that landed in these car dependant single-purpose business parks located miles from future transit investment.
Changing Residential Markets
The explosion of condominiums added to the existing 1970s stock of apartment buildings resulting in the realization of a City Centre. Higher Order Transit is now being built and it is projected that ridership will make this an economically successful transit investment. The Hurontario LRT which will eventually connect the GO Commuter Rail service in Port Credit to Brampton is a natural and important improvement which will help to continue intensification especially if the original plan to loop around Square One is funded.
Toronto’s Financial district was surrounded by low rise 19th Century manufacturing properties. Changing markets have had a significant impact on these areas often referred to as the “Brick and Beam” market.
In the 1980s many of these buildings became “loft” based live/work environments when light manufacturing businesses outsourced production to low-cost labour in other countries. Those properties were transformed into high value renovated offices and condominium properties often catering to business in the cultural and technology sectors. Proximity to the extensive streetcar network was a contributing but not only factor in this change.
The Irony of Affordability, Land Value Accretion and Markets
Truly little affordable housing is located near transit hubs because of land value accretion and new markets. This is a perverse outcome for those lower-income families who have the greatest reliance on transit. This issue has never been addressed successfully as a policy challenge in the GTA despite the positive impact affordable housing will have on transit use and revenue.
3) Public Policy Conditions
Public policy too can impact the location of property investment. Zoning, regional taxation policy, and the location of government services all influence developers and their market interest. When new public policy is out of line with TOD interests, it usually falls on developer to initiate change.
The time and risk of adapting policy to markets -- even when land and economic conditions are optimal -- drives the cost of a proforma up and usually forces a project beyond the investment horizon of most investors. If public transit is to benefit from TOD some argue that policy should lead to development ready sites. Regardless of the outcome it is important to first recognize what areas of public policy are most important to the TOD process.
d) Land-use policy, zoning
e) Non-Land-use policy
f) Location of Public and Private Institutional and cultural buildings
When a new transit project is proposed governments rarely make the immediate changes in zoning required for intensified TOD. The ideal situation is for “development ready zoning” to exist while the transit improvement is under construction. But zoning and land use policy change is normally left to development interests. This usually leads to significant lost opportunities. What is less understood is that even when zoning is aligned with markets, it by itself does not ensure development.
One fundamentally sound action public decision-makers can take is to ensure that public buildings, municipal offices, and services (schools, hospitals, libraries, and public event spaces) are aligned with transit networks. As well, the private sector investment in public attractions such as sports arenas, theatres, museums, and other cultural venues help to provide destinations beneficial to transit networks. These ‘destination’ investments add value to TOD locations on the feeder networks.
Non-transit specific policies can also impact transit’s desirability for real estate development. This is particularly true for tax policy, especially commercial property tax policy. If tax rates are significantly different between transit and non-transit locations or between jurisdictions with varying degrees of public transit access, they can create a set of negative incentives for the location of new business.
a) Land Use Policy, Zoning
Zoning conditions are often accused of being out of step with markets. Their impact on what can be built and how much can be built on a site is a subject of a great deal of discussion, research, and opinion. When zoning becomes a tool of social policy or a defense by existing owners wishing to preserve the status quo the risks mount for TOD.
We do not opine on social issues, what is built and how it is built. Rather, this research has been concentrated on the direct relationship between zoning and what occurs near transit stations.
Too often zoning restraints do not align with markets. If, after new transit has been announced, zoning remains unchanged and is perceived to be difficult to navigate the result usually is no TOD and development interests focus elsewhere. We examined many cases where the zoning of property around higher order transit stations has never been changed from the original pre-transit zoning permissions. This results in maintaining the status quo most often in low density property.
When steps are taken to create development ready zoning prior to the completion of new transit the likelihood TOD will follow is greatly enhanced. The new zoning, however, can not be to the exclusion of mixed -use development.
The initiative to rezone falls to the development community in most cases. The application process for necessary amendments adds cost and risk to the development pro-forma. These costs in time and money are ultimately paid by the consumer adding to the cost of property at transit intersections. This is one of several reasons affordability escapes TOD. This added cost is not required if the zoning is amended early in the process of creating the new transit project.
Mixed-use outcomes, desirable in most markets, are also at risk when conditions favour only one type of development. Retail, cultural, residential, and commercial projects have vastly different proformas and when zoning favours one type of development over another without regard for market conditions, mixed-use outcomes tend to fail.
Municipalities and transit planners are well advised to anticipate and plan for future development even in the short term when existing property owners may oppose low density development. This may seem obvious, but it is critical to supporting future transit ridership.
When Mississauga was contemplating the Hurontario LRT the planning department turned down multiple applications on Hurontario for low density uses even before the Hurontario LRT was approved and funded. Sadly, there are many more examples where that degree of foresight was not present. The political decision to leave zoning alone in neighbourhoods surrounding the Sheppard subway has in part led to the extremely poor ridership on that transit upgrade.
Even mature and “successful: transit infrastructure can be enhanced with zoning amendments. Such is the case for the King Streetcar. As light industry vacated the “Brick and Beam” district, the City adopted the new/live work model. Considerable credit for this transformation goes to City Hall which removed old land use constraints on the industrial zones without a requirement for official plan amendments. Rezoning and approval times dropped precipitously. A critical mass of downtown housing increased in the Kings and areas south of Front Street.
Few could have anticipated the scale and extent of the dramatic market shift towards residential in the downtown with the addition of some 300,000 condominium units built in under 20 years. The result has been a significant increase in transit use on the King Streetcar and the necessary streetscape changes to facilitate a dedicated transit traffic zone for more streetcar capacity.
b) Non-Land-Use Government Policy
Public policy, especially real property tax policy, directed at one problem can generate unforeseen or unanticipated outcomes in other areas. This is particularly true when municipal tax policies create competitive differences or when policy from a senior order of government aimed at a problem in one municipality impacts another municipality. This can inadvertently undermine other TOD supportive policies.
Tax policies can create competitive disparity between municipalities. This happened very dramatically in the late 1980s. The Corporate Concentration Tax (CCT) was enacted by the Province in 1990 to tax all commercial properties in the GTA. Because it only applied to buildings of greater than 190,000 square feet the impact was felt exclusively by tenants in the downtown core of Toronto[14]. Its purpose was to fund road and transit programs across Ontario.
Wildly unpopular, the Act that implemented the tax was repealed after only three years, but the damage was done. The imposition of the CCT coincided with prolonged delays in approving the Sheppard subway, disputes over its land use potential, and increased property taxes in Toronto furthering the discrepancy between Toronto and the 905 municipalities.
The CCT was the beginning for exiting downtown Toronto tenants in favour of the 905. The early nineties in many cities saw a movement of financial services in general to low-cost areas where back-office functionality enabled by new communications technologies made remote centres in lower cost regions possible.
Public policy speculation that the office market would head to land near the Sheppard subway simply did not materialize. By the time, the CCT was repealed tenants had already seized the opportunity to move to or expand with offices on low-cost land in Markham, Mississauga and other 905 municipalities that were zoned office industrial.
Once started, this trend accelerated during the next 30 years resulting in the creation of over 75 million square feet (about twice the area of Central Park in New York City) of office development representing a quarter of a million jobs in the 905. Fueling this move were uncongested highway expansion (at the time), free parking, low land costs and one third the amount of realty tax.
The winners were low-cost districts in Mississauga, Richmond Hill, and Markham. Long after the fact, and in fairness, governments are now investing in transit solutions for those office parks some 30 years later. The creation of the York Region’s transportation authority in 2000 was a direct and positive initiative in response to that rapid growth of jobs and population. A great deal of that 905 development could have been located near the subway network in Toronto, specifically North York, or sub centers in Scarborough or Etobicoke, but instead it skipped over those centers and located in the 905.
The creation of the Greenbelt in the mid-1990s is an example of policy whose outcomes has created its intended outcome and significantly impacted residential development throughout the region.
Designed to create intensification and get more value out of the high cost of public infrastructure, the Greenbelt has had a positive impact on intensification of property. It has, in part, sparked interest in high rise condominiums and spawned the era of ‘up” rather than ‘out.’ From a TOD perspective. This has had and will continue to have a positive impact on transit use in the region.
c) Location of Public and Private Institutional and Cultural Buildings
When institutional infrastructure (health, educational, and government services) and private infrastructure (sporting venues, cultural event facilities, the Path etc.) are located on transit networks they create markets that are supportive of TOD. When these institutions are in greenfield areas the potential ridership benefits to public transit are lost.
Public infrastructure, stimulates and focuses private property improvement. The value of public infrastructure well placed in a transit network provides reasons for transit users to take transit to those destinations. When these conditions exist, TOD is likely to be more viable beside the institutional investment or within convenient reach of the property by public transit.
Aligning new public infrastructure with transit, is a well-established public policy[15]. Governments, however, do not always follow their own policies. When that occurs transit ridership and TOD suffer doubling down on the cost to the public purse of greenfield investment in public institutions. Too many critically important institutional buildings have been placed in locations that lack higher order transit or are in locations that are unlikely to be serviced by significant transit soon.
Public transit networks succeed best when there are multiple destinations connected to where people live. Public institutions provide networks with reasons for people to take transit and improve the opportunity for TOD.
The stations serving public institutions or stations which connect directly with nodes that have public buildings are more valuable to the end user. When private development occurs on a network serving public institutions it creates more transit ridership.
Low-cost land often trumps the value of locating on a transit network when deciding where to locate a new institutional investment. Over the past decade, several hospitals in the GTA have been placed in locations without good transit (for example, Humber River, Credit Valley, William Ostler, Cortellucci Vaughan, Oakville Trafalgar). Lacking an attractive transit alternative, employees, patients, and their families are forced to drive. The opportunity cost of this is the foregone potential transit revenue that could have been created if these high value destinations had been located on or near transit services.
Post-secondary institutions have fared slightly better, with a decision to place Sheridan’s new facility in Mississauga City Centre (instead of on a highway location) where it will be served by the future Hurontario LRT; York University is finally served by the subway (Line 1), and York’s new campus in Markham Centre will be served by York Transit, GO, and the TTC.
Conclusion
Why accelerate TOD now?
The region has reached a tipping point. Congestion, the high growth of population, continued under investment in transit capacity, and the prohibitive cost of housing are choking the region and its reputation for liveability.
One solution which will have immediate impact is to optimize the land at major transportation stations. Failure to do so will continue to hold critical ridership for our transit agencies from growing. Other collateral economic, social, and environmental damage from failing to align homes and business with transit is preventable.
Changing conditions unfavourable to TOD cannot be left entirely to the private development community as has been the custom until now. Developers are currently maximizing the potential of TOD where possible along existing and planned subways, streetcar routes, and LRT routes. However, there is a significant cost in the form of lost opportunity along many of these routes because conditions are prohibitive.
The extreme stress placed by the movement of goods and services on the road systems during the early days of COVID laid open a festering wound, congestion, and the limited capacity of the road network to grow. Transit must improve and be financially sustainable and the first step is ensuring that development aligns with transit.
The region can no longer afford to have new development which is not connected to transit. To achieve this objective there will need to be a higher level of collaboration between the private sector creators of housing and commercial development and policy makers at Municipal, Provincial and Federal levels. The nature of these changes and the quantum of opportunity that can be realized will be the twin focus of SRRA’s next study building upon principles in this paper.
To Be Completed
About the Authors
The authors of this study have extensive experience in three disciplines: real estate and transit development, land use planning and public policy innovation.
We hope the intersection of these backgrounds gives the report a unique and balanced approach to the subject.
Iain Dobson
Glenn Miller
Stephen Johnson
Appreciation
We would like to thank the many people who helped ….
[1] There are instances where the property does not increase more than it would have without transit upgrades. That usually occurs where the transit grossly underperforms.
[2] Transit-oriented development (TOD) is a form of urban development that optimizes the residential, employment and cultural spaces within a reasonable walking distance of public transport. It increases public transportation ridership and facilitates intensification in the urban form.
[3] For brevity’s sake, this report uses ‘TOD’ to refer to residential and non-residential intensification around transit stations.
[4] 1981 Census – Toronto CMA over the Montreal CMA. By 1981, Toronto CMA’s population had surpassed Montreal by more than 200,000.
[5] Real Estate Search Corporation, The history of the Office Sector 2008.
[6] Ryerson University was renamed in 2022.
[7] “A Region in Transition” video available at SRRAresearch.org.
[8] In the UK many back offices located in Ireland leading to a real estate boom which lasted 20 years there.
[9] “Progress towards the vision,” Canadian Urban Institute, 1997
[10] The Stock Exchange site, Bay Adelaide site where the old Woolworth store was, are examples of blocks which suffered from holdout owners, but eventually the economics of the larger development prevailed.
[11] Jacobs 2010,
[12] There are instances where the property does not increase more than it would have without transit upgrades. That usually occurs where the transit grossly underperforms.
[13] At the same time Don Mills became the first suburban highway-based office cluster in the region.
[14] See c 75 Commercial Concentration Tax Act, 1989 (yorku.ca)
[15] MTO’s Transit Oriented Development Policy 1991 and revised several times since.