There was quiet news from the City of Toronto recently about building more housing around Toronto’s 120 transit stations, including subways and buses.
The goal is to increase housing numbers, and creating more housing around transit makes sense at first glance. Being close to transit would encourage people to use public transit, no need for parking, more land to build more housing. There are many benefits, in theory.
I have seen this theory fail in real life.
Back in the early 2000s, I lived in Manhattan, the city that never sleeps, the city where if you can make it here, you can make it anywhere. It is also the city with abundant transit connections within the city and going out of the city.
My graduate school and subsequent work life that spanned over a decade taught me that being near public transit costs. It costs a lot.
Most people I met during my NYC life were not living near their work or near transit. They were driving or taking other transportation modes (regional buses, trains, ferries) to get to city transit stations, leaving their cars near the transits, and then taking the subway into the city. Multiple transits were involved.
I was one of those people, though in a more comfortable setting. Living in Brooklyn (near Manhattan, subway station nearby) came with a price: paying an exorbitant broker’s fee to a rental broker for finding the apartment, paying much higher rent than my coworkers who were driving or taking trains into the city from farther locations.
Being near transit is a convenience everyone wants, even drivers. The convenience is especially important for people without cars.
The recent news from the city about building more housing near Toronto’s transit is disingenuous. Without mentioning the type of housing or whom the housing is for, we are still left with the big elephant in the room: affordability.
Building more housing near transit may bring in more residents, but it will not help the people who need affordable housing the most.
Transit Proximity Commands Premium Prices
You pay for convenience.
I have seen it throughout my adult life, both in NYC and in Toronto. It sounds reasonable to expect the tradeoff. To get the convenience of being near public transit, it sounds fair to pay for such convenience.
Buying a better computer costs more. Paying for a gym membership rather than exercising outdoors in harsh weather costs more. These are examples of what some of us pay for and some of us cannot afford.
However, when it comes to housing costs, the reasonable analysis of “you have options to select what you need” goes out the door.
Accessible transit is not a luxury for renters. It is a requirement.
Other than a select few who choose to rent, most people have to rent and therefore rely on public transit to get from one place to another: work, grocery shopping, medical appointments…in other words, to survive.
The affordable housing discussion tends to focus on one aspect of housing: ownership. However, there is another even more important discussion missing in this overall housing conversation: rentals.
Renters do not have the option to live far from transit and drive. They need transit access, which means they pay premium prices for that access.
Building more housing near transit without addressing this price premium does nothing for affordability. It just creates more expensive housing in convenient locations.
Purpose-Built Rentals Near Transit Still Price Out Most Renters
These days, I am hearing more about a new housing type: purpose-built rentals.
It is a rental development with a built-in mandate: getting a 15 percent deduction on property taxes for keeping the development as rental and capped increases in rent amounts.
This sounds promising. Planning for housing development while considering the future and future generations is the right and crucial approach in affordable housing efforts, especially when it comes to housing near transit development.
However, there is a problem. Purpose-built rentals are not the same as affordable rentals.
Currently, no affordable housing requirements apply for purpose-built rental housing projects. According to the City of Toronto, some developments may be exempt or transitioned from Inclusionary Zoning requirements.
What does this mean? It means we can build plenty of purpose-built rentals near transit stations, and they can still be priced beyond what most renters can afford.
The transit location drives up the value.
The purpose-built rental designation does not require affordability. We end up with more rental units near transit that solve the supply problem on paper but do nothing for the people who actually need affordable housing near transit.
Without clear mandates requiring affordability in these purpose-built rentals, especially around transit areas, meeting affordable housing numbers would not likely happen. As time goes on, housing costs around transit will become more expensive for everyone, both owners and renters.
The Policy Framework Rewards Building Near Transit But Doesn’t Require Affordability
Here is where the disconnect becomes clear.
Developers receive multiple incentives to build near transit, but renters receive none of the affordability benefits those incentives were supposedly designed to create.
In construction, excavation (digging into land to support a building or accommodate parking) is a huge cost. It can take up as much as 40 percent of overall construction costs. Transit-oriented developments often eliminate parking requirements, which saves developers significant money.
Purpose-built rental developments near transit get a 15 percent property tax reduction. The land itself becomes more valuable because of transit proximity.
Developers are essentially receiving three layers of financial benefit: reduced construction costs, lower property taxes, and higher land values.
Where do these savings go? Not to renters.
The City of Toronto has implemented Inclusionary Zoning as part of the requirement for new buildings. Starting in 2022, 5 to 10 percent of condo units need to be developed as affordable units. By 2030, those percentages would increase to 8 to 22 percent. The official definition for Inclusionary Zoning is creating affordable housing in new developments while supporting mixed-income communities.
It is the right starting point, but implementing it is another story. Purpose-built rental housing projects are currently exempt from these requirements.
This creates a policy framework that encourages building near transit through financial incentives but does not require any of those financial benefits to translate into affordable rents.
The more valuable the location (like being near transit), the higher the rents can be. The more incentives developers receive, the higher their profit margins become.
We have designed a system that makes it financially attractive to build rental housing near transit while making it financially optional to keep that housing affordable. That is not a housing affordability strategy. That is a developer profit strategy that happens to produce housing.
Final Thoughts
Focusing on building more housing is the right step.
The difficulty lies with how and what type of housing, not just more.
With many stakeholders and competing interests, including financial interests, planning and building more housing could only push for more non-affordable housing.
The central issue in more housing near transit is not just the numbers but also who those numbers are for. Without considering this issue, we can produce lots of housing near transit. Whether people can afford to buy or rent is an entirely different discussion.
As my old NYC friends’ favorite dinner party topic indicated with “where do you live?” and “how close to the subway?” questions, Torontonians will follow the same dinner party discussions. The difference is that in Toronto, we still have time to make sure the answer to those questions does not determine who gets to live in this city.
I suppose we could wait for driverless cars to solve this whole problem. Imagine getting picked up at your affordable housing in the suburbs and dropped off at work downtown without worrying about parking or transit costs. The car just drives itself to some faraway parking lot until you need it again.
The only problem is that by the time driverless cars become our reality, the affordable housing in the suburbs will probably cost as much as living next to the subway does now.
Progress has a funny way of keeping the affordability problem exactly where it is while making everything else around it more complicated.
Life Outside of Design Studio 