The province’s new pitch to have developers pay for a large part of the Scarborough subway by offering them land is being described by four industry experts as unworkable and “far-fetched.”
The math suggests that in order for developers to cover the cost of building two additional stations for a three-stop subway rather than the planned one-stop extension, the province would need to allow those developers to build two of the largest private real-estate projects in Canada — eclipsing neighbourhoods largely made up of single-family homes.
Those experts say there is simply no way that enough demand for that real estate would materialize in time to make those projects financially viable, leaving the province’s proposal dead on arrival.
What’s at stake is that Scarborough residents may be soon left without any rapid transit. The subway is meant to replace the aging Scarborough RT, widely considered to be at the end of its run.
Assessing the government’s plan, James McKellar, director of the Brookfield Centre for Real Estate and Infrastructure at Schulich School of Business, said “Someone must have bought some of that new green stuff … That won’t work.”
Details of how the province proposes that the development industry would recover the costs of building the transit infrastructure remains vague, but Transportation Minister Jeff Yurek earlier told the Globe and Mail it would involve offering developers land and air rights around and over the future subway stations. Yurek said this plan would “not be a cost to the taxpayer.”
Graham Haines, research manager at Ryerson University’s City Building Institute, looked at that plan by asking how much buildable square feet a developer would need to be offered, in order to offset the cost of building just one of the subway stops.
The city is currently moving forward with planning of a one-stop subway extension at the Scarborough Town Centre, which is estimated to cost at least $3.35 billion; a three-stop subway was last estimated to cost, as of July 2016, $4.6 billion. The additional stations would be at Lawrence Ave. and Sheppard Ave. along McCowan Rd. Building the northern Sheppard station would also involve connecting it to the line with an additional kilometre of tunnel.
It’s not clear how the additional $1 billion in costs breaks down between the two stations, so Haines started with the assumption of an even $500 million to build each station.
Market analysts Ben Myers, president of Bullpen Research & Consulting Inc., and Shaun Hildebrand, president of Urbanation, said the price of land per buildable square foot in Scarborough is between $30 to $50 per square foot.
At that value, the scale of development required to offset the cost of building one station at $500 million would be in the magnitude of 10 million to 17 million square feet.
That amount of development is equivalent to between eight and 13 Aura towers — the 78-storey condo at Yonge and Gerrard Sts., which is for now the tallest residential building in Canada. Looking at it another way, the development required would be equal to 12 to 19 times the Honest Ed’s redevelopment site at Bloor and Bathurst Sts.
Based on typical condo development, that amount of development would be expected to produce some 11,000 to 19,000 condo units. By comparison, only 9,339 residential units were proposed in the fastest-growing part of Scarborough during the five years between 2013 and 2017, according to statistics from the city’s planning division.
Haines did calculations along the lines of Myers’ work, but assumed the land value around stations was much higher at $100 per buildable square foot. That scenario would allow the cost of building just one station to be offset by 5 million square feet of development, or the equivalent of four Aura towers.
That would produce some 5,500 units at just one site — by comparison, the entire CityPlace neighbourhood is expected to be about 7,500 units when completed downtown. Haines said even one of these projects in Scarborough would be one of the biggest development projects in Toronto.
McKellar said the province’s plan would require “the most exceptional demand for condos that ever existed in the City of Toronto” noting no transit station has ever drawn anywhere near that demand, including in the downtown core.
“Whether it’s five or 10 million (square feet), it doesn’t matter in that there isn’t the market for that kind of density,” McKellar said.
Myers noted that typically a developer is looking to make 15 to 20 per cent profit on their investment.
“It sounds really far-fetched,” Myers said of the province’s plan.
On Thursday, Mayor John Tory — who has long backed a subway plan, originally three stops and then the one-stop version pitched during his first term in office — said he was open to the province’s plan to pay for the additional stations with development assuming it was on “acceptable terms,” which he said “means any development that produced the money for that would have to be compatible with the city’s planning guidelines and with neighbourhoods that those transit stations are in.”
The province currently doesn’t own the land where the stations would go, meaning that property would have to be expropriated not only to build the station but also to accommodate the development at each site.
There is little room, for example, at Lawrence Ave. and McCowan Rd. where today there is the Scarborough Hospital campus, several apartment buildings and sprawling, leafy neighbourhoods.
A development of the scale calculated would also conflict with several planning principles in the largely lowrise area.
In response to an email from the Star outlining these calculations, the concerns about feasibility and question about how their proposal would work, Yurek’s spokesperson Mike Winterburn reiterated past statements.
“Well-designed land value capture mechanisms, like the sale of air rights, provide ways for private sector builders to decrease the cost of building transit for taxpayers,” he said. “Our government is confident that private sector support will help secure funding that will allow for construction to begin sooner. We will be able to build better transit, faster for Ontarians.”
He said their government is currently working on options to “maximize the value achievable from transit-oriented development.”
The previous Liberal government earlier agreed to fully fund a seven-stop light rail line, completely separated from traffic, to replace the SRT. That project was cancelled under former mayor Rob Ford in favour of the more expensive subway, which is in part being funded through a special tax collected from all Toronto homeowners for the next 30 years.
The earliest a subway extension could be completed is mid-2026. If the LRT project had gone ahead as planned, it was expected to be in operation next year.