Repealing Toronto’s Office Replacement Bylaw could unlock thousands of new housing units: JLL

JLL recently released a new report, which comes at a critical time as the City of Toronto deliberates on the Office Replacement Bylaw.

JLL’s report, called Less Office, More Housing, showcases how repealing the bylaw could unlock over 50,000 new housing units while also stabilizing the office market, at no cost to taxpayers.

The report strongly encourages the City of Toronto to repeal the Office Replacement Bylaw with no inclusionary zoning requirement which represents the city’s most feasible path to stabilizing the housing market.

The report noted that repealing the Office Replacement Bylaw could unlock over 51,000 new
residential units that would likely be economically unfeasible if an office replacement is required.

Housing completions will begin to slow in Toronto beginning in 2027. Therefore rental growth could further accelerate in years to come as demand continues to outpace supply.

Repealing the Office Replacement Bylaw could, according to the report, result in the removal of over 9m s.f. of lower grade office space from the market and could lower overall market vacancy by 3 to 4 per cent.

The report says that lower overall vacancy would improve buildings valuations and therefore could boost property tax revenue for the city, as commercial property tax levies account for 9.3 per cent of the municipal budget.

While these projects are and will continue to happen organically, they are not nearly as scalable. Studies have estimated that at most 5 per cent of buildings would be structurally feasible for conversion, and far fewer than that would be feasible from a cost and timing perspective.

Calgary’s Development Incentive Program, often cited as the most successful program, was achieved with a subsidy of approximately $68,000 per residential unit created.

Including a requirement for affordable units will make fewer projects financially feasible, thus slowing new supply, noted the report. This risks worsening the housing crisis by exacerbating the supply-demand imbalance in the market.

Affordability requirements raise rents for the market-priced units in the building. Holding constant developer yield expectations, land price, vacancy rates, and construction costs, an affordability requirement for 25 per cent of units in a building raises rents by 8 per cent for the other 75 per cent of units in the building.

The report concluded by stating that by unconditionally repealing the Office Replacement Bylaw, the City of Toronto could achieve three major objectives including approximately 51,000 new housing units, approximately 9m s.f. of Class ‘B’ and ‘C’ office space removed from the office market and $0 cost to taxpayers.