JLL is calling for the City of Toronto to scrap its office replacement bylaw to allow for more multi-family housing in core areas and near transit stations elsewhere.

According to a new JLL report, the nearly two-decades-old bylaw is hindering the construction of about 51,000 proposed residential units across 73 properties slated for redevelopment. The bylaw requires demolished office buildings in designated areas to be replaced by new office product rather than other asset types, including multi-residential which is in critically short supply across Canada.

“We’re in a housing crisis, and this is the most low-hanging-fruit policy lever that the city can pull in terms of creating the housing supply that it would take to, at some point, stabilize the market,” said Scott Figler, JLL’s head of Canadian research in an interview.

Figler said he and JLL felt obligated to produce the report, based on his experiences trying to rent and own a home and current office market conditions.

“Office market vacancy right now is at 18% in the city of Toronto,” he said. “It doesn’t make sense to build more office right now. So I feel pretty confident in saying that there’s a good chance that the city is holding up all of these [73] projects because of this office-replacement requirement.”

Toronto sports Canada’s largest downtown housing market. The bylaw applies to the Downtown North, Financial Core, Eglinton, Downtown West and Bloor office submarkets, as well as properties across the city that are located within 500 metres of a transit station.

Figler said office demand has changed considerably since the bylaw was implemented in the early 2000s. Tenant companies have compressed the amount of space leased per worker, or the office-utilization ratio, by about 30% due to remote work, open floor plans and other factors.

“This zoning law that was passed 20 years ago was designed for a bygone era that doesn’t apply anymore,” said Figler. “Now, all it’s doing is slowing what would be residential redevelopment that’s definitely needed.

“We’re exclusively talking about mid-rise and high-rise here. So, it could be rental apartments, it could be condos, we’re not talking about single-family neighbourhoods.”

Figler said that, based on interviews he conducted for the report, developers have spent one to three years to get their multi-residential housing projects exempted from the bylaw.

“To the city’s credit, they’re starting to think about this more and to be more flexible,” he said. “But as long as this zoning bylaw is on the books, it creates a lot of uncertainty.”

JLL based its claim about the 73 redevelopment properties and 51,000 hindered units on a city database that lists projects seeking bylaw exemptions and the company’s own office database.

“That’s the situation today, but I think that this situation is going to continue into the future,” said Figler.

In other words, he added, there will only be more and more case of poorly performing buildings where the developer just wants to tear and building down and construct more multi-family housing.

In five years, the number of low-grade office properties and number of proposed multi-residential redevelopment units could double, and the city would not have to provide subsidies or other financial incentives to developers, he estimated.

“The city can really unleash a lot of residential supply just simply by scrapping this bylaw,” said Figler.

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