Report to: Development Services Committee Report Date: June 23, 2009

SUBJECT: Toward a Markham Growth Management Strategy:

Housing Stock Analysis

PREPARED BY: Policy and Research Division Staff,

Planning and Urban Design Department

RECOMMENDATION:

That the report entitled “Toward a Markham Growth Management Strategy: Housing Stock Analysis”, dated June 23, 2009, be received;

And that the housing stock alternative, as described in the consultant report (attached as Appendix A), be received as input to the completion of a draft Markham Growth Management Strategy;

And that Staff be authorized and directed to do all things necessary to give effect to this resolution.

EXECUTIVE SUMMARY:

In 2008, the Town retained Hemson Consulting Ltd. to complete an evaluation of intensification options and housing growth alternatives in support of a Growth Management Strategy for Markham.

The purpose of the housing stock analysis is to determine how much change in the housing stock the Town can reasonably plan for within the Provincial and Regional planning framework and residential market context. From the demand side, the study evaluates Town housing stock alternatives in comparison to a base-case market based scenario of growth. The study then identifies the necessary shift in housing demand, from social, cultural and economic perspectives including affordability, price range and relative cost of construction of the various housing forms. From the supply side, the study reviews the characteristics of new development and redevelopment projects to gain a better understanding of the time required to deliver large-scale projects and to determine how far ahead a significant change in housing form can be projected.

In February 2009, Council resolved that the housing stock alternatives described in the February 3, 2009 staff report form the basis for discussion in the proposed public engagement program and for further review. Staff and the Town’s consultant have now completed a review of a 55% intensification target and the relative difference between the 55% intensification target and two higher targets for intensification, a 60% option and an option involving no change in the current settlement area boundary.

In reviewing the housing stock alternatives, some of the key implications of achieving the Provincial and Regional residential intensification targets, and even more aggressive targets suggested by Council, are identified, including the general implications and risks for Town revenues and service delivery.

The study concludes that intensification of the Town housing stock beyond the 55% target involves the following risks:

• potential for a large mismatch between family-based demand and a supply of units serving non-family needs;

• potential that Provincial, Regional and Town growth management policies and growth targets may not be achieved; and

• potential for fiscal and service delivery impacts such as a reliance on unrealized revenues, inefficient infrastructure investments and difficulty in establishing front-ending agreements.

The study also evaluates and confirms the Region’s projected land budget (of approximately 600 ha) requirement for additional residential land to be designated outside of the Town’s current settlement area. These lands are identified for future compact, complete greenfield development, delivering housing stock required to address forecast needs.

As instructed by Council, staff included a discussion of the different intensification options and housing stock alternatives as part of the presentation material made available to participants in the Growth Management Strategy public engagement sessions held in March and April 2009. The May 25, 2009 report summarizing the public engagement activities identifies that participants were generally supportive of the Town’s approach to distribute residential intensification to key locations coincident with proposed rapid transit services, and to limit the amount and pace of outward growth.

In recommending a preferred alternative for housing growth, it is essential to monitor market performance and housing preferences over time to permit the Town to evaluate, and adjust as needed, the planning policy context and phasing of land for housing growth. Consequently, the consultant’s recommendation of a preferred alternative for housing growth does not preclude adjustments to the alternative over time, such as increasing the proportion of intensification to more than 55% or adjusting the timing and phasing of new residential land development. Also, the method used by the Region to calculate the intensification percentage does not account for some new ground-oriented greenfield units within the built up area. If these units were to also be included it is estimated that the intensification percentage could be in the order of 60%.

Staff will review and comment on the consultant recommendations, based on further information received from a fiscal impact analysis and a further review of the land budget and housing mix and report back to Development Services Committee in the Fall.

PURPOSE:
The purpose of this report is to provide Development Services Committee with an overview of the findings and recommendations of the Housing Stock Analysis work undertaken by our consultant and to have committee accept the report as input into a draft Markham Growth Management Strategy.

BACKGROUND:

To ensure a balanced approach to growth management, the Provincial Growth Plan envisages increasing intensification of the built up area to make better use of land and infrastructure while at the same time building more compact greenfield communities to reduce the rate at which land is consumed outside of the built up area. In this regard, the Growth Plan establishes intensification policies and targets for the built up area and new greenfield communities as well as policies for settlement area boundary expansion as part of a municipal comprehensive review.

York Region has adopted the Provincial Growth Plan density targets including a minimum 40% residential intensification target (Region wide) and a minimum 50 residents and jobs combined per hectare density target for designated greenfield areas. In bringing its planning into conformity with the new Provincial policies, the Region has identified in the preparation of its plans and strategies, among other things, a minimum residential intensification target of 52% for Markham and a boundary expansion requirement for Markham to accommodate projected residential and employment land budget requirements.

The intensification percentage refers to the proportion of units to be built between 2015 and 2031 inside the defined built boundary, compared to all units built within the Town. More important than the percentage value, however, is the mix of housing it represents, and the contribution of that mix to a diverse and viable 2031 housing stock.

The staff proposal of 55% achieves the same population as the Region’s 52%, over the same land area, but incorporates an adjusted mix of ground-related units, reflecting the housing stock in Markham today. As a result, the 55% mix allows for a larger proportion of medium density housing (semi-detached and townhouse), while increasing the share of apartments by only 1%. The slight increase in apartments, plus additional townhouses in the medium density range, contributes to the increase in the intensification percentage to 55%.

The Region forecasts that Markham’s 2031 population will require a total of almost 140,000 dwelling units with a housing stock mix (shares of different unit types) comprised of the existing units in 2006 plus new units to be constructed over the period to 2031. To meet the Provincial requirement for intensification, the Region proposes that just over half of the 62,000 new units added by 2031 will be located within the Town’s built up area. The mix of the new units projected for Markham at a 52% intensification target is much different than in 2006, balancing the objective to accommodate more residential intensification with the objective of ensuring a diverse overall housing stock.

Markham uses a similar approach, although the Town’s review estimates that the 2006 housing stock was a little more diverse, and the new housing stock can include additional intensification potential up to 55% or 60%. The resulting 2031 housing stock will also accommodate the 2031 Town population.

OPTIONS/DISCUSSION:

In 2008, the Town retained Hemson Consulting Ltd. to complete an evaluation of intensification options and housing growth alternatives in support of a Growth Management Strategy for Markham.

From the demand side, the study evaluates Town housing stock alternatives in comparison to a base-case market based scenario of growth. The study then identifies the necessary shift in housing demand from social, cultural and economic perspectives including affordability, price range and relative cost of construction of the various housing forms. From the supply side, the study reviews the characteristics of new development and redevelopment projects to gain a better understanding of the time required to deliver large-scale projects and to determine how far ahead a significant change in housing form can be projected.

The Hemson final report on the Town’s housing stock analysis entitled “Intensification Options: Implications for the Town of Markham” is attached as “Appendix A” to this report. Excerpts of key sections and findings of the report are summarized as follows:

Markham Is Considering a Range of Intensification Options/Housing Alternatives

Accommodating more growth through intensification will require a shift in the overall housing market away from ground-oriented housing forms (single and semi detached) towards higher density units such as rowhouses, stacked townhouses, multiples and apartment buildings. The implications of Markham planning for change in the housing stock to achieve the Region’s target of 52% intensification are outlined in Table 1.

Table 1:Town of Markham Housing Historical and Forecast Housing Mix Region of York Scenario (52% Intensification) and a More Market-Based Forecast
	Base Scenario (Expectation Without Growth Plan)				Region of York Proposed Allocation
	Single & Semi	Row	Apt.	Total	Single & Semi	Row	Apt.	Total
1986–96 1996–06	74% 59%	3% 19%	23% 22%	100% 100%	74% 59%	3% 19%	23% 22%	100% 100%
2006–31	51%	19%	30%	100%	35%	19%	46%	100%

The table compares the historic mix of housing units in the Town to two scenarios: a base case which is a more market-based forecast that represents what we would have expected to occur in the absence of the Provincial Growth Plan policies; and the growth scenario proposed for the Town in the Region of York’s recent work.

The minimum requirements of the Provincial Growth Plan, as allocated to the Town by the Region of York, indicates a significant shift in housing demand patterns in favour of apartments from the levels experienced historically. The required shift to apartments is also much higher than the current levels of construction, which are already considered high in an historic context, given the recent success of Markham Centre and other development areas. To some extent age is also reflective of the economic strength of the household, and the housing choices it can afford to make.

At the request of Council, in addition to the Region’s 52% and the Town’s 55% intensification target, Town staff were asked to conduct a sensitivity test of two higher targets for intensification, a 60% option and an option assuming no change to the current settlement area boundary. Achieving the Region’s target of 52% intensification or the Town’s 55% intensification option, involves achieving greater shifts towards higher density housing unit types, particularly apartments.

Under the no-urban-boundary-expansion option, Council asked that all future housing growth be accommodated within the existing urban boundary. All growth within the existing urban boundary means approximately 84% of projected residential growth would need to be accommodated in intensification units located within the current settlement area. The shifts in housing market mix for each scenario, in favour of apartments as well as the downward shift in singles and semis, are shown in Table 2.

Table 2: Town of Markham Housing Historical and Forecasting Housing Mix Range of Intensification Scenarios
	Base Scenario	52% Intens. (Region)	55% Intens. (Town Staff)	60% Intens. (Town Staff)	Fixed Urban Boundary, 84% Intens. (Council)
Single and Semi-Detached Units
1986–96 1996–06	74% 59%	74% 59%	74% 59%	74% 59%	74% 59%
2006-2031	51%	35%	32%	30%	17%
Row house Units
1986–96 1996–06	3% 19%	3% 19%	3% 19%	3% 19%	3% 19%
2006-2031	19%	19%	21%	19%	14%
Apartment Units
1986–96 1996–06	23% 22%	23% 22%	23% 22%	23% 22%	23% 22%
2006-2031	30%	46%	47%	51%	69%

It is clear from the above table that achieving any of the intensification targets currently being considered by the Town will require a shift in current housing preferences away from single and semi-detached units and towards apartments. While these types of shifts can be assumed from an analytical perspective, from a practical perspective, achieving them presents some key challenges.

Housing Demand Continues to Be Driven By Young Families

One of the major factors driving demand for housing and the type of housing people rent or buy at any given time (single detached, rows, apartments) is the age structure of the population. Housing demand in the Greater Toronto and Hamilton Area (GTAH) and North America generally follows a well-established pattern beginning with apartment occupancy for new households started by young adults, often in a rental form. This typically progresses to ground-related housing when families are formed and have children. The pattern then begins a gradual move again back towards apartment occupancy as the number of divorced or widowed people increase in numbers and as children move out of the family home and some empty nesters seek to “downsize.” However, among aging households, apartment occupancy has not historically become the dominant choice until people are in their 80s.

The pattern of age structure and housing is illustrated in the following graphic. The graphic shows the relationship between age of household head and housing unit preference.

As can be seen above in the graph, the largest age group in the GTAH today is just entering the peak years for family formation and peak demand for ground-related housing. Because of continued immigration of relatively young people (20s and 30s) and out-migration from the GTAH of somewhat older families (40s and 50s), the peak population age group in 2031 is forecast to still be at about the same age. While as a country Canada’s peak baby boom population in 2031 will still have not reached the point at which demand for apartments overall will exceed demand for single and semi-detached units, the GTAH population will remain much younger still.

The housing market in Markham as part of the GTAH housing market demonstrates similar trends by age. What does differ between Markham and the GTAH market area overall is Markham’s age structure which is generally younger than the overall market, increasing local demand for family-oriented ground-related product relative to the larger market. In the current market, housing demand in the Town of Markham is driven by young families seeking ground-related units, particularly rowhouses and stacked townhouses or other multiple forms for first time buyers. Most of this demand is from people moving from Toronto, either native-born Canadians or immigrants who initially settled in Toronto. For both types of households, it is most typically a move from a central-city apartment to ground-related housing or a “move up” within the ground-related market. Over the planning period the growing age groups remain those most interested in ground-related housing.

From a policy perspective, as the planned level of intensification increases, the number of families choosing apartment style units over single family or even rowhouse units must also increase. The key challenge to achieving intensification objectives, therefore, is to encourage a significant shift towards apartment units, one that the market on its own is unlikely to deliver. A major shift in demand from this ground-related pattern to apartment-style units would be required to achieve even the Growth Plan intensification target. Such a shift is beyond what is happening in Markham to date: the shift in preference to date has primarily been from single to semis and rowhouses. In effect, the Town of Markham and other levels of government, through land use planning policy, infrastructure funding (in particular transit) and other intensification strategies such as financial incentives, would need to intervene to facilitate a market condition that is achievable rather than attempt to “force”large numbers of new residents to live in a higher density form than they otherwise may have chosen.

Given the current and forecast age structure of the population in the GTAH and the Town of Markham, it is clear that much of the future housing demand will be for ground-related forms. While some continued shift towards higher density forms would have been expected under the pre-Growth Plan policy context, new Provincial planning policies are aggressive and require a much greater shift to higher density forms. The Town must plan for at least the minimum levels in the Growth Plan as expressed through the Region of York’s forecast. The Town can plan for even higher levels of change to promote more sustainable, transit oriented forms of development. However, in order to achieve even the minimum policy targets, significant cultural and economic shifts will need to occur with respect to how families make choices about how and where to live.

A Housing Supply based on Intensification & Redevelopment Takes Time to Realize

On the housing supply side, there are also challenges to increasing the planned level of intensification. In addition to questions on the demand-side of the likelihood of more families choosing apartment-style units over those which are ground-related, major changes to the timing and nature of the development and intensification process would be required.

Intensification, or increasing the density of development within Markham’s current settlement area, can occur in a number of ways:

· through redevelopment of underutilized lands;

· infill of vacant lands or spaces between existing buildings;

· expansion or conversion of existing buildings; and

· development or redevelopment of large land areas within the current settlement area such as Markham Centre and the Langstaff Gateway lands.

All of these types of intensification represent development to higher value uses and, under the right set of circumstances, are to be expected in the normal course of urban development. Intensification occurs when reinvestment is warranted for older buildings or sites are no longer viable in their current use. In the case of greenfield development, the investment and sometimes long term commitment must be warranted by the competitive market demand over a substantial period. Intensification is a process that tends to occur incrementally and over a very long period of time.

Intensification, on the supply side, is driven by four key factors:

· the existing development pattern, or physical characteristics of the site and area;

· land ownership and interests;

· planning policy; and

· infrastructure and services.

The overall likelihood of realizing intensification opportunities depends on the number of factors in place and on the compatibility or “fit” between these factors. The Town’s policy and practice may increase the probability of intensification, but if the other factors are not in place, the Town simply cannot count on redevelopment occurring in any given time frame.

Markham is unique, however, in that it has a number of vacant, brownfield and underutilized land holdings located within its centres and corridors where the four factors affecting the probability of large scale development and redevelopment of the land at an intensified level have already been met or can be met well within the 2031 planning horizon. Development of the Markham Centre lands is well underway and redevelopment of the Langstaff Gateway lands and the Markville Mall could potentially occur over at least the next 20 years if not longer.

Greenfield Development Satisfies a Key Part of the Housing Market

While providing more residential units through intensification advances a number of sound planning objectives, it is also important to provide some greenfield development lands in order to maintain a balanced housing stock to address the full range of residents needs. The predominant unit types provided through intensification are higher density forms such as apartment and rowhouses and other multiple types, with very little single and semi-detached units typically provided through intensification. Single and semi-detached and townhouse units are an important part of providing a good mix of housing, but are to be provided primarily through new greenfield development land.

The Town should take efforts, consistent with the Provincial Growth Plan, to minimize the amount of greenfield land that is designated. Some new lands will, however, need to be provided to satisfy demand for ground-related family-oriented housing which has historically driven the need for lands to accommodate housing.

To accommodate the new ground related units in the forecast housing stock, the Region has determined, and our consultant agrees, that some units need to be located in an extension of Markham’s current settlement area, as provided for in Provincial policies. In a 55% intensification scenario, staff have identified that 82% of the new units to 2031 could be located within Markham’s current settlement area and 18% be would need to be located in new compact greenfield communities in an extended settlement area. To accommodate new ground related housing, to maintain a good balance in the housing mix over the forecast period and to mitigate some of the potential risks if the planned housing mix is not achieved over the planning period, approximately 600 ha of residential land located outside the current settlement area may be needed.

The method used by the Region to calculate the intensification percentage does not account for some new ground-oriented greenfield units within the built up area. If these units were to also be included it is estimated that the intensification percentage for Markham could be in the order of 60%.

In addition to existing unbuilt greenfield lands within the current settlement area (+/-1100 ha), it is anticipated that the 600 ha will accommodate residential land needs to 2031 (excluding intensification). Over the past 25 years it is estimated that the Town registered 3800 ha for residential greenfield development. Therefore, the total forecast greenfield land requirement to 2031 represents less than half that amount and the 600 ha represents approximately one third of the current forecast greenfield land requirement.

Monitoring the Housing Market and Adjusting Pace and Phasing of Growth

The vision that the Town wants to achieve for Markham in 2031, and the context in which growth toward the vision will occur, includes aspects that are new and untried. This challenges the Town’s ability to be certain that its decisions will always align with future circumstances that it cannot predict. In plan making, Markham needs to keep its options open. For this reason, the Town will carefully monitor the progress of growth, and its implementation, relative to the vision, and prepare to adjust if circumstances are different than anticipated. The Town will also plan growth more deliberately, in phases, using the tools available to facilitate the implementation of growth policies and any needed “course corrections”.

It is expected that there will be changes in market preferences for housing in Markham over time, however their nature and timing are challenging to predict now. As well, some of the planning policies required to address senior government growth directions, particularly as they relate to intensification of the built up area, promote development that may vary from market preferences. The success of these policies can only be determined over time.

Consequently, it will be preferable to select good base planning policies to accommodate a range of possibilities, and essential to identify and monitor key market trends that demonstrate, and assist in anticipating change. Where monitoring over time confirms a continuing difference between policies and market preferences, it will be necessary to determine if any policy change should occur.

In recommending a preferred alternative for housing growth, including a target for intensification within the current settlement area, and an additional residential land area outside the current settlement area, it is essential to monitor market performance and housing preferences over time to permit the Town to evaluate, and adjust as needed, the planning policy context and phasing of land for housing growth. Consequently, the consultant’s recommendation of a preferred alternative for housing growth does not preclude adjustments to the alternative over time, such as increasing the proportion of intensification to more than 55% or adjusting the timing and phasing of new residential land development.

CONCLUSIONS:

The Town of Markham is well-positioned to accommodate more intensive forms of development. However, some significant cultural and economic shifts would be required to achieve the levels of residential intensification being considered by the Region and the Town. These shifts have fundamental implications for the overall physical and social character of the community. There are challenges on both the demand and supply side of the issue. Intensification of the Town housing stock beyond the Regional intensification target of 52% (Markham’s share in order to meet the Provincial intensification target of 40%) involves a number of potential risks.

A balanced approach to residential growth management attempts to address the market needs of Markham’s future residents, while still meeting Provincial and Regional growth objectives. A prudent approach provides for intensification of Markham’s built up area to make more efficient use of existing and planned infrastructure, particularly rapid transit, while at the same time, providing assurance that the Town will have a residential land supply available to accommodate a full mix of housing types. Such an approach can be carefully monitored and adjusted over time.

FINANCIAL TEMPLATE:

Not applicable.

ALIGNMENT WITH STRATEGIC PRIORITIES:

Aligns with the strategic priorities of Growth Management, Environment, Transportation/Transit and Diversity within the Building Markham’s Future Together Framework.

DEPARTMENTS CONSULTED AND AFFECTED:

The Treasurer has reviewed and commented on the attached Hemson Report.

RECOMMENDED BY:

_____________________________ ________________________

Valerie Shuttleworth, M.C.I.P, R.P.P Jim Baird, M.C.I.P, R.P.P

Director of Planning & Urban Design Commissioner, Development Services

ATTACHMENTS:

Appendix A – Intensification Options: Implications for the Town of Markham

A Housing Stock Analysis prepared by Hemson Consulting, June 2009

Q:\Development\Planning\MISC\MI510 Growth Management 05-05\Reports\DSC GMS June 23 2009 Housing Stock Analysis.doc