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Blog December 4, 2018

Public Lands, Private Control, and Housing Needs in the "Smart City" Quayside Development

For over a year, Google’s Sidewalk Labs has flooded the Internet with watercolour images of bits of a future ‘smart city’ neighbourhood in Toronto’s Quayside district. But unlike normal developers, Sidewalk Labs has yet to make a complete and formal application to the planning department and city council. And citizens do not have any details about the business plan for the proposed development. Sidewalk Labs is an American for-profit company, but Waterfront Toronto is public, and should be forthcoming about both the physical plan and the business plan.

The scant available information suggests that the new district, if it comes to fruition, could be built through what is essentially a huge public subsidy for a development that may or may not be driven by the public interest. This is only a possibility, at this point, but it is a very worrying one.

Real estate expert Julie Di Lorenzo – who resigned from the Waterfront Toronto board because of what she considered a lack of due diligence and accountability on this project-- explained in an interview that the available information for the project lists only the ‘book’ value of the Quayside land controlled by Waterfront Toronto. Corporations often list only the book value of an asset acquired at a lower price, so as not to have to pay taxes on the higher market value until a real development with revenue comes into being. But Quayside is land that is publicly owned (partly by Waterfront Toronto and partly by the city, with a couple of small private owners). The land has been made ready for development at great public expense.

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Few people know that the Quayside district has already been zoned, ahead of any particular plan. The density allowed by the zoning amounts to a buildable total of 2.7 million square feet, Di Lorenzo explained (and confirmed by a note to Waterfront Toronto’s 2017 financial statement). Given the high market value of waterfront properties, the price per square foot on that site is likely between $100 a square foot and $200. That would give a total value, for the land as it is already zoned, of $500 to $600 million, which makes the land a major public asset.

Ordinarily Waterfront Toronto builds some public spaces (like the Corktown Common park) but sells most of the ready-for-development land to developers. But we don’t yet know, more than a year after the initial announcement, what they plan to do with the Quayside land. The Plan Development Agreement released on July 31 leaves many key details of the relationship between Sidewalk Labs and the public agency vague, but as noted by many press stories, it states that Sidewalk Labs is acquiring no land. Ordinarily, nobody can act as a developer if they do not already own the land.

But in this case Sidewalk Labs is proceeding like a developer, including posting pretty pictures of the future online. How can this be? An independent real estate cost consultant calculates that if a developer (or the developer’s partner) has full control over $500m worth of land, then, with conservative estimates of 20% equity, a project of a couple of billion dollars can be financed just with the value of the land. 

Thus, Sidewalk Lab’s project could be financed not by the Google billions but rather thanks to the value that has accumulated through the long-term contributions to Waterfront Toronto’s work of the long-suffering taxpayers of this country and especially the city. For years now, governments have been handing land over to Waterfront Toronto to manage, prepare and sell off, without the public getting clear facts about if or how the public shares in the profits that have accumulated along the waterfront. Waterfront Toronto’s uninformative financial statements give the public figures about construction jobs and future jobs, about future income taxes and other economic benefits that normally follow from regular, private sector urban development; but in the case of Quayside, if the land is to remain in public hands rather than being sold, citizens should be told who’s going to secure which revenue stream.

Sidewalk Labs has stated they will build “purpose-built rentals” on Quayside. But that is no act of benevolence, since the Doug Ford Ontario government has just exempted new purpose-built rentals from rent controls.  

And Sidewalk Lab’s promise of “below market” affordable housing is somewhat misleading. The units to be built at Quayside are only an average of 760 sq ft.: it’s not hard to build small apartments and charge less than the Toronto average. As for affordable units, one of the points that won Waterfront Toronto public support in its early years was that it was obligated to have 20 percent affordable housing. But the affordable and/or community housing was not charity from developers; it was a legal requirement.

Elsewhere, including other districts of the waterfront, the city, its housing agency and/or local nonprofit housing providers make specific plans for affordable housing, even when the housing is built by the developers pursuant to the city’s concessions on density and zoning exceptions. In the case of Quayside, however, neither the city nor the community housing agency nor supportive housing providers (such as nearby Woodgreen) seem to be in the picture: if they were we would surely have heard about it. But guessing is all we can do; we don’t know who is supposed to build what by way of affordable housing. And this is in large part because the city is not a party to the Quayside agreement, and so the city’s transparency policies and norms do not apply.  

So Torontonians have no idea who will decide, for Quayside, what affordable housing will be built where and for whom, and what exactly ‘affordable’ will mean. Whether Sidewalk Labs will become landlords themselves (for any of the types of housing), whether Waterfront Toronto plans to take on an unprecedented landlord role, or whether this work will be contracted out, perhaps to one of Sidewalk Lab’s many for-profit subsidiaries, is one of the many key governance issues omitted from the drawing-heavy public communications.

Now is the time for the new city council and for community groups around the whole city (not only the group at the waterfront) to insist on the Toronto tradition whereby the city, the housing agency, and nonprofits work together to set the priorities for affordable housing, make specific plans, and set up a management structure. Affordable housing is provided by many different actors; but affordable housing policy is by definition public policy, and cannot be privatized or kept secret. 

Sidewalk Labs may perhaps be poised to start a massive real estate venture by using the value of public land as if it were their private capital. This may not happen, especially if Waterfront Toronto’s powers and assets are reduced by the Ford provincial government in the wake of the provincial auditor general’s report that is due tomorrow.  But whatever happens with Waterfront Toronto, citizens should be told what the publicly owned land at Quayside is worth, who is to benefit from its considerable value, and who exactly will act as landowner, developer, and future landlord.