Building October November 2016 by IQ Business Media

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LIFE AFTER THE BACK COVER…

what’s on BUILDING.ca

READ > Corrosive Corruption Brazil’s overt corruption scandals affected not only the Summer Olympic Games, but may also signal a new era in the global regulatory enforcement landscape.

66 05

CONTENTS

FEATURES

16 > Where to Dig? /

Across Canada, infrastructure renewal and investment is desperately needed. But who pays and how? Land Value Capture mechanisms are seen by many as a potential solution to this dilemma. By Rhys Phillips

22 > Building Expectations / The new miracle material for the 21st century could be – wait for it – wood. By Leslie C. Smith

EXPLORE > Dance Floor Though short-lived, Montréal architect Jean Verville’s Dance Floor installation energized Museum Avenue.

EXPLORE > Montréal Biodome KANVA in collaboration with NEUF architect(e)s unveil their plans for the Biodome conversion.

26 > The Energy Ideal /

A study published by Natural Resources Canada tests building design metrics in an effort to achieve a netzero energy ideal. By Shannon Moore

IN EVERY ISSUE

6 > Editor’s Notes 8 > Developments 10 > Market Watch 12 > Legal 30 > Viewpoint

ABOVE IMAGE:

When completed, the University of British Columbia’s Brock Commons will be among the world’s tallest mass timber hybrid structures at 18 storeys. (Photograph by Steven Errico)

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Let’s All Get Along

Volume 66

Here’s what we know: over the next 10 years the Federal Government aims to deliver $120 billion of infrastructure investment. What we don’t know is how it will be spent, or how they will come up with it. And this has many in our industry worried. “Infrastructure is seen by many as the new bright hope in Canada, and the new Federal Government talks a good game, but when are they going to act, especially with national infrastructure conditions reaching critical levels?” asks Ian Woods, principal of Markham, Ont.-based Fraser Woods Inc. Media reports about frequent cost overruns on major public projects (for example, when costs on the current Toronto subway jumped about 45 per cent mid-project) certainly highlight the dilemma of how governments, especially municipalities, are going to pay for much needed core infrastructure, and University of Toronto associate professor Matti Siemiatycki of the Department of Geography and Planning has a couple of interesting ideas. He proposes creating an Infrastructure Bank (to “provide low interest loans and credit enhancement services to provincial and municipal governments investing in priority infrastructure projects”) and establishing an arm’s-length agency to advise on how to allocate funding for the country’s largest projects. Of course having “rigorous project planning and evaluation, procurement best practices and project financing under a single roof” (as Siemiatycki describes it) certainly sound great — and the Feds actually say they are looking into it — but the current reality requires the various levels of government to get bold and creative when looking for new ways to unlock capital and, let’s be honest, ensure that the cost of infrastructure development is borne by those that most directly benefit from it. One way to do this is for governments to focus on capturing both the current ‘stores’ of value and the future value that they expect their projects to deliver in order to fund its development — and that’s where Land Value Capture (LVC) methods come into play, as discussed in this issue. According to KPMG, for some, pragmatism will lead to more boldness in the privatization of assets (a.k.a. ‘asset monetization’). In one of their Foresight newsletters, they point out that “rather than shrinking away from the political implications of privatization, governments will increasingly see privatization as a smart way to recycle capital in order to fund new services and assets.” At the same time, KPMG expects to see new ways of ‘value capture’ emerge and municipal authorities getting tougher and smarter with private developers who own land surrounding projects, leveraging the value that will be gained by homeowners and businesses within proximity to the asset through land taxes and development taxes. And we will almost certainly see new taxes being developed and ring-fenced to fund future infrastructure investment. “We’re at one of the most crucial periods for investing in infrastructure in Canada’s history,” says Andy Manahan, executive director of the Residential and Civil Construction Alliance of Ontario (RCCAO), a coalition of groups representing Ontario’s construction industry (and who sponsored both of Siemiatycki’s reports). And he’s right: across the world, cities are using new models of development to unlock the value of underutilized assets, build new infrastructure, and promote economic development. In Canada there is a flood of infrastructure money being rolled out from various governments with a heavy emphasis on transportation. But it seems the way we are going is that despite infrastructure being a national priority with a collective national benefit, much will depend on local politics, expectations and norms.

Peter Sobchak Editor We welcome your feedback. Send your questions and comments to psobchak@building.ca OCTOBER NOVEMBER 2016

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05 Number

Editor / Peter Sobchak Art Director / Roy Gaiot Assistant Editor / Shannon Moore Legal Editor / Jeffrey W. Lem Contributors /

Richard Joy, Rhys Phillips, Leslie C. Smith

Customer Service / Production Laura Moffatt 416 441 2085 x104 Circulation Manager circulation@building.ca Sales Manager Faria Ahmed 416 441 2085 x106 fahmed@building.ca Senior Publisher / Tom Arkell President, iQ Business Media Inc. Alex Papanou Building magazine is published by iQ Business Media Inc. 101 Duncan Mill Road, Suite 302 Toronto, ON M3B 1Z3 (416) 441 2085 x104 • info@building.ca Website: www.building.ca SUBSCRIPTION RATE: Canada: 1 year, $30.95; 2 years, $52.95; 3 years, $64.95 (plus H.S.T.) U.S.: 1 year, $38.95 US, Elsewhere: 1 year, $45.95 US. BACK ISSUES: Back copies are available for $8 for delivery in Canada, $10 US for delivery in U.S.A. and $20 US overseas. Please send prepayment to Building, 101 Duncan Mill Road, Suite 302 Toronto, ON M3B 1Z3. Subscription and back issues inquiries please call (416) 441 2085 x104, e-mail: circulation@building.ca or go to www.building.ca Please send changes of address to Circulation Department, Building magazine or e-mail to addresses@building.ca Building is indexed in the Canadian Magazine Index by Micromedia ProQuest Company, Toronto (www.micromedia.com) and National Archive Publishing Company, Ann Arbor, Michigan (www.napubco.com).

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MENTS

DEVELOP-

Réseau Sélection now the top private-sector retirement community developer in Canada MONTRÉAL | Réseau Sélection is now the largest private-

News Canada Green Building Council launches new Energy Benchmarking training OTTAWA | The Canada Green Building Council (CaGBC) has launched new training on energy benchmarking strategies and regulation for both private and public sector stakeholders. Titled Introduction to Energy Benchmarking and Understanding Ontario’s Mandatory Energy Benchmarking for Large Buildings, these courses introduce the general processes for accurate data collection, show participants how to create a building profile and successfully use ENERGY STAR Portfolio Manager, and discuss Ontario’s upcoming Energy and Water Reporting and Benchmarking regulation. They were developed in consultation with the Illinois Chapter of the U.S. Green Building Council, and were modelled after the successful training they implemented in support of the City of Chicago’s Energy Benchmarking Ordinance. As the voice of the green building industry in Canada, CaGBC is spearheading a national strategy for energy benchmarking that aims to reduce the challenges and complexity of implementing benchmarking and reporting requirements in Canadian cities and provinces. Included in this strategy was the launch of a white paper in April 2016 called Energy Benchmarking, Reporting & Disclosure in Canada: A Guide to a Common Framework. The CaGBC is providing training to support the green building industry in meeting upcoming requirements like those in Ontario, where the reporting of annual benchmarking results for large commercial buildings will soon become mandatory province-wide. Several other jurisdictions, including the City of Vancouver and the Province of Manitoba, are also considering similar legislation. “By implementing these practices, building owners and managers have access to key data on the performance of their buildings, which enables them to make strategic investments in operational improvements, technology upgrades and retrofits in an effort to conserve more energy, reduce emissions and realize financial savings,” says Thomas Mueller, CaGBC president and CEO. OCTOBER NOVEMBER 2016

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sector player in retirement home community development, construction and management in Canada, with 10,000 units, including those under construction. The company is also one of the top five residential builders in Québec, and ahead of schedule on its five-year plan, with the value of its projects initiated and under construction expected to hit $900 million by the end of 2016. “There’s been a great deal of talk about Québec-based companies being sold off to interests west of us or south of the border. With its position as the top private-sector player in its line of business in Canada and its growth over the past three years, Réseau Sélection is extremely proud to be one of the new flagships of Québec business,” said Réseau Sélection president and CEO Réal Bouclin, pointing to the company’s threefold growth in staff in less than three years, with nearly half of its 3,000 employees located in the regions. On the strength of a $1.4-billion property portfolio, Réseau Sélection continues to grow, announcing a five-year, $2-billion development plan in 2015 for construction of 30 new retirement home communities and a total of 18,000 units by 2020. The projects initiated under the plan will comprise an investment close to $900 million by the end of 2016, significantly ahead of the company’s forecast. Réseau-Sélection has also announced that it will launch six large-scale projects with construction slated to begin over the next six months, at a value close to $250 million, bringing the total value of projects under the five-year plan to around $900 million ahead of its forecasts.

Le Sélection Ste-Dorothée

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The new projects include construction of Le Sélection Ste-Dorothée (with a $95-million price tag and 300 rental units, it will be a first for Québec and a prototype for development outside the province); completion of two new phases at Rosemont-Les Quartiers, featuring condos and care units; construction of Le Sélection St-Augustin, a traditional retirement residence with 275 serviced condos and rental units; construction of Le Sélection Valleyfield, 250 units; construction of le Sélection St-Hyacinthe, with 260 units; and a major renovation project at Le Sélection Île des Sœurs.

residents and growth opportunities for local supply chain partners,” said Alan Caslin, Chair of the Niagara Region. Substantial completion is expected by year-end 2017, with production expected to begin in spring 2018. The prime consultant team for the project includes: CSO Architects in joint venture with B+H Architects; PCL Constructors Canada Inc.; Thornton Tomasetti; H.H. Angus & Associates Ltd.; and Lea Consulting Ltd..

People in the News Neil Rodgers elected President of Ontario Home Builders’ Association

New Projects PCL Constructors break ground on Canada’s first multi-modal Brilliant Factory TORONTO | PCL Constructors Canada Inc. (Toronto) has

been selected to build GE’s first multi-modal “Brilliant Factory” in Canada. Located in Welland, Ont., the multi-modal facility will manufacture GE Power’s reciprocating gas engines, components for compression, mechanical drive and power generation. The facility is expected to create 220 jobs with operations commencing in early 2018. The first phase of the investment is USD$165 million. Premier Kathleen Wynne and the Honourable Chrystia Freeland, Federal Minister of International Trade, joined GE global executives and representatives from Welland and the Niagara Region in a groundbreaking ceremony celebrating the start of construction in August. “Ontario is a smart choice for companies looking to grow their business and create good jobs. With this investment in Welland, GE has cast a vote of confidence in Ontario’s culture of innovation, highly skilled workers and dynamic business climate,” said Premier Wynne. “GE’s significant investment in the Niagara region closely aligns with Regional Council’s actions to foster an environment for economic prosperity. By waiving industrial development charges and providing incentives through our Gateway Economic Zone, our Council supports GE’s continued success as they create new high-skilled jobs for Niagara

TORONTO | Neil Rodgers has been elected President of the Ontario Home BuildGE Welland ers’ Association (OHBA) for 2016-2017. He most recently served as the association’s first Vice President and has been a member of the Executive Committee since 2012. With almost 30 years of experience in land development, Neil’s career has spanned both the public and private sectors of the industry across southern Ontario, British Columbia and the United States. Currently the Executive Vice President, Acquisitions at Tribute Communities, one of the largest integrated land developer/community builders in Ontario, Neil is responsible for all aspects of land acquisitions, vendor/investor and broker relationships and market research. Prior to joining the Tribute family, Neil played a pivotal leadership role in the merger of the Urban Development Industry Ontario and the Greater Toronto Homebuilders’ Association, to form the Building Industry and Land Development Association – the largest local home builders’ association in Ontario. A focus for Neil’s term as OHBA president will be on evidence-based research in order to demonstrate what the future of the marketplace will look like with the current policy models that are in place. Neil plans to use this research to help educate, advocate and inform the government on issues like the Greenbelt and Growth Plan, the OMB Review and Building Code changes around Net Zero housing as well as the Climate Change Action Plan. b

Neil Rogers building.ca

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MARKE T Global real estate markets showing progress in levels of transparency

“These results are encouraging as they highlight the steady advances the global real estate industry is making,” says Jeremy Kelly, director, Global Research Programmes at JLL and an author of the report. “Improvements are down to a number of factors: initiatives to deepen the availability and quality of market data and performance benchmarking; the enactment of new legislation in several countries; the introduction of higher ethical standards; and the wider adoption of ‘green building’ regulations and tools.”

Two-thirds of real estate markets globally have shown progress in levels of transparency over the past two years, according to JLL and LaSalle Investment Management’s 2016 Global Real Estate Transparency Index ( GRETI ). The 10 countries identified as ‘Highly Transparent’ by GRETI account for 75 per cent of global investment into commercial real estate, highlighting the extent to which transparency drives real estate investment decisions. A number of key factors are driving this progress and frame the broader issues raised by both high and low transparency. Capital allocations to real estate are growing. JLL forecasts that within the next decade in excess of US$1 trillion will be targeting the sector, compared to US$700 billion now. This growth means investors are demanding further improvements in real estate transparency, expecting standards in real estate to be on a par with other asset classes. There is a growing recognition that transparent real estate practices play a significant role in capital formation, municipal finance, and as a foundation to improve the quality of life in many communities. This foundation includes security of property ownership, safe housing and workplaces and the ability to trust agents to act honestly and professionally. Another key factor is technology, which is both a driver of the digitization of all kinds of real estate data and also an enabler in disseminating and analyzing this data; improvements in data capture techniques are allowing a more granular and timely assessment of real estate markets. OCTOBER NOVEMBER 2016

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The revelations of the Panama Papers in early 2016 have led to mounting pressures for greater real estate transparency and put the fight against corruption decisively on the international political agenda.

Spotlight: Transparency

Canadian highlights Canada consolidates its ranking as third by improving performance measurement indices, and has grown even more transparent in terms of investment performance transparency related to privately-held fund performance. While still in consultative stage, the IPD Canada Quarterly Property Fund Index has gone from its initial launch just a few years ago to become a more widely recognized industry benchmark in 2016. The Index is reasonably wellpositioned to see progressively more widespread usage and adoption as a benchmark, as Index participants grow their assets under management, and as potential new funds join the Index over time. The Anglosphere continues to dominate the ‘Highly Transparent’ group: the United Kingdom (1st), Australia (2nd), Canada (3rd) and the United States (4th) hold the top positions. These traditional standard-bearers are taking real estate transparency to a new level; making improvements that go beyond other transparent markets, particularly in the granularity, quality, frequency and geographical spread of performance measurement, valuations and market fundamentals data, which now also extend to niche property sectors. Several ‘Highly Transparent’ countries, including Canada, impose obligations on real estate agents to perform anti-money laundering (AML) checks to verify the identity of their clients and any underlying beneficial owners. “The wider recognition of IPD’s Pro perty Fund Index has helped put Canada on par with countries like the U.S. and the U.K., who have had open-end fund indices for several years,” said

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Chris Langstaff, senior vice president, Research & Strategy, Canada LaSalle Investment Management. “Index participants can also measure their fund’s performance over the longer term, as benchmark performance history back to 2005 is available to Index participants, improving transparency related to data availability. Canada’s regulatory and legal frameworks and transaction processes, as they relate to transparency, also remain among the world’s strongest.”

The future of real estate transparency “Our index shows steady advances which are a result of both industry and government efforts. That said, there are too many examples of opaque and corrupt practices, poor corporate governance and failures in regulatory enforcement that are resulting in serious consequences for society, business activity and for investment,” says Jacques Gordon, LaSalle Investment Management’s Global Head of Research and Strategy. “Investors and tenants will bypass countries unable to address these shortcomings, and will gravitate instead to more transparent markets.” There are a number of factors at play internationally which will influence real estate transparency in the next several years. For example, revelations of the Panama Papers in early 2016 have led to mounting pressures for greater real estate transparency and put the fight against corruption

decisively on the international political agenda. Beneficial ownership disclosure and anti-money laundering procedures will be embraced more widely and rigorously, and as reported in GRETI, expect to see material progress in the coming years by many countries in their drive for greater transparency in corporate and real estate ownership. As new data capture techniques get adopted, the pressure mounts for real estate to raise the bar and achieve even higher levels of transparency. JLL expects to see the rise of a new ‘Hyper-Transparent’ category in future years (an even higher classification to which those currently in the top tier may not yet qualify), where data feeds from sensors help inform owners and tenants about how buildings are used and how they perform. The mounting intolerance of corruption within the world’s growing middle classes will force the pace of change, especially amongst the Semi-Transparent countries, and social media will help people mobilize around this issue. Ultimately, technology will continue to advance and will allow some countries to leapfrog the traditional route to transparency, something that is already happening in places like Kenya, Ghana and Ecuador. There will be greater emphasis on regulatory reform, but also on enforcement, particularly in semi-transparent markets where the greatest disconnect currently exists. b

2016 Global Real Estate Transparency Index Covering 109 markets worldwide Highly Transparent

Transparent

SemiTransparent

Low Transparency

Opaque

No information available

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LEGAL Security Deposit Insecurity A new Alberta Court of Appeal decision should remind landlords that there is actually very little “security” in a “security deposit.” By Melissa McBain

Landlords often require that tenants provide a deposit when entering into a lease. Sometimes it’s a security deposit, sometimes it’s prepaid rent, and sometimes it’s a combination of both. In the landlord’s mind, the deposit is a pool of money it may draw on if the tenant fails to fulfill its obligations under the lease. However, an Alberta Court of Appeal decision demonstrates that this is not true in all circumstances, leaving landlords with security deposit insecurity.

Security Deposits

A on West Private Debt Ltd. v Surefire Industries Ltd., Instore Alignvest Street in Goderich, the Ont.’stenant historic paid a deposit of about $3 million to the downtown before the of a sale-leaseback transaction. The landlord as part tornado hit (above), lease provided that the deposit was to be held by the the damage (right), landlord “as security for the performance by the Tenand in August 2013 (below) town’s ant ofafter its the obligations under the Lease” and that unrebuilding efforts.

Even if the deposit in Alignvest had been held to be prepaid rent, it is far from certain that the landlord would have been entitled to retain it following the trustee’s disclaimer of the lease.

less it was applied to remedy a breach, the deposit would be applied to various months’ rent after the twelfth month of the term. About 10 months into the term the tenant was declared bankrupt and the trustee disclaimed the lease. At the time of disclaimer the tenant was current on its rent. The tenant’s general secured creditor (“Alignvest”) sought an order that it, and not the landlord, was the party entitled to the $3 million deposit in the landlord’s possession. Alignvest argued that according to the lease, the deposit was a “security deposit,” meaning the money was still the tenant’s property and was held by the landlord as collateral for the tenant’s performance of its obligations under the lease. Therefore, Alignvest alleged, the landOCTOBER NOVEMBER 2016

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lord only had an unregistered security interest in the deposit that ranked behind Alignvest’s registered general security interest over all of the tenant’s assets. The landlord argued that since under all circumstances the funds would ultimately accrue to the landlord (either as rent or to remedy a breach), the deposit was “prepaid rent” and it became the landlord’s property at the time it was given. The Court noted that the lease referred to the deposit as a “Security Deposit” and “as security for the performance by the Tenant.” The Court disagreed with the landlord that under all circumstances the deposit would accrue to the landlord, stating that where, for example, the lease was terminated prior to the twelfth month without breach by the tenant (for instance, if the premises were destroyed

by fire), the deposit would be returned. Although there were elements of the funds that were akin to prepaid rent inasmuch as they were earmarked for certain specific months, the deposit

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was more accurately described as a “security deposit.” Therefore Alignvest had first priority to the funds. The decision was upheld on appeal. As the Alignvest decision makes starkly clear, landlords may be left empty-handed where the deposit is a “security deposit.” A prior ranking secured creditor will be entitled to the deposit ahead of the landlord, irrespective of a bankruptcy. A possible solution might be for a landlord to register its interest in a security deposit under provincial personal property security legislation in an attempt to preserve priority.

Pre-Paid Rent

The decision in Alignvest may give the impression that a landlord can avoid jeopardizing its right to the deposit so long as the lease is clear that the deposit is prepaid rent and in no circumstances will it be returned to the tenant. However, this would not be true in circumstances where the tenant goes bankrupt and the trustee disclaims the lease. Disclaimer has the same effect on the tenant as if the parties had agreed to end the lease. Therefore, following disclaimer, a tenant has no obligation to pay rent. While some cases have held that prepaid rent becomes the landlord’s property at the time it is paid, there is an argument that a landlord has no legal basis to retain rent paid by the tenant for periods following the disclaimer, notwithstanding that the rent was paid in advance. Any claim by a landlord to rent from the tenant for periods following disclaimer is further weakened by two other factors. First, most provincial legislation limits the landlord’s claim from the bankrupt’s estate to the three months of arrears and three months of accelerated rent. (These amounts are treated as a preferred claim under the Bankruptcy and Insolvency Act, but preferred claims do not have priority over secured claims). Second, a landlord is prevented from enforcing lease covenants following a stay imposed by insolvency proceedings, including any entitlement to prepaid rent. This means that, even if the deposit in Alignvest had been held to be prepaid rent, it is far from certain that the landlord would have been entitled to retain it following the trustee’s disclaimer of the lease.

Forget Deposits - Look to Third Parties

What is a landlord to do when secured creditors may have priority to “security deposits” and “prepaid rent” may have to be returned upon a tenant’s bankruptcy or insolvency? Since entitlement to advance funds in bankruptcy scenarios is uncertain, landlords are advised to look to third parties, rather than taking a deposit from the tenant itself (common examples include guarantees, indemnities, and letters of credit). The Supreme Court of Canada has held that “nothing… protects third parties…from the consequences of an insol-

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Melissa McBain is a partner in the commercial leasing department of Toronto-based Daoust Vukovich LLP, and has dedicated her career to representing commercial landlords and tenants in a variety of commercial leasing matters.

vent’s repudiation of a commercial lease. That is to say, they remain liable when the party on whose behalf they acted becomes insolvent.” This is understood to mean that guarantors and indemnifiers remain liable for the tenant’s obligations following disclaimer, including liability for rent due over the unexpired balance of the term. However, guarantees and indemnities are not without issue. First, enforcing the guarantee or indemnity entails commencing a claim in court and proving damages. Second, there’s a risk that the guarantor or indemnifier will not have sufficient assets to make good on the award. Letters of credit, specifically irrevocable standby letters of credit, are therefore a good option. The letter issuer’s obligation to honour the credit is independent of the lease. Letters of credit are typically obtained from banks or other large financial institutions, giving the landlord access to a source of stable funds. Further, it is unlikely that a landlord would have to commence a claim or prove its damages depending on how the letter of credit is worded. However, many tenants are unwilling to tie up credit to sign a lease. Little wonder that landlords have security deposit insecurity. b

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Designers, builders and wood product manufacturers in Canada are reaching new heights and larger scales with a new generation of wood products and systems. Wood structures are reducing the carbon footprint of our built environment and offering significant benefits in terms of structural performance, scale possibilities and construction efficiency.

For more information on wood building and design or FREE professional technical support, please visit: wood-works.ca | cwc.ca

Program of the Canadian Wood Council

2016-10-21 5:51 PM

WHERE TO DIG? By Rhys Phillips

building.ca

here is an adage that says “for every complex problem there is a simple answer…and it is wrong.” This instructive caution, however, appears lost on most politicians and economists. Since the great recession of 2009 and a subsequent less-than-stellar recovery, multiple grand fixes have been trotted out, from bailouts, to quantitative easing, to persistently low interest rates. Massive infrastructure investment now appears to be the next best hope to stimulate better long term growth. Both the previous and current federal governments have earmarked $125 billion over the next decade, to be augmented by similar investments from provinces and municipalities. Three distinct rationales support major infrastructure investment. First is the $141 billion “infrastructure deficit,” those existing assets that the 2016 Canadian Infrastructure Report Card estimates are in poor or very poor condition. An additional $247 billion of legacy infrastructure is in only “fair” condition. Combined, 34 per cent of Canada’s existing $1.1 trillion infrastructure requires immediate attention. Left unfunded, for example, such Canadian staples as the quality of potable water will simply decline. Even worse, under current practices this deficit will grow to 80 per cent in just 20 years. Second, infrastructure investment will influence future economic performance in both the short and long term. In the short term, given current low and episodic growth each dollar of infrastructure investment adds $1.50 to the economy’s immediate growth. Over the longer term, improved and expanded infrastructure will stimulate economic efficiency, smooth the movement toward the new knowledge economy, and support sustainable growth in the face of the negative economic effects of climate change. To help this restructuring of the economy, in April the Federal Government announced a $2 billion investment in research and innovation infrastructure at colleges and universities. Investments in “smart city” infrastructure will both improve productivity in our increasingly city-based economies while reducing public service delivery costs. Finally, there are social returns that can extend beyond simply additional hockey rinks, parks, libraries and community centres. While these are importLRT Station ant, responding creatively to ameliorate negatives including road congestion, pollution and frustrating transit commutes while supporting positives like healthy cities will improve public well-being, reduce spiralling health costs and, not incidentally, further contribute to workforce efficiency.

The Devil in the Details But like all simple answers, ensuring infrastructure investment has the desired effects is actually quite complex. Not the least is our weak knowledge that inhibits rapid initiation of both specific remedial and new investments that will best deliver future economic and social returns. The Report Card found only 37 per cent of even large reporting municipalities have a State of Infrastructure Report (SOIR). It concludes, “a long-term plan is needed… [that] would also allow municipalities to plan for projected population growth, keep up with technological innovation, and deal with the increasing impact of extreme weather events.” Similarly, Ontario’s Auditor General 2015 Annual Report found, “there is no reliable estimate of Ontario’s infrastructure deficit — a crucial factor in making evidence-based, properly planned investment decisions, both for new capital and refurbishment of existing infrastructure.” With or without a thorough inventory, there is also the issue of prioritizing initiatives according to timing, need, efficacy, affordability and potential for producing desired results. University of Toronto associate professor Matti Siemiatycki of the Department of Geography and Planning, argues for the creation of a “centre of excellence” fully independent from Infrastructure Canada and tasked with building.ca building.ca

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using evidence-based assessments to rank and recommend to the Federal Government projects involving $100 million or more funding. In his report, titled Implementing a Canadian Infrastructure Investment Agency (CIIA), Siemiatycki also raises the possibility of even capitalizing the CIIA as an “independent infrastructure bank facility.” Capitalization could be achieved by assigning a portion of revenues from profit-making federal infrastructure assets and/or privatizing profitable federal infrastructure assets with the onetime revenues being loaned out for new projects through the CIIA. Importantly, he adds, “one clear prerequisite is that all revenues are invested by the CIIA in top priority projects that will drive economic productivity, competitiveness and social equity returns.” The CIIA would be a bank offering loans using historically low interest rates rather than grants, which differs from the Liberal government’s asset “recycling” funding floated last June. A Canadian Infrastructure Bank (CIB) was part of the Liberal’s 2015 election platform and in March of this year the government recruited an investment banker to provide advice on its creation. But would such a bank provide significant financial savings? The answer, according to a second February 2016 study carried out by Siemiatycki, concludes “somewhat.” He first points out that all Canadian governments have relatively strong credit ratings and second, bluntly put, the world is awash with a huge capital pool seeking secure investment opportunities. By his calculation, direct loans from a CIB to municipalities “may be offered at or near the federal government borrowing rate, and thus provide borrowing cost savings in and around 125 basis points for large municipalities and provinces and considerably more for smaller municipalities and provinces.” In terms of smaller entities, however, he notes that already seven out of 10 provinces have their own similar agencies with interest rates dependent on the credit rating of the parent provincial government. Notably, a survey conducted with the Royal Institution of Chartered Surveyors (RICS) members this spring and co-sponsored by Building found almost 48 per cent of respondents believed a CIB represented no advantage or would make things worse while 26 per cent saw only a little advantage. In the end, Siemiatycki says, such a bank should deal only with projects costing over $10 million and should be part of a broader agency as outlined in his other study.

The Potential of Land Value Capture Strategies But given such priorities as transit and affordable housing, we can assume there will remain a significant revenue shortfall. When coupled with a reluctance to increase debt (at least sufficient to remove the deficit and stay out in front) or raise taxes, the question remains, who pays and how? Certainly, some public infrastructure investment and subsequent operating costs can be indirectly funded (paid for) by the tax increment generated by improved economic/health OCTOBER NOVEMBER 2016

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performance. Additionally, the privatization of functions (with subsequent private investment), monetization of assets, implementation of user fees such as toll roads, direct cost recovery levies and even tax increments or fees on specific services such as water and sewer are other tools. But one key underutilized tool that is centuries old, rooted in classic economic theory, much discussed in academic papers and even practiced in polyglot forms around the world is land value capture (LVC). LVC starts with the concept of economic rent or land value uplift (LVU) defined as a return on land and property that is in excess of what would have been the return except for some unique factor. LVU is thus that part of any increased value generated at no effort, cost or risk to the owner. While the factor generating this uplift may be population or economic growth, in terms of infrastructure we are interested in the value created by either public investment or public changes in land use regulations. The value capture rationale and its relationship to funding infrastructure, however, are different between these two public actions. In the former, the value increment is increased by an actual public investment, such as building a transit station; in the latter, the value is created through a public planning decision such as increased density or permitted use with any value subsequently captured used to fund potentially unrelated infrastructure such as affordable housing. There is remarkably broad consensus that the public has a right to capture some or all of this “unearned income.” But again, when considering how to determine the value created as well as how to capture this value, the devil is in the details. Debate often surrounds which strategies actually constitute LVC. For example, is requiring a developer to pay new infrastructure’s full cost when it is a necessity a cost recovery or LVC? In an interview, Adam Found, author of the CD Howe Institute’s report Tapping the Land: Tax Increment Financing of Infrastructure, says such direct recovery is irrespective of land value. For example, in the 1990s the Ottawa Senators paid $25 million for a new freeway interchange in order to build their arena. Additionally, residential developers, particularly in Ontario, must pay development charges to cover new infrastructure costs. These costs plus the LVC are passed on to the purchaser which means little value uplift accrues to the public. So while the Senators’ may have paid more than the actual

Photo: TransLink

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stances of individual properties. Irre spective of this caveat, transit LVU has been identified as being 10 to 50 per cent. The authors of Ottawa’s 2011 CPCS Economic Impact Assessment Review for its under-construction LRT predicted an average uplift of 18.2 per cent. But, as John Moser, Ottawa’s Manager of Planning, Infrastructure and Economic Development says, there is no specific LVC mechanisms in place, including for the two stations serving the $3.4-million LeBreton Flats development. The reason, he says, is that unlike Alberta and Manitoba, the Ontario government has yet to approve regulations to permit application of its 2006 Tax Increment Financing Act (TIF), considered by many as a key LVC mechanism and used extensively in the United States. But is it really a LVC? In March 2008, Vancouver’s TransLink launched a real estate division to develop property as a way to generate funds for transit. Under the plan, Translink will purchase land along new transit routes and around stations and increase the value through intensification of land use zoning and partnerships with developers to create high-density commercial and residential developments. It is interesting to note that after the opening of the SkyTrain in 1985, developers zoned in on the areas around the stations, building 7,870 houses within a 500-metre radius of stations between 1986 and 1996, as well as various commercial towers. The uplift in value was not realized at that time but TransLink is now planning four transit villages to augment existing hubs creating compact, mixed-use communities around the transit stations.

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land value uplift, they could not have proceeded without it. This debate, however, is perhaps moot. Full infrastructure cost recovery remains a key tool, especially where development such as a private arena is discretionary or where development is neutral or even negative in terms of a city’s planning goals. In many municipalities, higher rather than lower development charges to provide new communities with infrastructure like libraries or community centres may be required. The issue will be how to ensure any LVU component will be better shared. In Canada, a recent push for implementing LVC has come with a transit focus, and not surprisingly expanded on and supported in reports by MetroLinx, the Victoria Transit Institute and the National Bank, among others. The controversial but inviting potential of the increased capturing of LVU created by land use regulation changes as an infrastructure capital source has also received attention, notably Aaron Moore’s Trading Density for Benefits: Toronto and Vancouver Compared (2013). Only last September, the Toronto Star noted planners and politicians love the practice (provided by Section 37 of the Ontario Planning Act) while “some developers have decried it as an unfair shakedown.” Transit Infrastructure and the Promise of LVC The basic concept is simple. Properties near new transit stations (usually within one kilometre) experience uplift in value because of better access, a proposition supported by a wealth of research. However, some caution that results may vary — and even be negative — depending on the specific circum-

LVC Mechanisms: Land Value Tax vs. Tax Increment Financing (TIF) The premise of the TIF mechanism

holds that public infrastructure investment results when new development produces an “incremental” increase in total value, and therefore property taxes paid in a special assessment district ( SAD ). Most proponents advocate no extra rate be added to the existing property tax rate within the TIF-designated district; instead, the current tax level is frozen and all subsequent incremental tax revenues from within the district are applied against the cost of the infrastructure for a set period. In other words, TIF is more a “cost benefit” justification for legitimizing upfront government money in a hostile environment. The problem, of course, is if the cost of standard public services increases with more intense development, a public revenue shortfall emerges which must be met with fewer services, or a diversion of resources from other municipal areas. Indeed, Ontario’s reluctance to approve regulations may come from the potential impact on school funding, also an issue in Manitoba. As Rick Rybeck has written, TIF is a “revenue segregation” technique “that

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THUMBS UP OR DOWN ON CIB?

Currently a high priority for the Liberal government, a Canadian Infrastructure Bank (CIB) would be a federally established but independent funding institution to provide loans or other credit enhancement services to provinces and municipalities to invest in priority infrastructure projects. These loans/ services would not replace federal grant contributions to a project but help finance the provinces’/municipalities’ share.

A little 26%

A lot 26%

Would actually make things worse 7%

To what degree do you believe a CIB would improve the efficiency of the delivery of infrastructure programming, improve construction demand and reduce project costs?

In Q2 2016, Building partnered with the Royal Institution of Chartered Surveyors (RICS) to conduct a survey among its membership, asking their opinions of the efficacy of a CIB, should the government pursue one.

$25m $100m minimu 30%

No measureable improvement 41%

For more on the topic of a CIB, particularly the distinction between financing and funding, visit building.ca

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In 2004, the City of Montréal created Transgesco, a wholly-owned subsidiary company that enables the transit corporation to form partnerships with private sector companies to ensure the strategic development of its full commercial potential. Five areas of activity had commercial potential – retail outlets around stations, transit user information, smart cards, wireless communications and marketing of STM expertise.

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which captures value from an increase in accessibility (due to the transit line) and an increase in potential activity (due to zoning/dens ity).” Although not widely used in North America, Harrisburg, Pennsylvania uses splitroll taxes with land valued at six times more than building values. The result has been a remarkable 20 year urban turnaround. London’s Jubilee Line extension is often cited as a successful LVC model because about 10 per cent of its costs were recaptured, mostly through pri-

Photo: Henrickson at Wikipedia

diminishes the general fund.” It may include, in part, some LVC to the extent an increased reassessment value includes an LVU component, and particularly if the impact affects an already fully-developed area coupled with solid amended value reassessment. The percentage of the LVC collected, however, will be limited to the marginal tax rate. To ensure clear LVC, others argue, a supplemental tax component is required within the SAD. But another major problem of using TIF is its problematic assumption, as Rybeck documents in his 2004 article, that appropriate development will take place. Instead, the impact is often the opposite. The alternative mechanism is splitroll taxation, a separate land tax applied against the value of only land. Incremental land taxes come into force as soon as the LVU incurs, not when development eventually takes place. Andrejs Skaburskis and Ray Tomalty found developers surveyed in Toronto and Ottawa didn’t support such a tax, but the Queen’s University professors (and many others) concluded that such taxation speeds up development, increases intensification and reduces speculation. It is a tax championed by no less than seven Nobel economists since 1970. “In fact,” says Found, “almost all economists would agree that in principle the taxation of land is preferred to the taxation of structures.” Typically, WikiTransit reports, “[i]n split-roll taxation, land is taxed using a separate (and often higher) rate than improvements. Such a tax structure creates market incentives to maximize a property’s use … especially when assessments of land value are based on the highest-and-best use, building.ca

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More than $100m 15%

$25m$100m minimum 30%

No minimum 30%

Should the eligibility for funding from a CIB be restricted to projects with a minimum cost? If so, to what amount?

$10m minimum 26%

Set by province/ municipality 36%

No restrictions 46%

Should priority for providing financial assistance through the CIB be restricted by project type? Social housing/elder housing 14% Hospitals/ healthcare 7%

Road infrastructure 14%

Sports facilities 0% Green infrastructure including energy, sewer and water treatment 11%

vate contributions for the Canary Wharf station. But in his book Taken for a Ride, developer and South London landowner Don Riley laid out how he accrued huge value uplift returns because of the extension. Instead of gloating, he argues that at least part of this wealth should have gone back to the public. LVC Mechanisms: Public Land Development In the 1960s and ‘70s, the Toronto Transit Commission purchased land east of Young Street to permit trenching for the new subway and subsequently leased land to private sector developers to help pay costs. Oddly, in its study, Metrolinx never references this approach despite being studied around the world. Perhaps most cited is Hong Kong’s Mass Transit Railway Company that funds all its capital and operating costs through land development. Having missed out on the original property uplift around Sky Train station, Vancouver’s Translink created a real estate division in 2008 to develop its lands as TOD communities as well as undertaking land banking purchases still 10 years away from development. In these cases, LVU is captured directly through public ownership of the land and its development, either independently or in joint venture/leasing agreements with the private sector. Air right transfers involving selling/leasing rights to developers to permit increased height on neighbouring properties or to develop directly above a station is an alternative mechanism. Government as developer may rankle many conservative economists, developers and politicians, but it is an increasingly popular means of both paying for infrastructure and controlling the type of growth in the city. Calgary used a TIF approach through Alberta’s Community Revitalization Levy to fund $350 million of infrastructure that will generate more than double that in incremental tax revue. While this is subject to the TIF’s LVC limitations, because the city-owned Calgary Municipal Land Corporation (CMLC) owns most of the land, it should be able to appropriate the LVU when it

Only where appropriate 41%

Public transit 21%

Should the CIB give priority to projects that include a fair buy clear plan to capture value created by the infrastructure investment (such as land values around transit stations)?

Yes 51%

No 7%

sells the land to developers. A bonus: all development must reflect CMLC’s strict urban design plan. The Mayor of Toronto is lobbying the federal government for infrastructure funds to continue the rapid development of that city’s Port Lands. But again, with the city as the major land owner through its Toronto Port Lands Company, the city itself is in an excellent position to capture increased land values to support investment as it pursues development. LVC Mechanisms: Negotiated exactions & Transit Development Impact Fees Negotiated exaction and special levies usually involve, like TIF, establishing a SAD and either negotiating or requiring a contribution from those within the district. Negotiated extraction better permits a case-by-case assessment rather than a set fee for all properties. This allows for contributions more closely tailored to the benefit received, such as being connected directly to a transit station rather than 750 metres away. The most oft-cited example is London’s massive Cross Town Rail project were its value uplift of largely developed land is estimated at £5.5 to £12 billion. Both negotiated extractions and incremental fees have been used to capture value uplift. For an expanded discussion of Section 37, a ffordable housing and other related LVC mechanisms, visit building.ca

Closing the Barn Door with Half the Horses Gone Under the Liberals, over $9 billion in infrastructure money has flowed from the coffers. Yet despite decades of reports, research and conferences as well as significant successes in other countries, governments lack a long term, well-structured approach to land value capture as a tool to finance this investment. Like infrastructure investment itself, LVC is not a simple answer to the complex capital funding problem; but we need to do better and move very quickly. b building.ca

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BUILDING EXPECTATIONS

by Leslie C. Smith

The new miracle material for the 21st century could be ...

– wait for it –

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Brock Commons’ mandate is to deliver 404 student residence beds as part of the University of British Columbia’s strategy to address a current 6,300 student wait-list for on-campus housing. The narrow, gently sloping site fronts onto Walter Gage Road, adjacent to Gage Residence and the North Parkade. The building is 18 storeys with a total gross floor area of 162,700 square feet.

teel and concrete, the bigger the better, damn the ecological torpedoes — full speed ahead! That’s just so last century. Urban growth in our future may well be built on a more human scale than kabillion-storey skyscrapers. The growing consensus is that mid-rise, mixed-use development represents the new wave, in part fuelled by eco-consciousness from the consumer level right up to the highest government echelons. New climate policies coming into place stress carbon-neutral and even carbon-negative alternatives to current construction methods that rack up emissions faster than a fat kid tearing through a sack of Halloween candy. For an innovative group of builders and architects, mostly in Europe and on Canada’s West Coast, the answer is obvious: wood. Or rather, cross-laminated timber (CLT), wherein powerful adhesives are used to bond together huge panels with the commensurate strength of steel and durability of concrete at onefifth the weight. CLTs, also known as mass timber, have a small carbon footprint and a sublime recycling afterlife. Wood too is a natural, cost-efficient trap for carbon dioxide, providing the needed negative emissions to achieving Paris Climate Agreement – and new LEED V4 Gold – goals. Oliver Lang, principal at Vancouver’s Lang Wilson Practice According to Vancouver architect, in Architecture Culture, says the ecological benefits weigh Michael Green, speaking in a recent heavily in refined lumber’s favour. In June, Lang co-presented TED Talk: “If we built a 20-storey buildwith the University of British Columbia (UBC) at the Canada ing out of cement and concrete, the proGreen Building Council (CaGBC) conference in Toronto, excess would result in 1,200 tons of carploring the rationale for timber as an infinitely renewable rebon dioxide. If we did it in wood, we’d source that can be sustainably harvested. Moreover, in sequester about 3,100 tons, for a net Canada at least, this regionally available material offers great difference of 4,300 tons. That’s the economic potential to local communities. Rather than being equivalent of about 900 cars removed proverbial hewers of wood (that’s shipped across the world from the road in one year.” mostly to make simple two-by-four concrete forms which building.ca

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28 24

rock Commons is the result of a Natural Resources Canada competition that the UBC won, in part because of their previous experience with erecting four- and five- storey mass-timber buildings on campus. John Metras, the university’s managing director of infrastructure development, says the $51.5 million hybrid project could have been made entirely out of mass timber: “But we took a relatively conservative approach in the design to ensure we had the social license for it — that is, public acceptance of the concept. We’re trying to demonstrate applicability of wood in the most practical manner. The most efficient design involved steel connectors between the timber columns, and the use of a concrete podium and elevator cores, for stability and seismic performance.” While the residence exceeds provincial earthquake parameters, Metras says the issue of fire is no issue at all. Unlike steel beams, which can melt or contort in a blaze, “mass timber is not like your typical two-by-fours. These are large, engineered components. They don’t really burn. A fire would cause charring but the timber would retain structural integrity.” However, to allay any student and parental fears, “we encapsulated the entire structure with up to three layers of fire-rated drywall. We also installed a back-up water reservoir in the building so if there were an issue of water supply from the mains, the sprinklers would have their own resources.” The high-performance building envelope made from comOCTOBER NOVEMBER 2016

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posite wood fibre and resin has also been treated with a water sealer, for extra moisture protection. The designing, planning and testing of something that has never been done before did involve extra cost. Metras estimates this as an eight per cent premium, what he calls “the cost of innovation,” because it includes extra charges that future projects might not incur. “We built a two-storey, full-scale mockup of the structure to test the components and design. We tested out several design options for steel connectors

Photos: Steven Errico / naturally:wood

end up in landfills), Canadians could process the lumber themselves into customized, prefab slabs and columns and then ship the pieces out to be assembled like Lego blocks onsite. The cost advantage and jobs created could give a big bump to both our GDP and our global reputation. Speaking of global reputation, the UBC, in conjunction with Vancouver-based Acton Ostry Architects, is currently working on the interior finish of the tallest mass-timber hybrid building in the world. The Brock Commons Student Residence began construction in November 2015 with an original completion date slated for September 2017. The 18-storey, 53-metre-tall structure — limited in size only by the university’s Land Use Plan — will house over 400 students. It will also act as a living lab for UBC’s engineering, architectural and scientific faculties, who will monitor various factors of the building’s long-term effectiveness.

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25 FLOOR AND COLUMN CONNECTION

Photos: Steven Errico / naturally:wood

The floor structure is comprised of 5-ply clt panels that are point-supported on glulam columns, resulting in the clt panels acting as a two-way slab diaphragm.

that helped us arrive at the most efficient solution, which was a concrete core with an attached wood structure integrated with steel ledgers and drag straps embedded in the concrete to support each adjacent floor panel. At each floor level, we used CLT for panels and glulam [adhered-wood] columns. At each floor plate, a steel connector joins the column below with the column above. This allows the transfer of vertical load to go down through the columns and not place stress on the horizontal CLT panels.”

B.C.-based Structurlam Products, a global leader in CLT and glulam production, was heavily involved in the Brock Commons project. The residence has now been added to the company’s impressive portfolio, which includes the Frank Gehry-designed Art Gallery of Ontario façade, the Vancouver 2010 Olympic Oval and the just-completed Rocky Ridge Recreation Centre in Calgary. The latter building boasts the biggest wood roof in North America – 250,000 square feet, constructed entirely of glulam beams. “It took us a year to manufacture them,” says Structurlam’s president, Bill Downing. The Brock Commons project, on the other hand, involved far less time and effort than everybody had originally supposed — perhaps a result of all the pre-construction testing and planning. “It’s generated a lot of interest in the local design community,” Downing says. “They’ve recognized that you can assemble a wood structure very quickly with The structure is comprefab components. It only took nine-and-a-half weeks to prised of a one storey concrete podium and build Brock’s wood structure. They were able to build two two concrete cores floors a week, not one floor, as originally planned. The openthat support 17 storing target is now May 2017, advanced from the original target eys of mass timber and of September 2017.” concrete structure. vertical loads are carBecause the material for Brock Commons was comried by the timber pletely prefabricated and shipped to the site, only nine structure while the two workers were required to put the whole building together concrete cores provide (fascinating speeded-up footage of the construction is lateral stability. available on YouTube under “Brock Commons Time Lapse”). With nothing else to construct on-site, the workplace, Downing adds, was uncannily quiet, safe and clean. So, how far can tall-wood buildings go? “From an engineering prospective,” Downing says, “30 storeys seems to be the limit. The sweet spot is in the eight to 12-storey range, in terms of cost-effectiveness.” The real challenge is weaning builders from their pricey steel-and-concrete skyscraper diet. Even if the world changed tomorrow, British Columbia’s mass-timber advocates say our sustainable forests wouldn’t be under attack from CLTs. In fact, according to Structurlam’s background material, there are “more trees right now in the forest that we can use than we did 50 years ago,” including those threatened by rot, fire and pine beetle infestation that can be given new life as building materials. But put all that science and engineering aside for a moment and simply ask yourself: What could be more beautiful, or indeed more Canadian, than a structure built from our greatest natural resource? b building.ca

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The Energy Ideal OCTOBER NOVEMBER 2016

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behind,” says Marie Lyne Tremblay, Deputy Director of the Buildings and Industry Division at the NRCan’s Office of Energy Efficiency. “The goal of this consultation is to encourage a public discussion on how to achieve and improve highenergy performance in Canadian designs.”

Energy Consumption

By Shannon Moore

The report begins by establishing a context for the need and significance of comparative metrics. According to the 2009 Survey of Commercial and Institutional Energy Use, there are approximately 482,000 commercial and institutional buildings in Canada; and in 2010, “these facilities were responsible for 12 per cent of our nation’s energy consumption and 11 per cent of our total carbon emissions.” Clearly, the building sector has a significant impact on energy use, and the reasons for reducing and controlling levels are apparent and understood across the globe (think climate change, greenhouse gas emissions and fossil fuels). Ultimately, building to higher energy-efficiency standards needs to be a common goal, as “new buildings present a very real opportunity to substantially avoid energy consumption over the long term, especially when designers, builders and operators use an integrated system approach to energy efficiency.” In Canada, several codes and standards exist to ensure a minimum acceptable energy performance in the construction of new buildings — but market leaders are aiming for more. Energy-neutral or net-zero buildings present the ultimate ideal, producing as much renewable energy as they consume over a 12-month period. Unfortunately, few net-zero buildings exist in North America; and while some have come close to achieving the ideal, it can be difficult to track and improve their effi-

A study published by Natural Resources Canada tests building design metrics in an effort to achieve a net-zero energy ideal. In February 2016, Natural Resources Canada (NRCan) published a discussion paper on behalf of the federal, provincial and territorial Building Environment and Equipment Working Group (BEEWG) aimed at advancing the understanding and creation of energy-conscious buildings in Canada. Titled High-Performance Commercial and Institutional Building Design Metrics, the paper calls on industry stakeholders — including architects, designers, constructors and building owners — to provide feedback on comparative metrics that could potentially be used to identify and promote buildings on the path towards a netzero energy ideal. Using an overview and analysis of both existing and new metrics, the discussion paper aims to inspire a shift towards improved building standards in Canada. “The world is moving towards net-zero energy, but Canada is falling

ciency levels. What’s more, gaps often exist between the design of a building and its resulting performance. “Before a building is constructed, all that we have to assess its efficiency are specs on paper,” says Tremblay. “It’s important to understand that design is not everything. Performance after construction is the ultimate objective.” Certain metrics are needed in order for the market to compare buildings and determine their progress towards achieving net-zero energy. But what metrics work best? How can stakeholders determine what designs will yield the best performance, and how can they come closer to achieving the ideal? Such questions inspired NRCan to launch their study and to evaluate new and existing metrics for consideration among stakeholders. “One of the objectives of the consultation is to present options and see how the market reacts to them,” says Tremblay. “It’s not about establishing one standard, but about putting together variables and factors that should be taken into account when considering the performance of a new building design.”

The Metric System According to the study, the most common metric is the calculation of the amount of energy consumed over a one-year period divided by the floorspace of a building, yielding the energy use intensity (EUI) of a structure. If the result is zero, the building has achieved the ultimate ideal. However, the equation almost never generates this result. “The lowest EUIs represent the most energy-efficient designs,” says the report, but “while logical in theory, this simple measure does not capture the complex realities of building design, in which a given building may have genuinely credible reasons for operating at a higher EUI.” building.ca

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Medium offices – Zero energy ratings vs. Climate adjusted EUI 160 28

140

Zero energy rating

120 B

100

A M

NON

Q AO

Q Q

N M N Q B

open 24/7

0 0

Climate adjusted EUI (GJ/m2)

The first metric measures a building’s predicted EUI adjusted to its local climate. The formula assumes that 50 per cent of a building’s energy is used for heating, and is proportional to the number of heating days demanded by the building’s surrounding climate. But stakeholders be warned: this formula will not generate fair results when used to compare buildings that operate under different hours or those that have a varying number of occupants. [INSERT Climate Ad-

LOCAL CLIMATE

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Climate adjusted EUI =

(

)+(

1 predicted EUI 2

1 predicted EUI x 2

heating degree days of baseline (Montréal) heating degree days of proposed building climate

)

justed EUI equation]

The second metric uses a rating system to evaluate the comparative performance of existing buildings. A building’s normalized EUI (adjusted for climate, occupancy, etc.) is measured against a national building energy use database—in Canada’s case, the 2009 Survey of Commercial and Institutional Energy Use. The result helps to identify structures that exceed the performance of the best existing buildings, thus revealing the extent of their progress towards achieving the ideal. EXISTING BUILDINGS

BUILDING TYPE The third existing metric provides an estimation of a building’s expected energy consumption based on various external factors (including location and equipment specifications). The result is converted into a score between one and 10, revealing the building’s energy performance based on its type (office, school, etc.) and use of current technologies (without accounting for on-site renewables). MINIMUM CODE The last existing metric that can be used to measure a building’s performance “involves the modeling of the proposed building in comparison to a similar ‘reference’ building,” says the report. The reference building is a structure that meets the minimum requirements set out by an energy code or standard, and is used as a basis from which to measure the comparative performance of a second design.

A New Approach While these existing metrics can help to weed out efficient and progressive designs from their consumptive counterparts, no metric is ideal. All contain uncertainties,

Source: NRCan

For this reason, NRCan’s report lists four other metrics that can aid in the identification of a building’s progress towards achieving a net-zero energy ideal: Climate Adjusted Energy Use Intensity; U.S. Environmental Protection Agency’s Portfolio Manager/Target Finder System; U.S. Dept. of Energy Commercial Building Energy Asset Score; and Percentage Performance relative to a Minimum Energy Code or Standard. These metrics were evaluated and analyzed using building designs submitted to NRCan’s Design Validation Program between 2007 and 2011.

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and for this reason, NRCan developed three new metrics for consideration in their study. “We researched the existing metrics and felt that there were significant gaps and weaknesses in them all, so we decided to see if we could develop other options ourselves,” says Tremblay. “We need to work with experts and consultants to develop original and innovative ideas.” The three new metrics were tested against 24 medium office buildings and 24 primary schools. They are: Percentage Performance relative to a High-Performance Reference; Zero Energy Rating – the High-Performance Reference augmented by comparison to an archetype; and Zero Energy Rating (based on performance relative to code) — an alternate approach to measuring performance relative to a high-performance reference. This first approach was inspired by the existing Minimum Code metric, but instead assesses a building’s performance in relation to how close its design approaches a specified high-performance level. This comparison “maintains fairness by taking into account the special constraints of each building,” the report says. The goal of this approach is to determine how much a design can personally benefit from certain high-performance characteristics.

HIGH-PERFORMANCE LEVELS

This metric aims to assess a building’s efficiency by comparing it to high-performance archetypes established by NRC an, using a formula that generates a Zero Energy Rating (ZER). According to the report, “The ZER is based on two considerations: i) whether the proposed building is using more or less energy than an appropriate archetype; and ii) how much the efficiency of the proposed building would increase with the inclusion of high-performance characteristics.” The result generates a dataset which can be used to compare energy performance in buildings. COMPARISON TO ARCHETYPE

Zero energy rating =

( EUI

EUI proposed building high-performance archetype

) x ( EUI

EUI proposed building high-performance reference

)

RELATIVE PERFORMANCE The last metric established by NRCan aims to build on the previous metric. Using data obtained from the archetype, the metric questions if the ZER is more or less effective when referencing a standard or code, as opposed to a high-performance baseline. When test buildings’ ratings were plotted against their EUIs (as in the chart, opposite), the resulting correlations (for both offices and schools) were far stronger than with the previous metric options.

What Now? As NRCan struggles to determine which building design metric functions best, their study calls upon stakeholders to provide their input and expertise. “We aren’t presenting any of these metrics as the best solution, but are simply sharing them with a group of industry experts in order to obtain their views and opinions on them,” says Ian Meredith, Program Development Officer of the Buildings and Industry Division at NRCan’s Office of Energy Efficiency. “Our end goal is find a metric that fairly compares different designs in order to determine their individual performance levels.” The report claims that the most appropriate metric should be clear and understandable to a wide range of building sector stakeholders; be transparent, credible and defensible; provide the basis for a subsequent communication tool; and be cost effective for all parties using it. Suggested points for the stakeholders to consider in their feedback include: potential advantages and disadvantages to the building market that would result from the creation and implementation of a single high-performance design metric; identification of the primary characteristics required by a high-performance metric in order to be effective; comparison of the advantages and disadvantages of the seven metrics (including impacts on the building market); and more. To date, the response has been positive. “There’s a high degree of interest in the building industry for high-performance buildings,” says Tremblay. “That has been communicated to us through the input that we have received. People understand what is at stake here, and there is interest from all levels of the industry.” NRCan is currently preparing a report that will be sent to participants based on the feedback received from their discussion paper. They will also be launching a challenge to support the building sector’s move towards net-zero energy performance. The National High Performance Building Challenge will aim to entice proposals from stakeholders that emulate the principles of net-zero design. “The objective is to receive proposals and to share the best ones that are on their way towards achieving the ideal,” says Tremblay. NRCan hopes to undertake the project with the support of industry associations and/or organizations. “The goal of the National High Performance Building Challenge is to establish designs that are reproducible. Designs that anybody in the market can replicate, if they want to,” says Meredith. “If we can capture that nuance in this challenge, I think we will have done the market a tremendous amount of good.” Clearly, it is from NRC an’s various efforts that the building sector moves slowly but surely towards improved energy-efficiency in Canadian construction and design. b

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V I E W Walk With Joy ULI Toronto’s Executive Director believes the issue of housing affordability could easily determine the outcome of the next provincial election. By Richard Joy

Housing affordability seems to have leap-frogged transit, crime, the economy, the environment and even hydro rates as the number one issue of civic conversation. And no longer is it only a concern for low-income citizens — a demographic whose ranks have swollen — it is front of mind for mid- to high-income citizens (and voters) as well. Almost an entire generation of professionals earning decent incomes may be denied home ownership, whether they choose the urban core or the suburbs. And renters looking to dodge the real estate market are facing the brutal supply and demand squeeze of near all-time low vacancy rates in an increasingly unregulated market. Surprisingly, the issue of housing affordability is attracting little serious attention at Queen’s Park. It did not get the slightest mention in this fall’s throne speech. And in the weeks following the speech not a single question was raised on the issue by either opposition party. Two policy ideas are surfacing that could prove distracting to the cause of affordability and delay the adoption of more serious prescriptions. The first is the advancement of a largely housekeeping piece of legislation that has as its centrepiece a widely-adopted U.S. policy tool called Inclusionary Zoning — a requirement of a minimum percentage of affordable units to be created in future residential developments. The second, driven by some in the housing development industry and some academics and economists, is to open up more serviced greenfield lands in the suburbs to increase the supply of ground related homes, and in theory lower the cost of these homes as a simple equation of supply and demand economics. ULI Toronto put focus on both of these ideas this past summer. Building on a recent Urban Land Institute study, The Economics of Inclusionary Zoning, we hosted a roundtable of municipal, provincial and industry housing leaders, and while we learned that inclusionary zoning can be an effective tool to create affordable units (and its use is being OCTOBER NOVEMBER 2016

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expanded in cities like New York), it has never really been applied to the condominium market. It has almost entirely been used in purpose-built rental development — a typography we have seen very little of in Ontario since the 1970s (though this may be changing) — and its success has also almost always been tied to the ability to do density bonusing, usually in combination with government subsidy grants, neither of which are likely on offer in Ontario. On the greenfield supply front, we hosted a widely attended public debate featuring academics and policy consultants on both sides of this argument, and while there could be no consensus on this divide, it was broadly agreed that the issue of housing market affordability was complex. A strong economy, high wages, low interest rates, poor transit and other factors have also conspired to drive up housing prices. The degree to which publicly subsidized sprawl can seriously counter these other market forces should be weighed very carefully, but the temptation to see this as a magic bullet solution is something that some leaders at Queen’s Park are beginning to adopt. There are of course no simple solutions, and really no economically vibrant city region stands out as a great example, but without a doubt there are a range of options that can be explored. One would be uploading affordable housing back to the Province. 20 years’ after Ontario downloaded 100 per cent of social housing delivery to municipalities, there are fewer units available today due to lack of maintenance, even though demand for these units has significantly increased. MunicipalRichard Joy is Executive ities cannot afford to be housing serDirector of ULI Toronto. vice providers. Another example would Previously, he served as be to merge Inclusionary Zoning with Vice-president, Policy and provincially rezoned density increases Government Relations at along all major transit corridors and the Toronto Board of develop a housing grant program to acTrade, and was the company this policy – ensure that the Director of Municipal cost of adding affordable units is offset Affairs and Ontario by public policy (zoning) or dollars, not (Provincial Affairs) at shifted onto the real estate market. A Global Public Affairs. third option is expand opportunities for Follow him on Twitter unsubsidized second mortgage models @RichardJoyTO or email such as Options for Homes and Trilliat Richard.Joy@uli.org um Housing to lower the threshold for buyers to get into the real estate market. And finally, fully leverage public lands to significantly expand below market housing opportunities across the region. b

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