Zoning and Permits Shouldn’t Keep You Up At Night: Understanding OPA, ZPA, SPA for Real Estate Investing

In 2022, Toronto witnessed an unprecedented surge in land development applications, with the city processing over 1,200 Official Plan Amendments, Zoning By-law Amendments, and Site Plan Approvals. This boom in development activity, driven by a growing demand for housing and commercial spaces, underscores the importance of understanding the intricacies of land development. For those experienced with real estate investing, navigating these complex processes can unlock significant value in their portfolios. However, the path to successful land development is fraught with challenges, including regulatory hurdles, financial risks, and lengthy timelines. This article aims to demystify key terms such as Official Plan Amendment (OPA), Zoning By-law Amendment (ZBA), and Site Plan Approval (SPA), illustrating how they can create value in your real estate portfolio with examples from Toronto, a city known for its complex and dynamic development landscape.

How a Municipality Comes Up with Their Official Plan

An Official Plan is a long-term planning document that guides the growth and development of a municipality. It is created through a collaborative process involving the municipal government, residents, businesses, and other stakeholders. The process typically includes the following steps:

1. Visioning and Goal Setting: The municipality engages with the community to develop a shared vision for the future and identify key goals for growth and development.
2. Data Collection and Analysis: The municipality collects and analyzes data on various aspects of the community, such as population trends, housing needs, economic development, and environmental conditions.
3. Policy Development: Based on the vision, goals, and data analysis, the municipality develops policies and strategies to guide future development.
4. Public Consultation: The municipality engages with the public through various channels, such as public meetings, workshops, and online surveys, to gather input and feedback on the proposed Official Plan.
5. Approval: The Official Plan is typically approved by the municipal council after considering public input and making any necessary revisions.

 

Factors that Might Lead a Municipality to Update or Change Its Official Plan

There are several factors that might lead a municipality to update or change its Official Plan, including:

• Changing Demographics: Shifts in population size, age structure, and household composition can prompt a review of the Official Plan to ensure that it addresses the changing needs of the community.
• Economic Development: Significant changes in the local economy, such as the emergence of new industries or the decline of traditional sectors, can necessitate an update to the Official Plan to support economic growth and diversification.
• Environmental Concerns: New information about environmental issues, such as climate change or water quality, can lead to changes in the Official Plan to promote sustainable development and protect natural resources.
• Infrastructure Needs: Changing infrastructure needs, such as the need for new roads, schools, or public transit, can prompt an update to the Official Plan to ensure that the municipality has the necessary infrastructure to support growth and development.

Official Plan Amendment (OPA)

An Official Plan Amendment (OPA) is a process that involves changing a municipality’s Official Plan, which, as discussed, is a document outlining the long-term vision and land use policies for growth and development. When a proposed land development project does not conform to the existing Official Plan, an amendment is required.

Factors that Go into Deciding if an Official Plan Amendment Will Be Approved

When considering an Official Plan Amendment, a municipality will typically evaluate the following factors:

• Consistency with the Official Plan: The proposed amendment must be consistent with the overall vision and goals outlined in the Official Plan.
• Public Input: The municipality will consider the input and feedback received from the public during the consultation process.
• Technical Feasibility: The municipality will assess the technical feasibility of the proposed amendment, including whether it is compatible with existing infrastructure and zoning regulations.
• Environmental Impact: The municipality will consider the potential environmental impacts of the proposed amendment, such as its impact on natural habitats, water quality, and air quality.
• Economic Impact: The municipality will assess the potential economic impacts of the proposed amendment, both positive and negative, such as its impact on job creation, property values, and tax revenues.

Toronto Example:

In Toronto, the redevelopment of the former Honest Ed’s site required an OPA to allow for the creation of a mixed-use community known as Mirvish Village. The original plan did not accommodate the scale and density of the proposed development, necessitating an amendment to enable the project to proceed .

Benefits of a Successful OPA Request:

•        Alignment with Market Needs: By obtaining an OPA, developers can align their projects with current market demands, ensuring the development meets the needs of potential buyers or tenants.

•        Increased Property Value: Successful OPAs can significantly increase the value of the property by allowing for more intensive or different types of development.

•        Community Engagement: The OPA process often involves public consultations, which can help garner community support and reduce opposition to the project.

Considerations for Investors:

•        Time-Consuming Process: Securing an OPA can be a lengthy process, often taking several months to years .

•        Uncertainty: There is no guarantee that the amendment will be approved, adding a layer of risk to the investment.

•        Regulatory Challenges: Navigating the regulatory landscape requires expertise and experience.

How a Municipality Develops their Zoning By-Laws

Municipalities typically develop their zoning by-laws through a similarly comprehensive planning process to their Official Plan that involves several steps:

1. Data Collection and Analysis: The municipality collects and analyzes data on various aspects of the community, such as population trends, housing needs, economic development, and environmental conditions.
2. Vision and Goals: Based on the data analysis, the municipality develops a vision for the future of the community and establishes goals to achieve that vision.
3. Zoning Policies: The municipality develops zoning policies that guide how land can be used in different parts of the community. These policies are typically based on the vision and goals established in the planning process.
4. Public Consultation: The municipality engages with the public through various channels, such as public meetings, workshops, and online surveys, to gather input and feedback on the proposed zoning by-laws.
5. Draft Zoning By-laws: Based on the public consultation, the municipality prepares draft zoning by-laws that reflect the community's input and feedback.
6. Approval: The draft zoning by-laws are typically reviewed by a planning commission or similar body before being submitted to the municipal council for approval.
7. Implementation and Enforcement: Once approved by the municipal council, the zoning by-laws are implemented and enforced by the municipality's planning department or other designated authority.

Municipalities may also review and update their zoning by-laws periodically to ensure they remain consistent with the community's changing needs and priorities.

Zoning By-law Amendment (ZBA)

Zoning By-law Amendment (ZBA) is another critical process for land development. As discussed, zoning by-laws regulate land use, lot sizes, building heights, and other property characteristics. When a development proposal does not comply with the existing zoning by-law, an amendment is necessary.

Factors that Go into Deciding if a Zoning Bylaw Amendment Will Be Approved

When considering a zoning bylaw amendment, a municipality will typically evaluate the following factors:

• Consistency with the Official Plan: The proposed amendment must be consistent with the overall vision and goals outlined in the Official Plan.
• Public Input: The municipality will consider the input and feedback received from the public during the consultation process.
• Technical Feasibility: The municipality will assess the technical feasibility of the proposed amendment, including whether it is compatible with existing infrastructure and zoning regulations.
• Environmental Impact: The municipality will consider the potential environmental impacts of the proposed amendment, such as its impact on natural habitats, water quality, and air quality.
• Economic Impact: The municipality will assess the potential economic impacts of the proposed amendment, both positive and negative, such as its impact on job creation, property values, and tax revenues.

Toronto Example:

The development of The Well, a mixed-use project on the former Globe and Mail site, required a ZBA to increase allowable building heights and densities. This amendment facilitated the creation of a vibrant community with residential, office, and retail spaces .

Benefits of ZBA:

•        Flexibility in Development: A ZBA provides flexibility to develop properties in ways that are more profitable or better suited to current market trends.

•        Enhanced Property Utilization: Amending zoning by-laws can enable more efficient use of the property, such as higher density housing or mixed-use developments.

•        Potential for Higher Returns: By optimizing land use, a ZBA can lead to higher rental incomes or resale values.

Considerations for Investors:

•        Approval Risks: Similar to OPAs, there is no certainty that a ZBA will be approved, and the process can be complex .

•        Community Opposition: Local residents or businesses might oppose changes, leading to delays or additional costs .

•        Legal and Planning Expertise: Successful ZBA applications often require the involvement of planners, lawyers, and consultants.

What is a Site Plan in the Context of a Municipality's Official Plan and Zoning By-Laws?

A site plan is an essential document in the land development process, providing a detailed blueprint for the proposed development of a specific piece of land. It is typically required as part of the development approval process and must adhere to the municipality's Official Plan and Zoning By-laws.

A well-designed site plan should be consistent with the municipality's Official Plan and Zoning By-laws, ensuring that the proposed development integrates harmoniously with the surrounding area. It should also consider factors such as environmental sustainability, traffic flow, and the provision of public amenities.

Key elements typically included in a site plan are:

1. Property Boundaries: The site plan should clearly delineate the property boundaries of the development site, including the location of any easements, rights-of-way, and adjacent properties.
2. Buildings and Structures: The site plan should show the location, size, height, and architectural style of all proposed buildings and structures. It should also include details of any additions or alterations to existing structures.
3. Parking Areas: The site plan should indicate the location and capacity of parking areas, including both on-street and off-street parking. It should also show the design and layout of parking aisles, driveways, and access points.
4. Landscaping: The site plan should include a comprehensive landscaping plan that outlines the types of plants, trees, and shrubs to be planted. It should also show the location of hardscape elements such as patios, walkways, and retaining walls.
5. Signage: The site plan should include details of any proposed signage, including the location, size, and design of signs. It should also comply with municipal regulations governing signage.
6. Utilities and Infrastructure: The site plan should show the location and capacity of utilities such as water, sewer, gas, and electricity. It should also include details of any proposed infrastructure improvements, such as sidewalks, streetlights, and drainage systems.

By providing a comprehensive overview of the proposed development, a site plan helps municipalities assess the impact of the project on the surrounding area and ensure that it aligns with the community's overall planning goals. It also serves as a valuable tool for contractors and developers during the construction phase, guiding the implementation of the project in accordance with the approved plans.

Site Plan Approval (SPA)

Site Plan Approval (SPA) is the final step in the land development approval process. It involves a detailed review of the proposed development to ensure it meets the municipality’s standards for design, safety, and functionality.

Factors that go into deciding whether a Site Plan will be approved include:

• Compliance with the municipality's Official Plan and Zoning By-laws: The site plan must align with the long-term vision for growth and development outlined in the Official Plan and comply with the specific regulations governing land use and building design in the Zoning By-laws.
• Environmental sustainability: The site plan should consider factors such as green space preservation, stormwater management, and energy efficiency to minimize the project's impact on the environment.
• Traffic flow and infrastructure: The site plan should address the impact of the development on traffic flow and provide adequate infrastructure, such as roads, sidewalks, and parking, to support the proposed use.
• Provision of public amenities: The site plan should consider the provision of public amenities, such as parks, playgrounds, and community centres, to enhance the quality of life for residents and visitors.
• Compatibility with the surrounding area: The site plan should ensure that the proposed development integrates harmoniously with the surrounding area in terms of architectural style, scale, and density.
• Compliance with municipal regulations and standards: The site plan must comply with all relevant municipal regulations and standards, including those governing signage, landscaping, and utilities.

Toronto Example:

The redevelopment of the Galleria Mall into Galleria on the Park is an example of a project that went through the SPA process. This step ensured that the project’s design and infrastructure met Toronto’s standards, addressing aspects like landscaping, pedestrian pathways, and public amenities .

Benefits of SPA:

•        Detailed Planning: SPA ensures that all aspects of the development are thoroughly planned, reducing the risk of unforeseen issues during construction.

•        Municipal Compliance: Approval indicates that the project complies with local regulations and standards, facilitating smoother project execution.

•        Community Benefits: SPA can include requirements for landscaping, parking, and other amenities that enhance the development’s appeal to the community.

Considerations for Investors:

•        Detailed Requirements: The SPA process requires comprehensive plans and reports, which can be time-consuming and costly to prepare .

•        Potential Delays: Delays in obtaining SPA can impact project timelines and financial projections .

•        Ongoing Compliance: Maintaining compliance with SPA conditions throughout the project lifecycle is crucial for successful development.

Addressing Investor Concerns

Investing in land development projects involves navigating complex regulatory processes and managing inherent risks. Here, we address common concerns faced by investors and offer strategies to mitigate them.

1. Risk and Lack of Guarantees:

•        Thorough Due Diligence: Conducting comprehensive due diligence, including financial analysis and feasibility studies, can reduce uncertainties.

•        Partnering with Experienced Developers: Collaborating with developers who have a proven track record can enhance the likelihood of project success.

2. Timeline and Delays:

•        Realistic Timelines: Set realistic timelines for project completion, considering potential delays in approvals and construction.

•        Contingency Planning: Establish contingency plans and reserve funds to manage unexpected delays and cost overruns.

•        Regular Updates: Ensure regular communication with project stakeholders to monitor progress and address issues promptly.

3. Financial and Technical Due Diligence:

•        Comprehensive Assessments: Conduct thorough financial and technical assessments, including soil testing, environmental impact studies, and zoning reviews.

•        Professional Expertise: Engage experts such as planners, engineers, and financial analysts to support the due diligence process.

•        Risk Mitigation Strategies: Develop risk mitigation strategies to address potential technical challenges and financial uncertainties.

4. Market Conditions and Economic Factors:

•        Market Analysis: Perform detailed market analysis to understand current trends and demand drivers in the target area.

•        Economic Forecasting: Consider economic forecasts and potential impacts on interest rates, inflation, and market conditions.

•        Flexible Investment Strategies: Adopt flexible investment strategies that can adapt to changing market dynamics.

5. Trust and Transparency:

•        Track Record Verification: Verify the track record and credibility of developers before committing to a project.

•        Transparent Communication: Ensure transparent communication and regular updates on project progress, financial performance, and any issues that arise.

•        Investor Rights and Protections: Clearly outline investor rights and protections in legal agreements to build trust and confidence.

Key Takeaways

Investing in land development projects can be a rewarding strategy for experienced real estate investors looking to expand their portfolios and achieve more hands-off management. Understanding key processes such as Official Plan Amendments (OPA), Zoning By-law Amendments (ZBA), and Site Plan Approvals (SPA) is essential for navigating the complexities of land development. By addressing common investor concerns and implementing effective strategies, you can mitigate risks and unlock the potential for significant returns in this dynamic sector.

•        Official Plan Amendment (OPA): Necessary for aligning development projects with municipal growth plans and market demands.

•        Zoning By-law Amendment (ZBA): Provides flexibility and enhances property utilization, though it involves regulatory challenges.

•        Site Plan Approval (SPA): Ensures detailed planning and compliance with municipal standards, crucial for successful project execution.

By leveraging these processes and addressing common concerns, investors can confidently explore the opportunities offered by land development projects. As with any investment, thorough due diligence, strategic planning, and partnering with experienced professionals are key to achieving success in the land development sector.

Sources

1.        Urban Toronto, “Explainer: Official Plans, Zoning, and Amendments.” Urban Toronto

2.        Toronto Official Plan Review, City of Toronto. City of Toronto Official Plan Review

3.        Urban Toronto, “Honest Ed’s Redevelopment Moves Forward.” Urban Toronto

4.        “Planning and Growth Management Committee Meeting.” City of Toronto. City of Toronto Meetings

5.        “The Well: An Ambitious Mixed-Use Project in Toronto.” The Well Toronto

6.        “Development Approvals and Process.” City of Toronto. City of Toronto Development

7.        Urban Toronto, “Community Reactions to Development Proposals.” [Urban Toronto](https://urbantoronto.ca/news/2019/08/community-reactions-development-proposals)