Phased Development Agreements and the Future of Metro Vancouver

By Peter Kenward

Peter Kenward

As a lawyer whose practice focuses on private sector dealings with government, I am constantly presented with examples of how the system that the Province has put in place for regulating land use and development impacts the community in which we live.

In Metro Vancouver, the system has yielded substantial positive effects, enhancing the innate "livability" associated with our mountains and oceans. The system has also however yielded some significant negative impacts, including for housing affordability and transit. Important questions arise about the implications of this system for the future of the region, and about what kinds of changes might be made to address the negatives while still maintaining the positives.

The system that governs the regulation of major phased developments recently underwent some fundamental changes. Those changes are worth noting not only in and of themselves, but for the lessons they offer for addressing the issues facing Metro Vancouver.

A. The land use regime in Metro Vancouver

Let's start with a review of five key features of the present system at play in Metro Vancouver.

1. 22 governments …

Land use decisions in Metro Vancouver are not by and large made by a regional government, but rather by 22 independent municipalities The relatively small size of these local governments, combined with the typical level of voter turn out, results in neighbourhood "not in my back yard" (NIMBY) pressures having great weight. This has tended to keep densities relatively low, including along transit lines.

2. … managing "islands in a sea of green"

More than 70% of the land supply in Metro Vancouver is in the Agricultural Land Reserve or the Green Zone.

Green Zone

Source: Livable Region Strategic Plan

There can be no doubt that the values that have led to the ALR and the Green Zone are fundamental ones, and there is of course nothing wrong with voter responsiveness per se. But the discussion cannot end there. The question that has to be asked is whether the system sets the proper balance between those considerations and other relevant considerations.

For example, is the best land use system for Canada's major west coast port City one under which over 70 percent of the land is removed from the equation, and land use decisions over the balance (being the lands available for residential, commercial, industrial and other developable uses) are divided up among 22 largely independent entities?

There can be little doubt that the heightened land prices associated with the reduction in land supply (less than 30% of the land base being developable), and the reduced densities that NIMBY forces tend to lead to, has contributed to major problems with housing affordability. And there can be no doubt that the fact that transit has to cover relatively large areas that have relatively low population densities negatively impacts transit efficiency.

3. Planning focus

Let's look at a couple more core elements of the system. Local government financial resources are relatively constrained, with a substantial focus on property taxes. That factor, combined with a system that is weighted in favour of neighbourhood voter pressures, tends to lead to local government planning that focuses on freezes and constraints that limit supply and increase costs, rather than on increasing supply and reducing costs.

One of the leading responses thus far to the affordability problem is "inclusionary zoning". Under inclusionary zoning, local governments seek to address the affordability problem by requiring developers to design their developments to set aside a pot of 10 or 15% of units that are cheaper (to be allocated by some form of list regime). Because no mechanism has been added to balance the NIMBY factor, inclusionary zoning often does not increase housing supply overall, meaning that it cannot improve affordability overall. The remaining 85% or 90% of units simply carry the cost, meaning that those units become even more expensive.

4. The regional plan

The regional planning system requires unanimity among 22 municipalities before a new regional plan can be adopted. This has resulted in a situation whereby the update of Metro Vancouver's regional plan, which could theoretically address some of these issues (for example by compelling set levels of development along transit corridors), has proceeded at a glacial pace.

One might also question the incentive that municipalities have to settle upon a regional plan that meaningfully comes to grips with these issues, given that doing so would require them to agree upon a plan that effectively reduces their own powers.

5. TransLink

TransLink has no power to regulate land use, and there is no mechanism by which TransLink can legally bind municipalities to increase density before TransLink commits to a new transit line. Whatever good intentions a municipality might have, neighbourhood pressures can substantially undercut their implementation once a line is committed.

TransLink itself has tended to focus much more on its potential access to various kinds of taxes (the property transfer tax for example) than on the density and supply issue, or on legal mechanisms that might address its leverage problem.

B. Phased development

There is no doubt that system change is a daunting task. But it is hardly hopeless. An example is the change that the Province made to the system of local government in 2007 to address a different (but not unrelated) problem that was arising with increasing frequency in connection with phased development.

1. The problem

A private party would commence a phased project on the basis of an agreed plan (which typically involved the provision of substantial up front amenities), and then find, after an early phase had been completed and the upfront amenities given, that NIMBY pressures resulted in the local government fundamentally downzoning or changing the rules of the game to block or negatively modify the completion of the project.

While this might be good for those who had moved in to the earlier phases (we are here, lets keep others out) or those who had no qualms about revamping development terms after amenities had already been provided (two councillors changed in the last election, and the new council's definition of the public interest is all that matters), it was not without negative effects. Planning for sustainability commonly involves comprehensive planning, and the system was undermining the ability of municipalities to implement comprehensive plans and to attract multi-phase investment and beneficial public amenities. Private investors are obviously less willing to incur up front costs when their investment is fragile, and heightened risk also increases financing costs and therefore overall development costs, which in turn has affordability implications.

2. The process for achieving a solution

A Business Coalition formed, involving the Urban Development Institute (Pacific Region), the Business Council of BC, the BC Chamber of Commerce and others, to seek a solution. I provided the legal input.

In order to maximize the prospects for success, we focused on creating a mechanism that would address the problem without undercutting democracy (by constraining councillor control over land use and development decisions). So the question we faced was how to achieve the greatest beneficial effect with the least disruption.

The approach we settled upon was a contract based regime, under which the proponent of a development project could enter into a contract with the local government that would grandparent the project relative to subsequent changes to the zoning bylaw. This created an additional tool over and above traditional zoning, without "cutting back" any existing municipal powers.

We worked closely with the Union of BC Municipalities, and, once they were on-side, persuaded the Province to develop and then add the Phased Development Agreement provisions at sections 905.1 to 905.5 of the Local Government Act.

3. The new regime

Under the new regime, protection does not arise automatically upon making a development application or the obtaining of an approval, but rather is negotiated on a case by case basis. The Phased Development Agreement that establishes the grandparenting requires consideration at a public hearing, with maximum term of the protection being 10 years, or 20 years with the approval of the Inspector of Municipalities.

The legislative change does not mandate that downzonings can never again happen in the later phases of a phased project: if there is no Phased Development Agreement, there is no protection. There are also limits on what can be agreed to: changes will apply for example if they are necessary to address a hazardous condition of which the local government was unaware at the time it entered into the Phased Development Agreement.

The agreement approach means that it is very important that the property owner take care in negotiating and drafting the Phased Development Agreement, because there is little to be gained from the agreement if considerations are missed that undercut the validity or usefulness of the agreement. Depending on the context, for example, it may be important to provide for multiple land use options, and for a range of assignment scenarios (to ensure that the agreement applies to the buyers of subdivided parcels) and to take into consideration infrastructure financing and property tax considerations. Certain kinds of development permit provisions can be subordinated to a Phased Development Agreement (on the basis that they have been taken into account up front), while other kinds cannot.

A carefully negotiated Phased Development Agreement can provide important protection to an investment, facilitate a comprehensive development occurring that might not otherwise be possible, and enable a community to engage in sustainability-based comprehensive planning with an increased prospect that the plan will actually be achievable.

C. Where to from here

The system that is currently at play in Metro Vancouver, while it has many plusses, has produced some clear negatives for housing affordability, transit and our viability as a port. Various forces can be expected to exacerbate these problems further, including the decline in undeveloped developable land and climate change. One can question whether major improvements are likely without system changes that directly address the causes of the problems, and that also seek to maintain the benefits of the current system to the maximum degree possible. The system that guides land use and development in British Columbia needs to continuously evolve, because a system that has a very positive impact in one context can prove destructive in another.

Peter Kenward