E44: What Toronto Inclusionary Zoning Really Means for New Developments

"If I were to build two identical buildings side by side within downtown Toronto, I would lose 17 percent of my gross floor space...or 17 additional percent, if I want to build a condo compared to if I want to build a fancy high-rise luxury apartment building." – David Aizikov, Product Manager Data Services at Rentsync

As new legislation passed in favor of Inclusionary Zoning in Toronto, we called on David Aizikov, Product Manager Data Services at Rentsync and Max Steinman, Interim CEO at Rentsync to discuss the new policy that is taking effect in 2022. The policy indicates that all new purpose-built rental and condo developments within the city of Toronto, above 100 units, will have to include a percentage of their gross floor space for inclusionary zoned units, depending on where they are located in the city. The impact of this policy is tremendous. Everyone from developers to renters, to vendors and suppliers within the rental housing industry across the GTA have been left with a lot of unanswered questions and concerns. In this episode, we look at the policy from all angles, the good, the bad, and the unknown, and make recommendations for those looking towards the future of building in Toronto.

Key points from this episode:

• What this means for purpose-built rentals and condo developments moving forward
• How could the policy impact the type of product we see available on the market at those lower rates?
• How will properties ensure that renters are not taking advantage of the policy?
• What three distinct inclusionary zoning areas were identified and how they were determined
• How could this impact the cost of land in and outside of these areas 
• Why the policy makes purpose-built rentals more attractive versus condo developments 
• Recommendations to developers who have plans to build in the GTA in the foreseeable future
• The impact on marketing new developments located in inclusionary zoning areas

If you liked this episode, be sure to subscribe or follow Sync or Swim wherever you get your podcasts, Apple, Google Podcasts, or Spotify.

Links mentioned in this episode:

Max Steinman on LinkedIn
David Aizikov on LinkedIn
Toronto Inclusionary Zoning Policy
Rentsync

Episode Transcript

0:00:47.9 NS: Welcome back to Sync or Swim. I'm your host, Nicolina Savelli. And on this podcast, I chat with rental housing industry experts to learn how you can reach more renters, sign more leases and maximize the value of your assets, and today I have David ISAC, Product Manager, Data Services at Rentsync and Max Steinman, who has been recently announced as interim CEO at Rentsync to talk to me about the new Toronto inclusionary zoning policy that is taking effect in 2022. So before we get into the new policy, David, I haven't had you on the podcast yet, so I thought that this was a good opportunity to have you share a little bit about your background and the work you're doing at Rentsync.

0:01:29.2 DA: Absolutely, so my background is as a real state consultant, I worked with developers in the purpose-built rental industry to provide them with recommendations for developments and now I'm with Rentsync, really I see myself as a data champion, trying to figure out how we can help developers and marketers with the various data points that we have available to us.

0:01:50.2 NS: Great, thanks so much, David. And now, Max, you have become a veteran now on the Sync or Swim podcast, I think you've been on at least three or four times, so I think our listeners know who you are, but can you share just a little bit about why this is such an important topic for us to discuss right now and what it could mean for purpose-built rentals and condo developments moving forward...

0:02:15.8 MS: Yeah, for sure. It's for Toronto home developer. It's one of the biggest policy announcements for sure in the last many years, and when the government gets involved and changes a policy, it ultimately affects everyone from those developers to renters, to vendors and suppliers within the industry. And this one's pretty big, it will make an impact in a lot of areas, so I think it's very deserving of Sync or Swim episode.

0:02:53.7 NS: Now, actually, before we got on this call, David had mentioned that it's taken them some time to get around to this policy and kind of putting it in place, why did it take so long? And what do you think kind of propelled this forward. If you can speak to that, maybe David, you can speak to that a little bit.

0:03:11.6 DA: Certainly before that, let me just give you a bit of a run-down in terms of what the policy actually entails, so like you said, they've been talking about this for the last three or so years, they've been bringing in experts from various other American markets that have existing inclusionary zoning policies. And then they're trying to basically pick and choose the various components they want include within their policy. This new policy now indicates that all new ppurpose-built rentals and condo developments within the city of Toronto, above 100 units, will have to include a percentage of their gross floor space for inclusionary zoning units or zoned-units. Now, this will depend on where within the city they're located... These units will have an affordability period of 99 years, which is substantial, I'm sure everyone is aware of, and these units will unlike conventional affordable programs will not be tied the average household actual income, but we'll actually be tied to income percentiles, so we're looking at average incomes across the large geographic areas.

0:04:17.1 NS: Right, okay, great. So let's get into the policy 'cause there's a lot of information there and kind of dig into it, so it will apply to all new developments around major transit station areas, according to the document that I read, and it will initially affect 5% to 10% of floor space of new condo developments in Toronto with the goal to ramp up to 8% to 22% of floor space by 2030, it will also impact purpose-built rental developments, and we'll get into that conversational later, so does this mean for developments already in progress, how do you think this will affect developers who had plans to build next year, are we going to ever developers walk back these plans... Is there a way to do that? Can you do that?

0:05:03.7 DA: I think that first and foremost, we should make this clear, developments that are already in the pipeline, those developments are going to be breaking ground in the foreseeable future, this will not affect them, this also on effect buildings who are already in the process of going in for approvals, this is only going to be affecting new developments that are going to be going out to gain approvals starting in 2022, so this policy goes into effect next year, so all new developments that have not already submitted their architectural plans and various other municipal submissions. Will have to include some component of this policy in order to get approvals from the city.

0:05:43.5 NS: Okay, great. Let's talk about rents. You mentioned rents. Rents will be set on income and will be focused on household earnings between 32000 and 92000, essentially capping rent at 30% of gross monthly income, what translates to approximately 800 to 2300 a month, which is a pretty wide gap. Personally, I haven't seen rents below $1500 a month in Toronto in a very long time. Will this affect the type of product we see available on the market at those lower rent rates? How are they gonna handle 800 a month rent in Toronto? How do you foresee this happening.

0:06:22.8 DA: Is... It's gonna be interesting to see how this plays out, and I think ultimately, the people that are going to be paying for this are not going to be the renters in the affordable units, they're gonna be the renters in the market rate units or the owners in the market rate condo units, because at the end of the day, the city has not offered to provide additional cash incentives, they are not providing any kind of no monetary support to developers, they expect developers to eat the cost of these reduced units themselves. And at the end of the day, you just like with all taxation, the taxes are passed on, the buck is gonna be passed on to the consumer, and the cost of living for your average household who isn't eligible for the inclusionary zoning or simply someone who wasn't able to get into one of these units, they're the ones who are gonna to do more.

0:07:09.9 MS: And this is the first time we've seen a policy that sort of aimed not just a low low income individuals, you know you see here that this can affect individuals earning up to 92000 years, and I know there's a lot of inflation and incomes have been rising, but you don't typically think of affordable housing policies for people who earn up to 92000 a year. And so it's a very interesting policy in that regard, it's looking to control for a percentage of the middle class, or for a percentage of middle income earners, it's looking to control what their housing costs are on a monthly basis.

0:07:58.9 NS: Yeah, I guess you spoke to it a little bit, David, but can you just talk about why there's this massive gap between... It's 3200-92000. How did they reach that... Is there any insight you can provide as to why that gap is so wide, is it because they're just seeing so many people not be able to find housing in that middle income range. Is that what they're trying to do here?

0:08:24.4 DA: Within the actual policy framework, they've specifically called out that this policy and to help school teachers, nurses, those working, again, as Max put it those with average incomes. These aren't low income households or super wealthy households either, these are just regular until average income households. But the way that they've actually indicated what the affordable rents are is based on the conventional affordability calculation, where they basically take a 30% of a household gross monthly income and use that as the rent that is applicable to these units and the problem is that instead of looking at what a household is actually achieving, and they've decided to look at what the average incomes are within an conglomeration of multiple neighbourhoods. So for the studios, what they've done is they basically looked at what would the 50th percent of incomes are for a one-person household, and then for two, three bedrooms, they looked at what the 60% percentile of incomes are within those respective neighborhoods. Right, so aggregating the data, that's how they basically come out to these incomes or to these rental figures, I should say.

0:09:36.5 NS: I see, so do you foresee a problem with this with this kind of the way they've calculated it, or is there any way that people can take advantage of this?

0:09:48.9 DA: That certainly is a possibility. I think that on this policy comes out, we're gonna see a lot of people, both developers and enterprising individuals testing this policy out, because it's looking at household income, it could very well be possible that you have a single individual who moves in who can't get married, because as soon as you know you have someone legal living there, you're not longer applicable because you're not over-fall under those specific... Or people moving in with roommates. Or unofficial roommates. I think we're gonna see a lot of challenges to this policy because at the end of the day, they basically fix the rents, based on average market incomes, and then say, from now on every year, you're only allowed to increase the rent based on the provincial guidelines. We can't actually look at what the real rate of inflation is, we can't even account for the fact that you may have just take 30% increase in you're gross monthly income because you were able to find a better job at...

0:10:41.0 MS: You can imagine some of the cat and mouse games that will go on now between both, I guess, the administrators on the government side or the city side, but also between renters and developers or landlords and the municipality as well, like when the government comes in with new policy often it incentivizes and creates... One of the consequences is it creates these sort of cat and mouse dances and just an easy one to think about is, let's say you're privy to one of the affordable housing units with a building and your boss comes to you next week and offers you a raise... Well, I'm normally... You're really happy when you get a raise, but what if that raise pushes you outside of the guidelines of that specific unit you were about to qualify for, and those are sort of the reverse incentives that can occur when these sorts of policies exist and are built this way and it would become very interesting, the other side between developer and municipality is an obvious workaround might be to not build properties that are over 100 units because they are exempt, start to see a lot more mid-rise developments or lots that get split. Do we see the trading of two lots where two developers can trade land parcels and each build 99 unit buildings, it's kind of crazy the thing, and permutations that could occur here in order to avoid... Because avoidance, we know is a real thing when money is involved, you can just look at the tax code, and entire industry of tax advisors and tax lawyers and tax accountants, so it's gonna be with the dollars at stake on the developer side, it's gonna be very interesting to see the creativity that emerges from this.

0:12:42.2 NS: Absolutely, yeah, 'cause if you think about it, what's 10 less units or one less unit, 122% of your unit has to be $800 a month versus maybe you're setting rates at 2500 a month, so at the end of the day, you're probably making more by keeping less units counted.

0:13:01.1 MS: And just building more luxurious units that are actually more affordable because you don't have to subsidize the cost with the market rents, with like all our market rents. So you don't have to subsidize those, your development costs by charging more for the market rents.

0:13:21.4 NS: Rare... And I guess the question that I came from, the earlier answer is who is gonna be responsible for tracking all of this down, is that the government is at the property managers, is that developers like, how are you gonna track people's income year over year or month over month and know that they're not taking advantage, and I think that that's kind of a question that you probably don't have the answer to right now, and it's really just a theory you can have, but maybe David, if you wanna speak to that a little bit about who this is all gonna fall on and making sure that these are regulated in some way... Yeah.

0:14:00.2 DA: Absolutely, so they actually haven't fully spelled out what the regulatory framework would look like around this, but what they have indicated so far is that, well, number one, developers are gonna be responsible for ongoing reporting, recording and tracking, they're gonna be the ones who are gonna make... have to be responsible to make sure that they're actually people in this unit, and they're the ones who are actually supposed to be there. They've also added additional amendments, ro try to fund or self-fund their internal administrators as well. So a great example, the city should receive no more than 20% of the net proceeds of sales of an affordably on unit, ensuring the 99 years of affordability. So what that means is every time one of these units turns over or someone decides to sell the seawall, actually take 2% of the sale price. They're taking this as a means of funding their own administrative process, but again, within the policy, you haven't actually explained what that money will be put towards, whether the city is gonna be the one that is going to be responsible to find and assign tenants, or will it be placed on the developer.

0:15:10.7 DA: And again, talk about the cat and mouse game that the renter can now play... It's creating a serious incentive for a renter to perhaps understate income, if they're an entrepreneur a cash payment, the permutations are crazy now, and you consider crypto currency as payment and all the other things that could happen to keep you in an affordable housing unit when maybe perhaps you don't deserve to be there based on the rules, it's gonna be... I think the one takeaway is it's gonna be really difficult, they're putting the burden mostly on the land or developer to administer, and it's gonna be so difficult for them to do that based on the potential consequences.

0:16:03.7 NS: That's overwhelming, I think for anyone to think about trying to figure out that process and putting people in place and hiring people to have to do that, that's an extra cost. Now, I do wanna move just past this a little bit, we know that there are three distinct inclusionary zoning areas identified within the city, what areas have been identified and how were they determined, David...

0:16:29.0 DA: So, there are three general inclusionary zoning areas or boundaries, within the city of Toronto, but the first one, it includes all of the downtown core, including parts of Midtown. The second area includes areas like the beaches, includes Eglinton, and then just on the west side, and then the third area includes Scarborough, the Scarborough Bluffs, and Etobicoke then areas srrounding York University. So these three areas were basically determined based on grouping, similar average market rents, and then looking at grouping neighborhoods by a similar sale price for new condo developments, they've also looked at a few additional components for what they... Basically, that is average income and then group with similar neighborhoods.

0:17:16.1 NS: Well, this impact the cost of land in areas outside of these areas, because will they become more coveted to not have to build there?

0:17:26.1 DA: Certainly, I think this is directly connected to what Max said earlier, this is going to start... It's gonna create a cat and mouse situation where developers start to move further out field, they're gonna try to build a product that is not going to be required to include a component or inclusionary zoning, restore, gonna see developers and moving further out to areas that didn't historically experience substantial new development, and I think that within these areas, we are going to see some increase in land prices, that was actually one of the reasons that they decided to extend the period of ramp up.. So the program starts in 2022 and it gradually ramps up until 2030, and that was actually in one of the reasons that they provided, because they want land prices to stabilize and increase over time, gradually before they have that full... onus of all new developments to have at 22% of their gross floor area.

0:18:23.2 MS: David, I'm curious if you know the answer to this yet, or if this is still something that's unknown, what about renovations or flips of buildings and also commercial to residential conversions, which are becoming more and more popular will the policy affect those projects as well and...

0:18:47.2 DA: Absolutely. Well, so within the party framework, they've indicated that... So renovated projects, will not have to include inclusionary within the existing residential floor space, however, any new residential for space, will have to include a component of inclusionary zoned units. They haven't specifically spelt out whether this includes conversions from office to residential, however, retrofits of existing or renovation of existing buildings, unless they're adding new floor space will not have to include this...

0:19:18.2 MS: I guess that would be interesting to know if they have to renovate 100 units in order to be considered a part of it, or if it's a 200 in a building and they're renovating 10 units, if now 5%, you have to... to be brought to market as an affordable option. Maybe you don't answer that yet, but I'm sure these details are gonna come out.

0:19:42.2 NS: It's also expect to impact approximately 3% - 5% of purpose-built rentals during the same time frame. What is the impact of this when it comes to planning a development now.

0:19:52.7 MS: Well, again, all of this creates a consequence, and I like to think that a developer is generally... They see themselves as good at building homes in the sky, and especially in the GTA, were going further and further into the sky these days, but one of the many decisions are developed has to make when they have a piece of land or procure a piece of land, am I going to build a rental or, am I going to build a condo? It's pretty obvious from this policy that the city wants more developers to consider rental, you can just see it within the numbers, we're looking at 22% of... Potentially up to 22% of all new condo developments being affected by 2030. That it is only considered to be 10% for rentals, so less than half, so you look at the economic indications, both are bad or developers, developers, and so they will likely pass off the cost to the end consumers paying market rate, so they'll probably be okay, but there may be some kind of inefficiency in the process of getting there, and there's just a 10% gap there, so I think whether developers like this are not...

0:21:25.9 MS: The city for buildings over 100 units quite clearly has made a statement that they want more rentals, and that might just play into the fact that rentals in general are considered more of affordable housing, there's less hording of wealth that way, less opportunity for... foreign investment, even with the foreign investment tax, so I think they just see that as a more efficient means to get more housing and rental prices down in the City of Toronto...

0:21:58.7 NS: In your expert opinion, obviously, there's a lot of issues with this, is there any recommendations that you would give to developers who have plans to build in the GTA in the next eight years? I think we've talked about some workarounds here, but maybe we can discuss this a little bit further as to what you would say to a developer who has plans to build in this area...

0:22:33.5 DA: Yeah, I think first and foremost, absolutely get your approvals it right now, submit all your plans, do it before 2030, you wanna get your plans and before you have to account for a greater and greater loss and available floor space at the end of the day, if you wanna build a condo today is the day to do it, not in a year, not in three, five years, because in three, five and 10 years, you're better off building a rental and that's really it because... I do wanna clarify next is a 10%, it's actually within Zone 1 5% of the floor space, which means that if I want to build two identical buildings side by side within the downtown downtown Toronto, I lose 17% of my gross floor space, if I want or 17 additional percent, if I want to go build a condo compared to if I wanted to build a fancy high rise luxury apartment building, it... If it's an apart building, I only have to give a 5% of my floor space where as a condo loses 22% of the floor space, it's astronomical and it really does, on the surface, look substantially more burdensome to build condo now with this...

0:23:42.8 AD: A Toronto at these high-rise condo... So like Max said, maybe this really is the start of boutique small scale, luxury rental development, and maybe this is a start of a de-scale power, of reduced quality in terms of the luxury or how we expect in terms of the quality of high rise development,

0:24:04.8 MS: And just something to note for listeners of the podcast that aren't in Ontario or British Columbia, in particular, Toronto and Vancouver are of the condo capital of the world, luxury apartment building development for anyone in the US is listening, they're probably scratching their head going, What these guys talking about... Nobody builds condos. High rise condos here, they all build rental anyways. So ultimately for the developer community and curator, which is a very strong, strong community, which as which are... There's strong associations, like Build, FRPO, they're gonna have to look at just their business probably differently and really look to other cities, other municipalities tour around, start to look at purpose-built rentals outside of Toronto. Montreal has really had a boost in purpose-built rentals in the last few years, Halifax has gotten crazy. It's sort of like the purpose-buil rental market of Canada and the US, which is cities like New York, which are somewhat comparable to Toronto/Vancouver which are comparible in terms of their culture and size, and you gotta start going down and seeing what's going on and how impressive these luxury rentals that are...

0:25:45.1 MS: The city of Toronto has a bunch now too, so you don't even have to leave, leave the city in order to get an idea, because this has already been a trend that been merging over the last three or four years, and it's been a positive traits, I think is gonna accelerate the amount of purpose-built developments going.

0:26:06.6 NS: That being said, this is kind of the first step for the GTA, do you guys, David, foresee this policy being enacted elsewhere in other big cities in Canada, have you seen anything similar come up? I assume if it works or if they see a positive effect from it in terms of affordability, that it may be repurposed elsewhere, and that could impact obviously the developments in those areas as well.

0:26:37.3 DA: I think that long-term this may very well be the flood that starts, it starts the eruption, it's gonna take us quite a bit of time to see what the actual market effects are on the availability of more affordable housing or even just a cost of a market rate condominium unit? Or a market rate apartment. I think that now that the city of Toronto has to prove this, there's gonna be a lot of watch lives, we're just waiting buying their time to see what we're actually going to see as an outcome from this, in another five to 10 years, we may very well see other city in Ontario enacting an inclusionary zoning policy, it's likely going to a larger, more urban center, whether that is Waterloo or London, which we really don't expect because a lot of these cities, they have substantial existing amount of available rental product in... This is something that is going to be much more important for really urban markets with really santal issues of affordibility, and in Ontario that's Toronto.

0:27:37.3 MS: I think there's winners and losers already identified that probably the economic winners here, are going to be the secondary markets surrounding Toronto, because prices are gonna go up, there's going to be more development there's going to be more jobs, and it's gonna be hard for those municipalities to then make themselves less competitive for developers.

0:28:03.4 MS: I think the timing of this is all quite interesting, when the downtown core Toronto, there's a lot of question marks in the future of economic hub of the city of Toronto, which is right downtown, and all the office space down down there now only being partially occupied and just a lot less economic activity going on down there, and coupled with maybe we are gonna start developing more outside of the city to get around these policies, and housing will be maybe higher quality outside of the city, it could be an interesting decision for the city and we'll have to wait many years to see what the effect of this is, that's always the case when these types of policies, the development cycles coming with this.

0:29:00.0 NS: With that said, are there any benefits for developers to build a product in these areas? Is there anything that you've said that a lot of this is just gonna fall on them to do this, is there any monetary benefits, are there any things that they're kind of incentives to doing this? And building in those areas, David.

0:29:21.8 DA: Unfortunately not. The city is indicated that they are not planning and providing any kind of monetary benefits, they're not planning on subsidizing value, and they're also... They've indicated specifically that they will not be providing additional density allowances for...for developers to actually reach their zoning requirements, so what that means is, again, the onus is exclusively on the developer, and the city has made this perfectly clear, not just with the way that the plans are drawn up, but throughout the entire process, I was there, I went to several of those meetings where the city was trying to get the public stakeholders opinions on this, and they were very obviously hostile towards condo developers, like this entire policy was meant to arget in of developers because they see condo developments are the root cause of... our housing shortage like the lack of affordable housing. And they think that this program in and of itself will solve this Icon, unfortunately, I don't see it that way, it will certainly provide more market rate or affordable units in the city of Toronto, which is great, but this is not a one-stop-shop solution. This is not going to fix all of our problems.

0:30:32.8 MS: I see it a little different, and I think that the market will regulate itself, so like it or hate it, land costs for large potential developments may take a bit of a hit, and so should regulate itself in the same level of profitability should be attainable and full developer, again, it's gonna be passed back to the market renter, but I actually think this could long-term, when we look a decade or two decades out, be highly beneficial to the developer, and the reason I see that is because the Toronto area has been the hottest rental market or rental estate market in North America for the last three decades, it's been absolutely on fire.

0:31:29.5 MS: I think one of the things that probably the city is totally wrong is that the fact that there were such an emphasis on condos and development here actually build out a very wealthy middle class in Toronto, and has being an economic driver for us, it's spread wealth away from landowners and developers into a lot of individuals hands, maybe not as many as everyone wants, but that is something that's different than in New York or Chicago where most buildings are rentals. But if you think about the opportunity cost, all of those through the last few decades for building condos and not rentals, they made a lot of money, to be wrong, they made lots and lots of money on developments in the last three decades in Toronto, they would probably be sitting on a lot more assets and overall net wealth, if they had built rentals, and so believing in the City, believing in the Canadian economy, I have to think that this is gonna force more developers to build ientals, and maybe they're gonna be less profitable week over week, day or year over year, but we're gonna be sitting back 20, 30 years from now and going and looking at some of these developers and their holdings and go, Holy smokes, they are empires now, because they've built so many rentals, so long-term...I actually think it could end up benefiting developers if the economy, business environment stays really strong in Canada, and in Toronto.

0:33:06.1 NS: I'd like to talk a little bit about what Rentsync, and bring it all together and talk about the impact of marketing services for these developments. How do you think that that's all going to impact marketing, and I think there's a lot of things that will impact marketing, so Max, maybe you can lead this question a bit...

0:33:29.3 MS: Yeah, I think that it's likely we will see continued, and I say continued 'cause it's already sort of happening with the last three years, that continued shift towards the condo development community building rentals. And as a result, I think you're gonna have to see a shift in the skill set of these organizations, there's a huge industry in Toronto about round-for-sale marketing and for sale condo, brokerages and marketing efforts and rental is not the same. It's not the same unit economics, it's not the same process in terms of marketing and selling in this case, leasing, and there's going to be a skill set, shift or adjustment for a lot of these developers where they like to it for the first time. It's an area that we're really familiar with and can certainly help these companies with and look forward to helping these companies with. So that's the first thing. I also think it could be very interesting. It's an interesting problem when you think of it, kind of from a 1000-foot view with luxury, over 100 unit development that now you've got in a condo position, you're maybe trying to sell one million plus condo units that also have the...20% of the building is affordable housing, and whether that should be kind of viewed as a negative or not, I think a lot of consumers will feel uncomfortable about that, and that's a marketing challenge that... A branding challenge that marketers will have to go through, and on the rental side, it's the same thing, we've just started to build a new level of product in the city for rentals, and you have to wonder if that will continue or if this will move the needle towards  B plus asset class or a B minus asset class, because it's hard to bridge the gap between somebody who is gonna be paying $3500 a month for a two-bedroom when they don't feel comfortable about the fact that there's people in that building who are only paying $1200 bucks a month, or $1500 a month. And there's that perception that's gonna be really challenging to deal with, I think at the end of the day, that's gonna cost money to, you're gonna have to invest into that problem and invest further into marketing or to get you the right messaging across.

0:36:36.7 NS: And this is a very extreme metaphor, not metephor, example, of kind of this, but I don't know if anyone's washed the Ceicil hotel documentary, and they have the one where it's the students coming in, and they've kind of got a nice luxury loft departments in there, and then you've got this like Ceicil Hotel, which is a completely different atmosphere or a completely different brand. Completely, and it's like, Is that what they're gonna be up against is that how these buildings are gonna be segmented now, which you're gonna have to hire two different marketing teams to basically cover the spectrum of those two areas.

0:37:22.9 MS: That's a fantastic analogy. And kudos for coming up with that on the spot, 'cause that's very much the problem, and whether is deserves to be the problem or not, people... Some people will look at it that way. Keep in mind, this is not low-income individuals, we say the policies and that nurses, teachers, middle earners are salaries, so it shouldn't really be looked at like that, but no, it will create resent... There's no doubt, there's all sorts of resent that it will create between residents, not that don't necessarily know or have the ability to know, but they'll know 20% of the building, 5% of the buildings that they're subsidizing those people in their own community. And I think one of the saddest things about this policy, if it's not handled correctly, is that I think it creates a larger rift between the typical landlord and the typical renter, and this is always something that's played out in the media and is a real problem and I think we were starting to see that relationship turn a little bit in the last few years, but some of these luxury rental buildings and just purpose-built rental in general and emphasis on customer service and being an good landlord and that being a competitive advantage in the market.

0:38:54.9 MS: And the view shifting from that renters are just like annoying people that live in your building to, these are our customers, and I can't help but think that this is not going to help the industry move forward towards having better customer service to... I'm also concerned about that.

0:39:25.0 NS: Yeah, I mean, I even feel with that hotel example, it was the same thing, the customer service on one side was very different from the customer service on the other side, and people were basically able to run rampant in the other side of the hotel, so... Yeah, obviously, that's a very extreme scenario and hopefully that doesn't happen, I just think that this income gap is gigantic of what they're trying to provide affordability for, and it could cause a lot of the issues that you've just gone through. So I wanna wrap this up now with some parting words thoughts on what you expect Toronto developers to do now that these policies have been passed.

0:40:10.9 DA: Well, let me start off quick, I know that Max, you've had tons to say about this, but I think overall, I think this is gonna motivate more rental development... I think you are right. Long-term, this is gonna benefit the city, but I don't think it's gonna be the solution to our affordability crisis. I think all this is gonna do is it's going to change where development for where we have new developments coming up, it's going to incentivize the revitalization, even gentrification of different communities within the city. I think the city is going to have to keep up to their five-year plan to revise a interview, and I think long-term, we're just gonna have more rental in the city.

0:40:51.4 NS: Max, any parting words? Any last thoughts on this?

0:40:55.6 MS: Yeah, I've gotta double down on enter, which is for your average Conover, I think you really gotta start to look at... You probably have already been looking at... Because of the way things have trending, I've been trending in the last few years. But now as a heightened level of seriousness and to your average apartment building developers, it doesn't change things too much, other than maybe the Quality, overall quality of the molding that you're gonna develop, if it's over 100 units, you just really gotta look at the feasibility and do the unit economics and pay close attention because you've got this coming and otherwise there's gonna be more of you... It could increase competition. So be ready for that as well.

0:42:02.0 NS: Which I guess marketer should be aware of as well. If there's more competition is gonna need to be more creative out of the box thinking with your marketing, so... Yeah, well, on that note, David, Max, thank you all for your thoughts and your insights on this topic, I'm sure we'll probably have to revisit it, hopefully not in five years, maybe a little earlier than that, see what's going on and how everything has taken shape, so... Thank you all for joining me on this episode of Sync or Swim. And until next time keep swimming.