Section 37 Bonusing: What You Need to Know

            To control land use planning, municipalities in Ontario create zoning by-laws or Official Plans.  These plans and by-laws are extensions of the Provincial Policy Statement (PPS), a statement of the province’s planning policy.  The PPS, last updated in 2014, aims to build healthy communities while maintaining a clean environment and a strong economy.  Official Plans and zoning by-laws often place limits on heights and densities of buildings in municipalities.  Sometimes, a developer wishes to build a building that is higher or denser than what the by-laws or Official Plans allow.  One way for a developer to build these buildings is through s. 37 of the Planning Act.

Under section 37(1) of the Planning Act, a municipality may pass a by-law (pursuant to s. 34 of the Act) that will increase the height and density of a development that is otherwise in excess of existing zoning by-laws and the Official Plan in return for the developer providing certain “facilities, services or matters”.  The operation of s. 37 ultimately allows municipalities to meet certain municipal objectives, such as the provision of day care facilities, affordable housing, public transportation and public realm improvements, and, in return, allows developers to increase the height and density of a development, often by-passing the onerous Official Plan amendment process and, in some instances, a zoning by-law amendment.

 Issues with S. 37 “Bonusing”

            Interestingly, s. 37 does not specify what type of facilities, services or matters must be implemented.  Notwithstanding this, it is generally understood that the facility, service or matter should be something that benefits the public, a premise that is routinely echoed by the Ontario Municipal Board (OMB).  Despite this recommendation, municipalities will often take cash-in-lieu of the specified amenity, a result of the ruling by the OMB in Re Copthorne Holdings Ltd.[1]  Some municipalities, including Toronto and Ottawa, have moved to include in their Official Plans acceptable amenities, services or facilities to be provided in accordance with s. 37.  Despite the existence of these enumerated lists, municipalities continue to accept cash-in-lieu as fulfillment of a s. 37 agreement.

The existing wording of s. 37 leaves many questions unanswered.  Primarily, is the process of an s. 37 agreement simply a commercial transaction between the developer and the municipality in which the developer purchases height and density?  Further, in the dialogue between municipality and developer in which the “bonus” is agreed to, how is the amount determined?  Finally, when a municipality accepts cash-in-lieu, what happens to the cash and why are there no statutory requirements on how the money is spent?

A major issue with respect to “bonusing” is that s. 37 is not available consistently throughout a municipality; not applied consistently within a municipality from a benefit perspective; and, not applied consistently across municipalities, and, as a result, it is difficult to determine precedent in the area.  The Board expressed concern in Dun West Properties Ltd. v City of Toronto that s. 37 benefits should be described in an Official Plan in a way that is clear, fair and transparent, and not be applied in an arbitrary manner.[2]

A Solution?

Bill 73, “Smart Growth for our Communities Act, 2015”, currently in its second reading in the Ontario Legislative Assembly, proposes certain amendments related to s. 37 and the cash that municipalities receive from developers with respect to s. 37 “bonuses”.  The proposed amendments would require that s. 37 bonus cash be kept in a separate account, that restrictions be placed on how the money may be invested, and that documentation relating to how the money is spent be recorded and kept.  These amendments would provide for transparency in the process, something that is currently lacking. 

Why You Should Care

Guelph’s Official Plan, last consolidated in September 2014, contains a “Downtown Guelph Secondary Plan” that explicitly allows for bonusing of an additional 2 storeys in height, and allows for bonus density to be considered as well.  This means that in areas covered by the Downtown Guelph Secondary Plan, developers may contract with the City for increased height and density.  More notably, Guelph’s Official Plan Amendment No. 48 (currently on appeal to the OMB) seeks to add height and density bonus provisions to Guelph’s Official Plan, including a list of allowable facilities, amenities or matters.           

Conclusion

            Ultimately, s. 37 agreements will inevitably be used more often into the future as municipalities begin to grow up instead of out.  The Bill 73 statutory amendments to s. 37 of the Planning Act will provide greater clarity and transparency with respect to the bonusing process.  Going forward, municipalities, developers, and concerned citizens will be better prepared to deal with and to understand s. 37 bonusing agreements.