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The Ontario government may be thinking of reforming this process (after the reforms implemented in 2007).  Articles in Canadian Property Management magazine, Toronto Star, the Guelph Tribune and other sources outline some of the popular positions.  The comment sections outline the diversity of opinion.  Controversy seems to be a cost of business for all sides in any debate over land use.  The relevant question is: “Is there a better alternative?”

Most cities have zoning rules to control land uses and avoid conflicts between neighbours and new neighbours.  Usually, the final decision rests with local politicians.  The process in Ontario adds an extra layer, called the Ontario Municipal Board (OMB), which acts as a final place to hear appeals.

The usual debating points are that developers complain about people and politicians who are motivated by a short term perspective or status quo inertia, which is a problem since the costs and benefits of real estate decisions have long term implications.  At the same time, local citizens complain that developers ignore local issues and, in extreme cases, focus only on profits.  (Although those profits exist only if some future buyer sees enough value to be willing to pay enough to cover costs.)  There are general concerns that the OMB’s decision-making process is non-political (which is either good or bad) and, more importantly, that it is unaccountable and that the criteria being used as obscure.  (For more on the pre-2007 process, see Chipman, J., 2002.  A law unto itself: How the Ontario Municipal Board has developed and applied land use planning policy, University of Toronto Press, Toronto; UG electronic resource; LC Call Number KEO872 C44)

Regardless of the profit which might be earned by a developer, a good process encourages projects which add social value and discourages projects which subtract value.  The OMB argues that it prefers dialogue and mutual agreement rather than being forced to make a decision.

Is there an in-between solution?

Alternatives to the zoning/re-zoning/appeal process already exist.  First, Ontario’s Planning Act includes something called Section 37 which allows for a new dimension of negotiations.  Careful use of Section 37 enables the various sides to divide surplus value created by a good project: there are ways to compensate for sincere complaints.  Toronto is one of the few cities in Ontario to use this tool regularly.

Controversy seems to be a cost of doing business in the real estate industry and parts of the process increase it.  Each time the City of Toronto revises its Official Plan, there are many appeals to the OMB.  I look forward to hearing a serious discussion of the how to set the rules of these negotiations.  Some cities are exploring more radical solutions.


An important aside: It is interesting to offer this negotiation perspective on the proper scope of government soon after the death of a person who changed the discussion.  Ronald Coase published very few academic papers during his 102 years.  The few that he did publish focused on the effects of transaction costs on organization and had such profound insights that he became a Nobel Laureate in 1991.  Critics who think that Economics accepts only mathematical arguments might note how little mathematics he used.

In one of his most famous insights, he considered: what difference would ownership make if there was a good negotiation process?  If Anne owned a property that Bob wanted and if Bob was willing to pay enough then Anne would willingly sell for a good price and move.  If, instead, Bob controlled that property and Anne was willing to pay enough, then the same process would look for a negotiated solution so that Anne would continue to live there happily and Bob would be willingly accept compensation.  Costly, wasteful and angry disputes occur when Anne and Bob think that they should use it for free, or if Anne’s neighbours object to doing any deal with Bob because of Bob’s haircut.