Infrastructure Sectoral Regulatory Review Roadmap

Targeted Regulatory Reviews

Following the recommendations of the Advisory Council on Economic Growth, and recognizing the importance of ensuring that regulatory frameworks remain effective and relevant, the Government of Canada announced in Budget 2018 that it would fund over three years "targeted reviews of regulatory requirements and practices that are bottlenecks to economic growth and innovation." The first round of targeted Regulatory Reviews focused on three high-growth sectors:

• agri-food and aquaculture;
• health and bio-sciences; and
• transport and infrastructure.

A central feature of the Regulatory Reviews is stakeholder engagement. In partnership with departments and agencies, the Treasury Board of Canada Secretariat led national engagement efforts with businesses, Canadians, academia, and other stakeholders. This included Canada Gazette consultations, in which stakeholders were asked to provide feedback on ways to enable regulations to be more agile, transparent, and responsive resulting in benefits for all Canadians.

Infrastructure Sectoral Regulatory Review Roadmap

The aim of the Infrastructure Sectoral Regulatory Review Roadmap is to explore broader issues related to construction permitting and to identify what, if any, regulatory barriers and bottlenecks exist. In this Roadmap, Infrastructure Canada commissioned research to provide an overview of the construction permitting landscape, to identify regulatory bottlenecks, and to review the World Bank's findings, which indicated that Canada has performed poorly regarding construction permitting.

1.0 Context

Investing in infrastructure helps to create a foundation for strong and inclusive communities, and to grow a strong low-carbon economy. Efficient construction permitting is a key step in building infrastructure projects that will benefit all Canadians.

Delays in construction permitting may hinder innovation and business investment in the infrastructure sector. Recently, the 2018 World Bank's Doing Business Report ranked Canada 22 out of 33 other high income Organisation for Economic Co-operation and Development (OECD) countries in dealing with construction permits (54 out of 190 total countries examined in the study). Out of four indicators in this area, Canada did not score well on one indicator regarding the time it takes to obtain a commercial construction permit. According to data collected, which was informed by a survey focusing on the city of Toronto, Canada ranks 32 out of 33 OECD countries on this indicator. Canada scored better or close to the OECD high income average for the other three indicators in construction permitting: number of procedures, costs involved in obtaining required licenses and permits, and for its building quality control.

1.1 Sector Regulatory Overview

Construction permitting exists for many good reasons, such as promoting public safety, internalizing external costs, balancing competing interests and priorities, and raising revenue for government service provision.

Construction permitting also has a significant impact on the construction industry, both in terms of the complexity of compliance and in terms of the uncertainty that long permitting processes can introduce. The McKinsey Global Institute points out that construction is one of the world's most highly regulated sectors, with the unpredictability of permitting and approvals affecting the time span of the project as well as the incentives for firms to invest adequately in equipment that may not be used as planned.

Making construction permitting more efficient and predictable can benefit businesses and the economy while still ensuring that broader public goals, such as minimizing negative environmental impacts and allowing for adequate public input, are met.

Public discussion on construction permitting processes outside of the energy sector has been driven mostly by high-profile economic advisory bodies and media reports, rather than stakeholder responses. A few organizations such as the Association of Consulting Engineering Companies of Canada (ACEC),^{Footnote 1} REALpac and the Residential Construction Council of Ontario (RESCON) have raised issues concerning the lack of consistency and clarity in permitting processes across jurisdictions.

1. 2 Regulatory Roles in Construction Permitting

Provinces and territories have primary jurisdiction over construction. Regulatory frameworks at the provincial or territorial level have a number of components including building codes, safety codes and zoning and planning acts. Typically, provincial and territorial legislation for planning will determine land use regulation, including requirements for official land use plans, zoning by-laws and the process for the subdivision of land.

Aspects of provincial and territorial legislation, whether mandatory or optional, are then implemented at the municipal level. The municipal government develops the land use plan for its community. It also prepares the zoning by-law, which regulates the details of building development such as height, area, and parking. Local governments also implement the development approval process, which is the final stage before the building can obtain a permit.

The federal government does not have a regulatory role in construction permitting, given provincial and territorial jurisdiction. Infrastructure Canada's core responsibility is to work with partners and stakeholders to help build and revitalize Canada's infrastructure, mainly by providing funding to provinces, territories, municipalities and Indigenous communities to address their infrastructure priorities and plans. However, the federal government does play an indirect role through the National Building Code, which is developed by the National Research Council. This role is explained further in section 2.6.

2.0 Analysis of Research Findings

To explore broader issues related to commercial construction permitting, Infrastructure Canada commissioned research to provide an overview of the construction permitting landscape in Canada, and assess key challenges and innovations in this area. In so doing, results from this research have helped to better understand whether the World Bank's findings are representative for the entire country.

2.1 There is a lack of rigorous information on regulatory performance related to construction permitting

A literature review on construction permitting processes showed that little academic research exists—not only in Canada, but in peer countries as well. The main source of information is publications from governments, consultants, and industry or professional associations—which can be more difficult to access and compare than peer-reviewed academic research.

In terms of industry group and other stakeholder publications or submissions, stakeholder feedback has primarily focused on construction for housing, and for large-scale, multi-jurisdictional projects as opposed to construction of commercial or public infrastructure.

Given the scarcity of easily available information, the findings highlighted in this Roadmap are limited.

2.2 The findings in the World Bank's Doing Business report are not generalizable across Canada

As noted above, Canada did not rank favorably in The World Bank's Doing Business report with regards to dealing with construction permitting. The rankings provided by the report are used as references for international companies looking to invest in Canada, and a low ranking can convey a sense of increased risk and result in a reduced interest in investment.

However, a review of this report's methodology has raised some questions regarding the reliability and validity of findings. The most significant challenge is that the ranking for the indicator on the time that it takes to issue a construction permit is based on a sole case study in Toronto which only examined the time it took to acquire a construction permit for a single warehouse in Toronto. 

Despite these methodological limitations, other sources appear to corroborate the World Bank findings of accurately reflecting the situation in Toronto.^{Footnote 2} The challenge appears to be linked to the lengthy time for site plan approval. 

A site plan is a tool used by a municipality to asses and ensure that the proposed land development is safe, functional, and has minimal impacts on neighboring properties. Features like building designs, site access and servicing, waste storage, parking, loading and landscaping may be reviewed. Site plan approvals vary greatly across jurisdictions in Canada in terms of whether they are required at all or for only certain types of permit applications, or the types of requirements within the site plan itself. 

Based on this analysis, it would appear that the World Bank ranking does not provide a definitive basis on which to derive conclusions about the speed of construction permitting processes across Canada.

2.3 Implementation matters as much as rules 

While permitting rules and requirements matter, equally important is how these rules are implemented. Many jurisdictions have standards for processing applications, and make these standards publicly available. However, research findings indicate these standards are often not met.

For example, site plan approval in Ontario is required to be completed in 30 days, failing which, the applicant can file an appeal. However, a study in 2013 by consulting company Bousfields and Altus found that site plan approval in Ontario often takes nine months. To give another example, publicly available data for Winnipeg show a city target of 20 days for approval of a new commercial building or addition, with actual median times consistently exceeding this target by three or more days, depending on the season.^{Footnote 3} According to the city website, permit approvals are anticipated to take longer during the busy construction season (April through September).

Process improvements are as much a source for improving permitting as are actual changes in regulations. Domestic and international research on best practices has highlighted several opportunities for process improvement. The most prominent of these is the adoption of electronic permitting systems. These online systems provide benefits in the form of improved efficiency, record-keeping and transparency, and reduced costs.

Other areas for process improvement include streamlining the permitting process by eliminating duplicative steps and other bureaucratic inefficiencies; improving transparency and client-focus; and better targeting training and resourcing, such as supplementing the capacity of municipal employees with qualified pre-approved professionals who can sign off on various aspects of the permit process.

2.4 Canadian jurisdictions are making strides with process improvements

Research on construction permitting found that across municipalities, there are two types of inefficiencies that could create bottlenecks in issuing building permits:

1. processing paper applications and transferring them across agencies/ departments; and,
2. staffing shortages in municipal offices lead to delays in reviewing and processing applications, especially during peak hours.

Research of permitting processes across Canada yielded examples of reform undertaken at the municipal level, whether the introduction of new technology, addition of specialized staff, or streamlining of administrative processes.

Regarding the processing of paper applications, research has shown that several jurisdictions have implemented online portals in order to streamline permitting processes or have also implemented e-permitting processes for various aspects of construction including Calgary, Saint John, Vancouver, Windsor, and Yellowknife. The City of Windsor provides a good example, having replaced its paper-based permit system with a new e-permit system that allows designers, contractors and homeowners to submit digital drawings, payments and other details online.

In addition, research has found that some jurisdictions have tried to address staffing issues and delays in processing applications relating to construction permitting. Vancouver, for example, launched a pilot project that involved training developers on the permit processes before they apply, in an effort to reduce wait times for small-scale residential projects.

Finally, research has also shown that several other cities have put in place the requirement for applicants to meet with a planner or city employee before even beginning the permit process, in order to provide extra guidance and streamline the approvals process. Furthermore, the RESCON study recommended that Ontario municipalities supplement the capacity of municipal employees with qualified professionals who could sign off on various aspects of the permit process.

2.5 Canada can learn from process improvements internationally

While the details of construction regulatory frameworks vary considerably across jurisdictions, similar implementation challenges are experienced across countries. A review of international practices in construction permitting shows that process improvements mirror those in other areas of government service delivery. Australia has been a leader in this area, as have several Nordic countries.

In Australia, builders are required under federal law to enter into contracts with a Principal Certifying Authority (PCA), who is a professional with expertise in the permitting process. Cities such as Sydney also offer free one-on-one meetings with city planners to go over the permit process. Their application process is streamlined, with building permit applications assessed within seven days, and permits issued within 24-48 hours.

Denmark is notable in that the building permit process is covered by a single procedure, from start to end. Copenhagen has high demand for construction bids and attracts investors through on online portal called Copenhagen Capacity which provides single window access for diverse aspects of business development. Investors are matched with local business advisors and consultants who will guide them in their business, including acquiring the required permits. In conjunction, there is also Business House Copenhagen which assists businesses to get required permits, applications and licences from the City and other authorities.

In the United Kingdom, municipalities like London use an online portal for all applications, and third-party contractors to carry out inspection. The U.K. allows applicants to manage their cases online. For example, applicants are able to submit applications online, attach supporting documents, pay the application fee, search building control details, and find approved inspectors.

2.6 Alignment of Federal Level National Building Code Requirements

The National Research Council develops and publishes the National Building Code (the Code) which sets out technical provisions for the design and construction of new buildings. It also applies to the alteration, change of use and demolition of existing buildings. Thus, the National Building Code can impact the substance of regulations relating to construction permitting but does not directly affect the process around construction permitting.

Other levels of governments are responsible for adopting the Code through their legislation. These governments may also choose to modify parts of the Code to suit specific jurisdictional building needs.  

As a result, the Code is currently applied differently across the country. Businesses must therefore spend resources to research, track, and conform to the codes for each jurisdiction in order to build or sell their products. These differences can impose significant costs and impacts on the productivity of the construction industry.

As mentioned in the 2018 Fall Economic Statement, harmonized, freely accessible and timely adoption of building codes across Canada will reduce costs on the sector. Industry and provinces have already voiced that this is an area where improvement can be made and have leveraged the use of the Canadian Free Trade Agreement's Regulatory Reconciliation and Cooperation Table (RCT) to progress toward a standard approach.

3.0 Role for Federal Government

The research findings show that the federal role in the regulatory space for building permit process is limited, as the legislation and regulations for construction permits primarily rests within municipal and provincial jurisdictions. Research also indicates that there is little opportunity for the federal government to directly influence the regulatory approach of municipal activities. Furthermore, the challenges highlighted with regards to construction permitting appear to be administrative in nature. They relate to issues in implementations of permitting processes, rather than the content and substance of regulations. The federal government will continue to remain supportive of innovative approaches within Canadian jurisdictions as they look to address process challenges associated with construction permitting.  

As the National Building Code can impact the substance of provincial or municipal regulations concerning construction permitting, this is an area where the federal government can play a role. The federal government has announced measures regarding the National Building Codes through the 2018 Fall Economic Statement, including measures to eliminate fees for the National Building Codes. The government also announced funding to address priorities in adoption and harmonization of building codes across Canada. The timely adoption, harmonization, and free access of the National Building Codes can support consistency of requirements across the country, while reducing costs on the sector and improving accessibility.

Other alignment opportunities where the federal government can play a role in the coordination or implementation of provincial and territorial infrastructure regulations may be identified by stakeholders. Recommendations for initiatives can be made to the RCT for consideration in future work plans.

4.0 Conclusion

Overall, this Regulatory Roadmap highlights the complexity of the construction permitting regulatory environment in Canada.

Analysis of construction permitting practices shows that it is more likely the implementation, rather than the substance, of regulations that may cause delays, such as what is highlighted in the World Bank report. Research has also shown that there is a range of approaches that could be applied to improve implementation of construction permitting processes across Canada. Indeed, many jurisdictions across Canada are putting in place innovative approaches in support of addressing existing or potential challenges in construction permitting processes. The federal government recognizes the different types of initiatives being undertaken across various cities and provinces in Canada, including digital approaches related to approvals of building permit processes.

Furthermore, as noted in this Roadmap, the federal government has taken action to support the harmonization of regulation, by eliminating fees on the Building Code publications and making it accessible. To support this effort, the 2018 Fall Economic Statement proposed $67.5 million over five years to the National Research Council of Canada, with $13.5 million ongoing, to make access to the National Building Codes free, and to provide sufficient resources for the federal government to address provincial, territorial, and other stakeholder code development priorities in a more timely way.

Going forward, the federal government will continue to remain supportive of partners and stakeholders finding opportunities to address challenges and applying innovative approaches associated with constructing permitting.