A Breath of Fresh Air
Ontario’s Conservative government has announced the goal of achieving 1.5 million new homes to be built during the next decade. The tabled bill entitled “More Homes, Built Faster Act” is intended to help them reach that goal. As part of the bill, on October 25, the provincial government announced changes in municipal zoning laws in some circumstances to allow for the construction of up to three units on each residential lot. These will enable more “missing middle” homes to be constructed without bylaw amendments, municipal permissions or waiting for additional planning approvals.
At first glance, this seems like positive news. Lack of supply is an overarching theme in today’s real estate market, especially in Toronto and the Greater Toronto Area. It was more than 10 years ago that low-rise developable land became scarce, and prices began to skyrocket. Since then, with the pandemic, supply chain issues, materials shortages, mortgage rate roller-coaster, the dearth of skilled workers, and of course, ever-increasing demand, our supply issue has worsened. As real estate professionals, we all feel the effects of that daily.
Apparently, the provincial government will do away with development charges, parkland dedication levels and community benefit charges for affordable housing, non-profit housing and inclusionary zoning units. Development charges on family-sized rental units will be reduced by up to 25 per cent. I question whether and how these changes will apply to new condominiums in Toronto, which requires new residential developments to include affordable units. Condos provide a starting point for most purchasers nowadays, from first-time buyers to investors, who produce badly needed rental accommodations.
The Ontario government’s changes include assigning housing targets to 29 large municipalities. The City of Toronto, for example, will be expected to have 285,000 new residences in place by 2031. We have not seen that level of construction previously. It is ambitious to say the least – but in fairness, we need those homes. I hope this can be achieved, and maybe it will be, considering recent changes in our federal immigration policies. I heartily support processing applications focusing on the skilled workers we need so badly, such as construction. The federal government is proposing to welcome 1.45 million new permanent residents in Canada over the next three years, with 60 per cent of them having the work skills we need. We know that a high percentage of those will settle in the Greater Toronto Area.
So, we need more homes and more skilled workers to build them, and our governments are promising just that. It sounds wonderful, and it would be lovely to see it happen. Certainly, developers and builders have been asking for streamlined development processes, but thus far, nothing much has changed. I do think that the provincial streamlining of our 26 conservation authorities into one agency will help when it comes to making approvals fairer and more efficient. You can read the More Homes Built Faster Act. 2022 here: (https://bit.ly/3gFXZtL).
On the same day these announcements were made, however, the Ontario government raised the Non-Resident Speculation Tax (NRST) on homes bought by foreign nationals from 20 to 25 per cent. This means we now have the highest NRST in Canada. I see this as a political move, rather than a practical or fair step. Foreign buyers are branded unfairly. The reality is, we have a very low percentage of foreign home and condo buyers.
At Baker Real Estate Incorporated, as part of our Baker Insights Group (B.I.G.), we produced a large report with Ben Myers on foreign ownership using data from the previous decade, and it showed that those sales represented only three per cent of our total. The same week we released the report, CMHC published theirs, and we were totally in line with it. I disagree with this step, because every great city in the world encourages foreign investments to help keep the economies humming. In addition, most of these foreign buyers are investors, and we desperately need the rental accommodations they provide.
All the actions I’ve mentioned here have been labeled “bold” by several sources. We need bold steps to help ease the housing shortage in Ontario – but we need them NOW. Will the government’s plan be implemented soon enough to make a real difference? Are we seeing enough change on the municipal level to have a direct effect on streamlining building processes and approvals? On one hand, it is great to see that all levels of government are working toward the same goal. On the other, I wonder if these actions will ease the supply issue enough to ensure the new homes and condos needed will satisfy demand, and people will see more affordable prices soon.