Governments must work together on housing supply crisis

by Richard Lyall on 16 Sep 2022

A perfect storm of different pressures is bearing down on the housing sector at precisely the same time the provincial government has pledged to build 1.5 million homes over the next 10 years.

As a result, it will require an all-hands-on-deck approach along with bold and determined action by policymakers and elected officials in all three levels of government if we are to reach that ambitious goal.

It’s not an over-statement to describe our current situation as a full-blown housing crisis. How we response to the challenge will ultimately determine whether we emerge or wallow indefinitely.

Inflation, supply chain disruptions and material cost escalations, limited labour supply and rising interest rates are all taking their toll on the residential sector – not to mention the cost of moving to net-zero. 

The financial impacts of an uncertain and unpredictable approvals process and an unprecedented increase in taxes, fees and levies collected by municipal governments only add to the burden faced by the sector.

Government charges in the GTA are by far the highest in North America. They have increased between 800 and 1,000 per cent in just over 10 years. If government charges alone were removed, the cost of a dwelling in Toronto would be 10-to-24-per-cent lower, depending on dwelling type.

A recent CMHC report found that government fees and charges impact the cost of building a home by as much as 24 per cent in major Canadian cities. Toronto has the highest government charges as a portion of total residential construction costs, followed by Vancouver and then Montreal.

Rarely have we witnessed a greater convergence of pressures weighing on new residential builds in Ontario.

The City of Toronto, meanwhile, has set construction of new housing back by hiking development charges by a whopping 46 per cent over the next two years. This means an increase of just over $43,000 in development charges for a single or semi-detached house, in addition to the $94,000 already being collected. For an apartment with two or more bedrooms, the charge will rise to $80,218 from $55,012.

Behind these numbers, market forces and policy decisions are real people who are struggling – individuals and families seeking to affordably secure housing.

It is outrageous.

There is also the false narrative that developers or builders will assume these additional costs. However, those who will bear the brunt of the regressive increased costs are new homeowners, and renters entering the market – the very people that most policymakers would concede need the most help.

Renters in the Greater Toronto Area are certainly feeling the impact, as rents have skyrocketed. Reports indicate that average rents in the City of Toronto are now over $2,600 per month. This time last year, rents were on average just over $2,100. 

Some of the contributors to the problem are beyond our control, such as the war in Ukraine, significantly higher energy costs and supply chain issues left over from the pandemic. However, many are within our purview, including systemic issues that are delaying the approvals process for new residential developments.

We have seen enormously hopeful signs from our provincial government in Ontario with respect to legislation it has introduced over the last two years and this summer. The Strong Mayors, Building Homes Act, which has passed third reading and is set to become law, will facilitate needed governance change at the municipal level and grant sweeping new powers to the mayors in Toronto and Ottawa with the goal of speeding up approval of housing projects.

The legislation is one of the issues to be addressed at a housing summit being held by RESCON on Oct. 6.

Toronto Mayor John Tory has also released a re-election platform that focuses on housing affordability. He proposes to expand housing options by permitting “missing middle” housing and allowing greater mid-range density on major roads and in areas served by transit such as along Danforth Avenue.

He also wants to end the spin cycle that is the approvals process and create a development and growth division at city hall that will serve as a one-stop shop to streamline the approvals process and get housing built faster in the city.

Toronto has set a timeline target of nine months for reviewing complex planning applications, but it takes an average 21 months to get an approval.

We must build more housing to ensure the continued prosperity of our society. If young people can not afford to live in our cities, they will seek alternatives elsewhere. Many are already doing that now.

It has been encouraging to see the province step up to the plate with legislative and policy solutions. The other levels of government must be on the same page in order to achieve a positive outcome.

Richard Lyall is president of the Residential Construction Council of Ontario (RESCON). He has represented the building industry in Ontario since 1991. Contact him at [email protected].

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