Famed theoretical physicist Albert Einstein once quipped, “You never fail until you stop trying.”
Hopefully, policymakers and various levels of government will embrace the axiom and continue to brainstorm and work on fixes to the current housing supply and affordability crisis.
High interest rates and material costs have made it difficult for developers and builders to construct homes that are affordable.
Nationally, the annual pace of housing starts in January slowed by 10 per cent compared to December. The seasonally adjusted rate came in at 223,589 units, compared to 248,968 in December. We are falling short of housing targets while our population continues to increase.
We must persevere, though. The way we deal with these challenges will determine our ultimate success.
Several issues of our own making are adding to the problem. Exorbitant taxes, fees and levies are making new housing unaffordable, overly restrictive rules on density in our cities hinder our ability to add more housing supply, and excessive regulations and red tape delay approvals.
Tax burden on new housing must be reduced
We know from a study done by the Canadian Centre for Economic Analysis that taxes, fees and levies on the purchase of a new home in Ontario accounts for a whopping 31 per cent of the price, up from 24 per cent in 2012. Most of these fees were added in less than a generation and equal a downpayment today. Housing is taxed as much as cigarettes and alcohol.
Our taxes, fees and levies are the highest in North America, and combined with other factors, are eliminating first-time homebuyers from the housing market. We need to reverse or significantly reduce charges at the municipal level. The federal government also must step up and provide more equitable transfers to municipalities for infrastructure to support housing.
More housing density must be allowed
We must also permit more as-of-right density in our major cities, especially along avenues and corridors.
The City of Toronto has taken steps to adopt measures that will allow single-family homes to be converted into duplexes, triplexes and fourplexes in all low-rise residential areas, which is positive.
The policy could transform up 70 per cent of Toronto’s yellowbelt area where only one single home per lot was permitted.
The city must now bring in as-of-right zoning for mid-rise residential buildings along arterial roadways and avenues and allow for more housing density around mass transit areas. To build higher along arterials, a builder must obtain a zoning bylaw amendment which takes far too long.
Regulatory hurdles must be minimized
Additionally, we must immediately implement major changes in municipal planning and development divisions to specifically expedite housing applications and streamline approvals.
The approvals process is simply too slow and there is a startling lack of accountability and transparency. Municipalities have been inconsistent in how they address the hurdles to development. Some cities have made progress towards speeding up approvals, but others are lagging.
Canada is at the bottom of the barrel when it comes to roadblocks that prevent new housing construction. We are in 33rd place out of 35 OECD countries when it comes to timelines to undertake construction projects. Further, we are 64th out of 190 countries in construction permitting.
Delays in approvals can add between eight and 14 per cent in additional construction-related costs annually, amounting to between $9 and $19 per square foot, according to a 2023 study.
Development applications in Toronto are taking 908 days for site plan approval, or 713 days for a zoning bylaw decision. It took on average 32 months to get an approval in 2022, up from 21 months two years earlier.
Recently, a study done by the Canadian Federation of Independent Business highlighted the costs associated with a $20,000 project to convert a powder room to a full bathroom renovation in major cities across the country and noted it would require 10 forms and permits to be submitted in Toronto. They include floor plans, an application to construct or demolish, and even a review by an architect or engineer which could add five to 20 per cent to the cost.
If there are that many hurdles for a bathroom conversion, can you imagine trying to build something simple like a secondary suite?
Some positive steps have been taken
There is some good news, though.
In Toronto, the city has launched an online data hub aimed at improving transparency around its plan to build more housing. The new reporting system is a positive move as it will bring together key housing data and track the city’s progress toward meeting its housing target. Data in the hub will be presented via an online dashboard as well as an annually published data book.
The federal and provincial governments have also eliminated sales taxes on new purpose-built rental buildings. This measure should be extended to first-time buyers of all types of residential buildings.
The forces against the residential building industry are strong. But we must find a way to cut through the headwinds.
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 media@rescon.com.
