TABLE OF CONTENTS
Can the Toronto housing affordability crisis get any worse? Yes. Can it get any better? Yes.
What a complicated mess.
With the election hovering, and politicians promising fixes, most housing experts say measures in the works are helping and will improve the affordable housing crisis in Toronto.
But they stop short when asked if they see a time where vacancy rates in Toronto would be above 2 percent (let alone a healthier 3 percent) and affordable housing supply would meet the growing demand.
You can’t look at affordable housing in isolation. This is more like a calculus problem than simple math.
Not enough rental housing and affordable housing combined with exploding population growth, rising rents and low vacancy rates have beset the city for years.
Throw in the stress test; hefty fees and taxes, weighty regulations, long, long delays for developers; aging apartment buildings in need of repair; renoviction; rent control and vacancy decontrol; waiting lists for subsidized housing; short-term rentals; foreign investors leaving units vacant and money laundering — and you begin to see the affordability dilemma.
Housing for a Toronto resident of moderate income and below is more a nightmare than a dream.
A recent study from Zoocasa says in the Greater Toronto Area where the benchmark cost of a home is $802,400, a median-income household earning $78,373 would take 32 years saving 20% of income annually to come up with the 63% of the purchase price as a down payment.
Also, a recent story in The Star cites a report by RBC Economics entitled Big City Rental Blues: A Look at Canada’s Rental Housing Deficit urges that the pace of creating new rental housing supply “must double” in Toronto if the city is to meet future demand. The Toronto Star cites the report: “To restore balance over a two-year time frame for example, Toronto’s rental stock must expand by an average of 26,800 units per year.”
1. WHAT THE CANDIDATES ARE SAYING ABOUT AFFORDABLE HOUSING
The two main prime minister candidates — Liberal Prime Minister Justin Trudeau and top challenger Conservative leader Andrew Scheer — each promise more affordable housing.
A signature element of Trudeau’s plan is to tax foreign-owned properties and to expand first-time home-owner incentives. The Liberal party already has in place a plan to build 100,000 affordable units in the next decade.
Scheer in his recently announced four-point plan promises to review and fix the mortgage stress test, to cut regulations for developers, to change the maximum mortgage term increasing it from 25 years and allowing it to go 30 years, and to make federal land available for housing to pump up supply.
The candidates are close in the polls, and New Democratic Party Leader Jagmeet Singh and Green Party Leader Elizabeth May could sway the Oct. 21 election.
The New Democratic Party wants to build 500,000 affordable housing units in a decade among other recommendations.
The Green Party wants to make housing “a legally protected fundamental human right,” to appoint a minister of housing, and to create a fund to offer rental assistance among other plans.
When Canadians choose a prime minister, you can bet housing affordability will be top of mind not only for Toronto voters but also for voters in Vancouver and other big cities.
Another thoughtful piece in The Star quotes David Macdonald, senior economist with the Canadian Centre for Policy Alternatives, an Ottawa think tank, “We’ve got ourselves into a pickle in the housing market and there isn’t a simple solution to reducing housing prices.” The story lays out the politicians promises of affordable housing fixes.
And, a recent story in the Huffpost cites the Swiss bank UBS, which looked at 24 major cities on four continents and concludes Toronto has the second-highest risk of a bubble, behind Munich, Germany.
Programs already in place from the federal, provincial and city governments to help low-to-moderate income renters offer some hope and a few more ‘for rent’ signs in Toronto, but while most housing experts applaud the efforts, they debate whether these measures do enough.
Canada has in place its “National Housing Strategy: A Place to Call Home,” the 10-year plan to give every Canadian a home. Ontario’s solution is its More homes, more choice: Ontario’s housing supply action plan to make housing more affordable, to cut red tape to make it easier to build the right types of housing in the right places, and to cut taxes.
Here’s the latest coverage on the elections from the Toronto Star and fromThe Globe and Mail.
2. TORONTO’S AFFORDABLE HOUSING PLAN
Toronto has its own answer to affordable housing: The “Housing Now” initiative, approved this year “represents the largest ever expansion of affordable housing” in the city, according to the office of Mayor John Tory.
The mayor’s office said in an email, “This plan will guide sustainable and equitable development with a vision to build mixed-income communities where residents can afford quality housing near transit.
“The first phase approved by City Council,” the statement says, “Will fast track new housing developments at 11 surplus city properties to create 10,000 new residential units – 3,700 of which will be affordable.”
The latest plan approved by the city’s realty agency in late September would see almost 1,000 affordable units built on city land as part of developments on four parcels.
3. ONTARIO’S AFFORDABLE HOUSING PLAN
In June, Ontario approved the More Homes, More Choice Act, 2019: Ontario’s Housing Supply Action Plan (previously known as Bill 108), to put more affordable home ownership in reach of more Ontarians, build the right types of homes in the right places, cut burdensome red tape, and help taxpayers keep more of their hard-earned dollars.
An emailed statement from the of the office of Steve Clark, Ontario’s Minister of Municipal Affairs and Housing, said “We are making it easier to build rental housing, including secondary suites like basement apartments or laneway homes. As more units are built, tenants will have more options and rents should come down.”
The statement also said, “At the same time, our Community Housing Renewal Strategy – whether it’s not-for-profit, co-operative or municipally owned housing – plays a critical role in providing affordable housing for those who are unable to access the private rental market, so all Ontarians can find a home that meets their needs. As a first step, the ministry is providing $1 billion in 2019-20 to help sustain, repair and grow community housing and help end homelessness.
Many developers and property managers support More Homes, More Choice: Ontario’s housing action supply plan, not as a panacea to the housing crisis, but as a start in the right direction.
Kris Boyce, CEO of Greenwin Inc., said in an email statement, “The fact is, developers have been facing an uphill battle to create new housing for years.
“As a developer and property manager, Greenwin is in a unique position where we see the demand for housing firsthand; we’re also well acquainted with the time consuming and costly barriers that prevent it from being created,” Boyce said. “We’re very optimistic that the province’s new action plan will lessen these barriers, paving the way for more homes to be built, leading to more choice, accessibility and affordability.”
4. CANADA’S AFFORDABLE HOUSING PLAN
Dana Senagama, Canada Mortgage & Housing Corporation (CMHC) senior specialist, market analysis, market insights, said partnerships among the city, provincial and federal governments are essential to fix the housing crisis.
“Partnerships must be at the heart of everything we do,” she said. “They need to be nurtured, developed and, often, re-examined. That’s why we’re looking at ways we can further cultivate collaboration.
“We also set the foundation for all levels of government to work together to achieve a long-term shared vision for housing. The multilateral Housing Partnership Framework was endorsed by our provincial and territorial counterparts,” Senagama said. “It sets the stage for the launch of provincial- and territorial-delivered National Housing Strategy (NHS) initiatives.”
That’s what the CMHC touts with Canada’s National Housing Strategy: A Place to Call Home, the 10-year, $40 billion plan to give every Canadian a home.
“Relationships are also at the core of the National Housing Co-Investment Fund, an NHS initiative we launched last year,” said Senagama. “The Co-Investment Fund prioritizes projects that support partnerships among governments, nonprofits, the private sector and Indigenous organizations.”
The NHS sets out to achieve bold outcomes over the next 10 years, including:
- Reducing chronic homelessness by 50%
- Housing need reduced or eliminated for 530,000 households
- Creating 100,000 new housing units, and repairing and renewing more than 300,000 housing units, and,
- Protecting 385,000 community housing units and expanding by another 55,000 units.
5. HIGHEST RENT IN CANADA
Toronto continues to have the highest rent among the largest Canadian cities with Vancouver typically not far behind.
Average monthly rent for a one-bedroom home in Toronto in August was $2,330 and $2,904 for a two-bedroom, according to the most recent National Rent Report by Rentals.ca and Bullpen Research & Consulting.
Unless you have a high paying job and own a home or are already in a rent-controlled unit — good luck.
The rapid rise in rental rates over the last 18 months, brought on by increased immigration, solid job growth, and the mortgage stress test has hurt low-income workers the most.
The Canadian Centre For Policy Alternatives (CCPA) “Unaccommodating – Rental Housing Wage in Canada” published in July said nearly every neighbourhood, in all parts of Canada, the hourly wage needed to afford an apartment rental is far above minimum wages and rising quickly.
The study said there are no neighbourhoods in Canada’s biggest cities (Greater Toronto Area and Metro Vancouver) where a full-time minimum wage worker could afford either a modest one- or two-bedroom apartment without spending more than 30% of their earnings, which is CMHC’s income threshold for “Core Housing Need.”
The CCPA says about its report: “rent is almost always higher for unoccupied apartments.” Rentals.ca data from October 2018 to July confirms this is true — not only for unoccupied apartments, but also for all other vacant rental types.
According to the Rentals.ca August National Rent Report, a tenant in Toronto would need to make $34.90 per hour to afford a one-bedroom unit in the 10th percentile based on monthly rent accounting for 30% of the tenant’s gross income, up from $29.17 in October 2018.
In the same 10 percentile, a tenant would need to earn $39.06 an hour in July, up from $34.38 in October 2018 for a two-bedroom.
6. WHY TORONTO?
In an analysis from Ryerson University’s Centre for Urban research and Land Development, Toronto is by far the fastest growing city in Canada and the United States combined.
And, some of the best and brightest are coming for the booming tech industry.
The city is also one of the biggest tourist attractions in North America.
Toronto is diverse, friendly, safe, easy to get around via transit, above average for foodies, and according to one survey the best city in Canada to find love.
But if you don’t have housing nailed down, or live uncomfortably with your parents and need a place to live — good luck with that.
Side by side the rush to live in Toronto is the reality of the rental vacancy rate, which the CMHC puts at 1.1% late last year, 1% this year and projects to be 1.1% again in 2020.
7. WHAT A FEW HOUSING EXPERTS THINK
Rentals.ca asked rental and housing market analysts, government officials and experts to offer their suggestions to fix Toronto’s housing/rental calamity, and to discuss their views on the pitfalls and positives of government proposals.
Josef Filipowicz, senior policy analyst for the Centre for Municipal Policy The Fraser Institute, said “big ideas are required to overcome the current shortage.” Two big ideas he likes are “allowing secondary suites in all neighbourhoods, as well as fundamentally shifting the economic case for rental development.
“It will be interesting to see whether the province’s commitment to defer development charges on rental development will shift this equation,” he said. “But a lot more could be done by the city, like expediting approvals and providing more clarity on what can get built and where, as well as revisiting its property tax policy.
“On this last point, rental building owners must consider long-term expenses like property taxes,” he said, “Even a marginal decrease could go a long way in making rentals a more attractive proposition for developers.”
But Geordie Dent, the executive director of the Federation of Metro Tenants’ Associations (FMTA), puts the burden on government to help renters — not developers and property owners. The FMTA is a nonprofit organization which advocates for tenants’ rights.
(Another tenants’ rights group, Ontario Tenant Alliance sponsors the Ontario Tenant Rights Facebook page with more than 27,000 members.)
He said local, provincial and federal governments could quickly help open up supply in a couple of ways. First, he advocates taxing owners of long-term vacant units. He said there are as many as 100,000 vacant units in Toronto.
Second, he said the city could better regulate short-term rentals, which he believes could transfer about 6,000 units to long-term renters.
A Toronto housing tribunal convened hearings in late August and early September to hear arguments to strengthen regulations of short-term rentals to open up more units for long-term renters because of Toronto’s housing crisis.
An adjudicator will decide sometime in late October whether these regulations imposed by the Toronto City Council earlier in 2018 to restrict rentals to an owner’s residence and to make short-term renters pay a 4 percent tax to the city will be imposed.
The city has argued the regulations are important to maintain the accessibility and affordability of long-term rental options as the city faces an acute housing crunch.
Dent’s top recommendation to fix the affordable housing crisis is for the national government to do what it has done in the past — build affordable housing.
“We’ve been through this before,” he said. After WWII with veterans coming home, “the government launched a big national housing program,” but only after “protests and browbeating politicians to build affordable housing.”
He said those programs were suspended in the early 1990s. Dent believes the government at all three levels needs to change course to again build affordable housing. He doesn’t see supply as the main issue in the housing crisis; “mostly what is built is built for investment,” he said, “and not for people to live in.”
He said what has happened to the city he “can’t afford to live in anymore” is the “Manhattanization” of Toronto. More housing has been built “than ever before.” But, he adds, it’s mostly all for the wealthy while the middle class and poor are being squeezed out of the city.
“Families can’t afford to live here,” he said.
What Dent is most worried about is increasing homelessness in Toronto.
“Shelter use is exploding, and about 100 people died on the streets last year,” he said.
According to fredvictor.org:
- Over 9,200 people in Toronto are homeless on any given night.
- 90% of the shelter system is occupied every night.
- 9,700+ people are on the subsidized housing waitlist
- 76 % of homeless people say what they really need to get out of homelessness is help paying Toronto’s high rents
Fred Victor cites these sources for its statistics: Statistics courtesy of City of Toronto, Homeless Hub, Wellesley Institute. The organization provides housing and shelter for men, women and families who live in extreme poverty, are marginally housed or are homeless.
The Fred Victor site says “the key driver of homelessness in Toronto is the economy and the housing market. Rental costs have increased dramatically over the past 10 years and a lack of affordable housing has increased to record high numbers… Affordability is the most significant challenge in helping move people out of shelters.”
Fred Victor.org also says on its site: “Toronto’s housing and homelessness crisis is broad and deep – and has been in the making for a couple of decades. The solution requires much more affordable and supportive housing than the Housing Now plan can deliver. To put it another way, we need an extensive initiative that can deliver the equivalent of the Housing Now Program each year on an ongoing basis.”
So, what does Dent think about the affordable housing initiatives by Toronto, Ontario and Canada?
He views the city’s ‘Housing Now,’ the province’s ‘More Homes, More Choice: Ontario’s housing supply action plan,’ and the federal government’s 10-year, $40 billion National Housing Strategy as half measures.
He called Toronto Mayor John Tory’s “Housing Now’ plan to fast-track affordable housing on 11 sites owned by the city “a good plan for 2009,” but Dent’s not sure if it’s enough for 2019.
He is not fond of Ontario’s ‘More Homes, More Choice: Ontario’s housing supply action plan,’ that among other things cuts the red tape in getting affordable housing approved and backs policies to encourage densification.
He said the FMTA was invited to the table to discuss affordable housing solutions, but that every suggestion from the group was “completely ignored.”
Needless to say, Dent is not hopeful.
He believes the “rental market should become healthier,” as a result of Ontario’s Housing Supply Action plan.
He said 1,849 units were added to the GTA in the first quarter of 2019, and 4,300 units are in the pipeline, according to Urbanation data.
As more units come online, that should impact housing demand.
“It’s common sense,” he said, “More supply means better rents.”
He cites the Urbanation Q2 survey “of new purpose-built rental apartments completed since 2005 across the GTA reported an average vacancy rate of 1.5%, rising from a low 0.3% in Q2-2018. While remaining exceptionally low, vacancy rates reached their highest level since Urbanation’s survey began in Q1-2015.”
Irwin said FRPO members are more interested in developing apartment buildings again because of Bill 108, More Homes, More Choice Act. He said the economics did not support developers building rentals before, and the bill is changing that.
But he’s also a realist.
“The system is not working,” he said, “and, there’s no magic bullet to fix it.”
He’s optimistic about the recent city and provincial programs, but disappointed that some Toronto city officials have criticized Ontario’s Housing Supply Action plan.
If Toronto doesn’t like the plan, he asked, “What’s the alternative? What would they propose instead?”
He agrees with Dent that the city should better regulate short-term rentals to open up units for more long-term units. (We’ll see what happens in late October).
But Irwin disagrees that government-built affordable housing will ease the crisis.
He said it has not been proven “that government getting involved in building apartments and being in the housing business is a great model.
“The buildings in the city in worse repair are managed by the city,” he said.
He has also suggested adding staff to the Ontario Landlord Tenant Board to speed up processing cases to benefit both tenants and landlords.
Irwin said both sides are entrenched, but his hope is “we can find areas of common ground and over time bridge some gaps.” He said he realizes this is a lofty goal.
“But look, we have a housing crisis in Ontario, and we can debate policy all we want,” he said. “This is not going to be solved without help from the private sector.”
Irwin said factions need to come together to seek some solutions. “Many millennials do not believe home ownership is an option.”
Irwin is right. Differing factions need to come to together and knock off issues one at a time.
And, Senagama is right. Getting back to a healthy vacancy rate and offering enough affordable housing will take collaboration among local, provincial and national governments, the private sector, nonprofits and Indigenous organizations.
And Dent is right to worry about increasing homelessness in Toronto, especially with winter coming.
Maybe Senagama, Dent and Irwin should go have coffee for a start.
We’ll see what comes of short-term rentals later in the month. Cutting fees and lengthy delays for developers to actually get shovels in the ground for purpose-built rentals in Toronto would be another step. The provincial Bill 108 is trying to do some of that. Next, maybe taxing owners who let units sit vacant.
8. TRADE-OFF AMONG LIVABILITY, AFFORDABILITY AND EXCLUSION
And last, here’s some common-sense perspective from Ben Myers, president of Bullpen Research & Consulting from a blog post on newinhomes.com.
“Whenever planning changes are suggested, many politicians and planners hide behind the word “livability,” — it would be nice of them to acknowledge that the cost of living should be considered when discussing the livability of an area.
“Ignoring the fact that GTA new condo prices have doubled in less than 10 years will not make it go away. Don’t get me wrong, some of the responsibility for that price spike can be laid at the feet of developers, but there is plenty of blame to go all around. I’m looking at you NIMBYs.
“Everyone wants a livable city, an aesthetically pleasing municipality with neighbourhoods that adhere to the principles of good planning.
“But it would be nice, and there would be less vitriol all around, if the folks at the forefront of those decisions would more regularly discuss the trade-off among livability, affordability and exclusion.
“For every setback to protect privacy, environmental protection, heritage protection, view plan protection, reduced shadow, prolonged approvals, new development fees, green roof, parking requirements, architectural controls, mandated suite mix, or other restrictive zoning measure results in either lost square footage and fewer units, higher prices for consumers, or a shelved project.
“When homes don’t get built, someone loses out on the game of musical chairs, and it is almost always the least affluent person that does.
“Do we want a region with 35-year-olds living with their parents, the less affluent forced to move away or share cramped spaces, and couples choosing not to have children because they can’t afford them?”
Good question to ponder from Myers for all Toronto citizens when they vote Oct. 21.
Regardless of the outcome of the election, he or she will be faced with a rental and affordable housing crisis in Toronto, and will need to come up with measures to get Canada’s largest city back to a healthy housing market and vacancy rate.