New hope for renters and first time buyers or another dream?
New changes will soon be introduced in the Toronto housing market that might lead to more affordable housing in Canada’s hottest market. Developers, landlords and renters are all watching to see how it will affect rents and house prices.
Beginning in 2022, close to 10% of all condominium developments are expected to be secured by the City as affordable housing. This figure would be increased to 22% by 2030. Toronto City Planning staff have finalized the plan to implement this inclusionary zoning.
The City’s Planning and Housing Committee wants to advance these goals: expansion of the Housing Now initiative; the Multi-Unit Residential Acquisition (MURA) Program and a proposed new Inclusionary Zoning (IZ) policy.
Mayor John Tory outlined that initial estimates show just these three initiatives together could help create more than 12,000 affordable homes within the next five years.
Affordable units would stay affordable for at least 99 years. Rents and ownership prices would be based on proposed new income-based definitions of affordable housing, targeting households with an annual income of between $32,486 and $91,611, which includes individuals such as early childhood educators, dental assistants and bank clerks.
IZ is already used in more than 800 jurisdictions in the U.S., Australia and Canada. This represents a much-needed shift in how the City treats new developments. It will ensure affordable housing is incorporated in new developments on a consistent basis rather than being negotiated on a site-by-site basis.
The new affordable rental homes to be created under this program will provide much-needed housing options for households earning between $21,000 and $68,000 per year, and deeper levels of affordability may be achieved for eligible households by adding additional housing benefits.
The introduction of this policy tool represents a shift in how the City treats new developments. It will ensure affordable housing is incorporated in new developments on a consistent basis rather than being negotiated on a site-by-site basis, providing clarity for all parties from the very beginning.
Property tax waivers coming soon.
A new Multi-Unit Residential Acquisition (MURA) Program coming soon will also provide grant funding and Open Door Program incentives to certain groups.
It will offer exemptions from property taxes and waive application fees to qualified non-profit and Indigenous housing groups to assist them to purchase and renovate existing market rental properties to ensure they remain permanently affordable rental homes for Toronto residents with low-and-moderate incomes.
“We continue to build upon our experience in creating and retaining affordable housing for the hardworking residents in this city who find it hard to make ends meet. Through innovative programs and continuous improvement, we are well on our way to delivering on our goal of creating 40,000 affordable homes by 2030, said Deputy Mayor Ana Bailão (Davenport), Chair of the Planning and Housing Committee
How the new zoning policy on affordable housing could affect homeowners and developers.
Profit-focused landlords and developers are often wary of mixed housing developments.
They fear that the mandatory inclusion of affordable housing in new condos would reduce the overall value of the properties and alter the dynamics of the neighborhood
Since affordable or mixed development houses are given to low-income Canadians as well as immigrants, such condos may no longer command premium pricing compared to other properties that do not have such zoning.
For developers, having to allocate 10% or more of all new condos to the affordable housing plan will certainly put a squeeze on their profit margins.
These could lead to a drastic increase in condo prices or a slow down in new developments.
The rise and rise of house prices and rents
The plans by the City of Toronto to incorporate more affordable housing in its urban development strategy might be too little or too late, or both.
The average selling price of a Canadian home is now almost $700,000, a figure that has risen by more than 38% in the past year.
Even with the new stress test rules and stricter mortgage guidelines, the Canadian housing market is not showing any signs of cooling.
Rents are also moving in the same direction, making life more difficult for immigrants landing in the three most popular cities in Canada for newcomers- Toronto, Vancouver and Montreal.
An anti-poverty group is calling a Toronto-based developer’s recent plan to buy $1 billion worth of single-family homes and turn them into rental properties a “frightening” example of how even more people will be priced out of an increasingly expensive housing market.
The plan would see Core Development Group build a single-family home rental business by buying housing stock in medium-sized cities across Ontario, including London, Kingston, Hamilton, Barrie, Cambridge, Peterborough, Guelph and St. Catharines.
Will they be affordable for renters and still be profitable to the investors? Those two elements don’t usually go together. Renters and first-time home buyers should brace up for more turbulence in the Canadian housing market.