There is no silver bullet for Canada’s housing woes, federal Finance Minister Chrystia Freeland cautioned while delivering the federal budget this week — a road map that includes an array of pitches to build more homes, stifle flippers, and overhaul housing programs that have faced scrutiny.
The Toronto area has felt the weight of overlapping housing challenges, which ripple out countrywide.
Million-dollar home prices have forced would-be buyers to stay in the rental market, as soaring rent costs squeeze out the city’s essential workers. With thousands relying on the city’s shelter network, the number one reason for homelessness cited during last spring’s street needs assessment was that Toronto housing costs were just too high.
What will the newest slate of federal housing promises mean for residents of the GTA? While many details are yet to come, here’s a look at what this budget could mean on the ground:
Market-priced home supply
Will the budget’s $8.8 billion to build 100,000 more Canadian homes in the next five years make GTA housing more affordable?
Royal LePage CEO Phil Soper says the injection of supply will help, particularly as the budget’s intent aligns with that of the Ontario government and the City of Toronto. The problem, he said, is the tidal wave of demand — millennials are aging out of their condos to raise their families and a record 400,000 immigrants landed last year.
The budget “is not quite enough,” says Karen Chapple, director of the School of Cities at the University of Toronto.
“It’s not really addressing the structural issues in the GTA — the declining population in some of the inner ring suburbs and the unevenness of growth. We have so much low-density housing and it’s very hard to move that stock because it’s inhabited by middle-class, long-term homeowners,” she said.
Chapple says Toronto is doomed to keep building “tall and sprawl” — ultradense towers and exurbs that require people to commute long distances to work, unless it removes some of the existing barriers. Among them, she said, are zoning that makes it easier to rebuild monster homes than multiple units; urban design regulations, and appeals and delays at the Ontario Land Tribunal.
“This money doesn’t quite do the trick without dealing with these details,” said Chapple.
Foreign buyers
The federal government’s two-year ban on foreign home buying made for great budget headlines, but it won’t contribute to housing affordability in Canada and certainly not in the Toronto region, said Royal LePage’s Soper.
He says the issue of foreign buyers probably registers with people who have misconstrued immigration for investment.
In 2017, such a ban might have had more impact but now the run-up in GTA home prices is higher at the tail end of a pandemic when the borders have been effectively sealed for nearly two years.
“This time it’s a made-in-Canada problem. The 2020 to 2022 rise in home prices includes virtually no foreign investment,” said Soper.
In Vancouver, which has a more concentrated population, it could mean a decrease in competition for extravagant homes among the super rich. But it will have less impact in Ontario, he said.
Soper notes the ban includes some significant exemptions, such as recreational properties that are popular with Americans in places such as Muskoka.
“We have 850,000 foreign students (in Canada). A small portion will live in homes they own and they’re exempt,” he said.
The Toronto Regional Real Estate Board says land registry data shows an average of 200 transactions a month by foreign buyers in the Greater Golden Horseshoe. But for the last two years that number has been about half or about 1 per cent of total real estate sales. There were about 11,000 sales in the real estate board’s territory in March.
Home flipping
Experts differ on the effectiveness of a new measure announced to curb house flipping.
The step, which impacts residential properties sold on or after Jan. 1 next year, would see individuals paying “full taxation on their profits as business income,” for properties held for less than a year (excluding homes sold under extenuating circumstances such as a death or divorce.) The measure would see Ottawa reaping an additional $15 million a year.
The move is a switch from current legislation that permits a capital-gains tax exemption on all principal residences.
Frank Clayton, senior research fellow in the Centre for Urban Research and Land Development at Ryerson University, believes the policy is aimed at a problem that “will solve itself.”
Clayton argues that when the housing market peaks, which he says it is going to or has already, due to interest rate hikes, “if we wait until 2023 (house flipping) is not going to be a problem because the market will be softer and people won’t be (doing it).”
John Pasalis, president of Realosophy Realty, a Toronto real estate brokerage that uses data analysis to provide advice to residential real estate purchasers, investors and sellers, holds similar doubts about the policy.
“The speculation tax is unlikely to have a big impact on the housing market,” Pasalis says, adding it’s “very rare” to see investors buying and selling a home within 12 months without doing any major renovations to it, simply to profit from rising house prices.
Rental housing
What’s in it for renters?
For one, a reform of the federal government’s multibillion-dollar Rental Construction Financing Initiative, which was introduced in 2016 to create more rental units, but has faced criticism over its formula — which currently lets some above-market-rent units be labelled “affordable housing.”
The rules are based on median family incomes. Using Toronto’s 2019 median, that would mean any rental could be affordable if it cost $2,228.75 or less — a rate that falls above this year’s average market rate for even a three-bedroom apartment. The new target Ottawa is pledging would ensure at least 40 per cent of the units fall at, or below, 80 per cent of local market rate.
“It was something that really needed a second look and we’re glad that they are taking a stronger approach,” said Douglas Kwan, a lawyer with the Advocacy Centre for Tenants Ontario.
He was encouraged, too, by a vow to federally review “housing as an asset class,” including the way corporate players in residential real estate are taxed. While Kwan was hoping for more immediate steps, pointing to the trend of rental buildings being bought by the likes of real estate investment trusts, the budget hints at “potential early actions” by year’s end.
Also on the horizon: a strategy that tackles the specific challenges faced by Indigenous households in cities such as Toronto. The budget grants a $300-million ask from the National Housing Council to develop an Indigenous housing strategy for urban, rural and northern settings — with the council lambasting the current approach as having “demonstrably failed.”
Deeply affordable housing
With the promise of $4 billion to accelerate housing efforts by municipalities, Kwan is looking for detail — namely, how much deeply affordable versus market housing would be boosted, and if there would be any marked increase in undersupplied rent-geared-to-income homes.
As of late 2021, more than 78,800 households in Toronto were waiting for rent-geared-to-income housing, with just 2,821 housed off that list last year. Tens of thousands are also waiting for units with support services. For those residents, Coun. Ana Bailão — Mayor John Tory’s designated housing advocate — said she was pleased to see a two-year, $1.5-billion extension of the federal Rapid Housing Initiative, which supports deeply affordable projects in the city.
By year’s end, Bailão says Toronto is expecting to have 1,000 RHI-funded units opened up — though she cautioned that with the city’s depth of need, they’d always want to see more funds.
While awaiting details, she’s hoping the accelerator effort offers supports that could be layered on top of city initiatives to further lower the cost of its resulting units.
Also well-received: a promise to keep up the higher levels of funding to combat homelessness allocated during the pandemic, and a pledge to issue a one-time $500 payment to those struggling with affordability.
“Even as fast as we’re building our modular housing, it’s still taking six months, nine months, a year,” Bailão said. Some households, she said, needed help “right now.”
Co-operative housing
More co-op housing appears to be on the horizon, with the federal government promising a new development program with a target of 6,000 units countrywide, and $1 billion in loans to support co-op projects, reallocated from the existing Rental Construction Financing Initiative coffers.
Toronto has a diverse co-op market, with some requiring buy-in, but others operating similarly to a rental — though without a traditional landlord or profit incentive, with residents becoming members of the co-op that can vote on decisions like when to raise housing bills.
But while co-ops provide affordable housing to some city-dwellers, advocates and elected officials alike have said federal funding doesn’t compare to what it’s been in the past — meaning building a co-op today is much harder, and available units have become a rarity.
Tom Clement, executive director of the Co-operative Housing Federation of Toronto, said the budget vow was “significant,” though details of the program are still being ironed out.
He’s hoping to see some grants available along with the promised loans, arguing that especially in expensive markets such as Toronto, loans may help secure the brick-and-mortar building, but that further assistance would likely be needed to offer rentals at an affordable rate.
Clement also hopes to see a program that offers some long-term certainty, in order to ensure a steady pipeline of new co-op units, as well as allowing for ongoing partnerships with the private sector to help boost supply and attracting more talent to work in the co-op sphere.
“To look at this as a long-term investment, to me, is really key,” he said.
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