A construction crane visible at the site of a condominium development in downtown Toronto, on Oct. 18, 2021.Fred Lum/The Globe and Mail
If you worry about the shortage of reasonably priced housing in Canadian cities – and who doesn’t – have no fear. Toronto city council has an answer: Just make developers build more of it.
Developers, after all, have been making money hand over fist during the great Canadian housing boom. Why not simply require them to include affordable, below-market units in any project they build? Other cities have tried it. Affordable-housing advocates love it. Those deep-pocketed developers can afford it. Easy.
Council embraced the idea with gusto this week, voting 23-2 to give itself the power to impose “inclusionary zoning” on large tracts of the city. Starting in September of next year, Toronto would force developers who put up buildings near big public transit stations to make 5 per cent to 10 per cent of the units affordable. By 2030, the figure would rise to between 8 per cent and 22 per cent. The policy is aimed at those too poor to afford Toronto’s stratospheric home prices but not poor enough to qualify for social housing. The units would remain affordable for 99 years, with rents and prices limited.
Around City Hall, there was talk of once-in-a-generation breakthroughs. Mayor John Tory said it was high time for the development industry to take a bigger role in providing affordable housing. Councillor Mike Layton called it a “big day” for the city, saying governments had to stop “enabling” developers.
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Whether it was a good day is another question. Interventions of this kind usually come with a cost. When governments compel private companies to keep prices down, the companies will find a way to make up for it one way or another. Developers who are told to charge lower prices on some units are bound to charge more for the rest. In effect, the owners and renters of market units will be made to subsidize the inclusionary-zoning ones.
That hardly seems fair, especially when even fairly prosperous people have a tough time getting a foot on the housing ladder. It is not just the penthouse dwellers who will pay the freight, but the young couple buying their first condo or the office worker looking for a retirement perch.
Worse, developers may simply build less. As lucrative as property development can be, it works with tight formulas of investment and return. Land, construction and operating costs are high in a top-tier city such as Toronto. If developers decide they can’t make a buck on a project under the new regime, they may just delay or cancel it. That’s not good for anyone. Toronto is the country’s biggest landing spot for new immigrants. It desperately needs to increase housing supply to meet the demand.
This could have gone a different way. Development groups had asked the city to give them incentives, rather than commands, to build more affordable housing. Many North American cities have taken that approach. Some offer to waive density limits so developers can build higher towers and more units. Others lower hurdles on building approvals or give builders a break on development charges. Toronto rejected those ideas and went with straight regulation.
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That is happening more and more these days. As alarm over housing affordability rises, governments are jumping into the game by imposing more rules and levies: foreign-buyer taxes, speculation taxes, vacant-homes taxes. The federal government, for one, is promising a ban on blind bidding for homes. It blames the system for pushing up prices.
A better way is to just clear the road so builders can build. Toronto could do away with the parking-space requirements that push up the cost of residential units in new buildings by tens of thousands of dollars. It could cut the red tape that adds months or years to the time it takes to design, build and open a new building. It could push for the lifting of rent controls, which discourage developers from putting up more rental buildings and landlords from maintaining their apartments. Best of all, it could ease the zoning restrictions that make much of the city off limits for everything but single-family homes.
Everyone wants to see more housing of the kind that ordinary people can afford – even, believe it or not, many civic-minded developers. Instead of giving them orders that might actually make housing more expensive, cities should be making it easier for them to do their job.
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