THE ANALYST : Premier Ford: Seven steps to housing affordability
By Andrew Brethour
It’s early in the mandate, but here are seven steps to relieving the price pressure and improving housing affordability in the GTA that Ontario Premier Doug Ford should consider. None of these ideas are quick fixes and each will require careful examination and implementation over several years. It took us 15 years to get into the untenable position we find ourselves in today and it will take a while to turn the “affordable ship” around.
Supply, Supply, Supply
The last year of the housing supply study coordinated by our firm, PMA Realty, in consultation with CMHC, the Ministry of Housing and BILD was in 2003. The study was completed annually from 1997 and created a databank of net residual residential land supply covering 37 municipalities in the GTA. The total number of lots (low density) and units (high density) were identified as in process, at draft stage and in registered plans of subdivision. All zoned land was included but not yet identified.
Provincial policy at the time was to maintain a three-year supply in these three noted categories. Today, 15 years later, we have a three-month supply. The province introduced the growth plan in 2004 but never did an economic impact statement. In 2004, a serviced 40-foot lot sold for $2,500 per front foot, or $100,000. Today, that same lot — if you can find one — sells for $20,000 per front foot, or $800,000. This reckless and irresponsible escalation in the underlying price of land was driven mostly by provincial policy, not consumer demand.
Mr. Premier, step one is to re-institute the annual land supply analysis and clearly determine the current and projected supply of lots and units in the now Greater Toronto and Hamilton Area. By 2030, only 12 years from now, population growth is projected to move from six million to nearly nine million people. Without a barometer of supply, growth will stagnate and go elsewhere.
The approval process takes too long and is too costly, further affecting affordability. Mr. Premier, review, streamline and deregulate the approval process. The GTA must compete on a North American, even global, basis for new employment opportunities. Many southern U.S. cities where growth is comparable to the GTA take a matter of months from land purchase to approval for construction. In the GTHA, it is an average of more than 10 years. Provincial policy should be set at a maximum of three years.
Mr. Premier, that is your challenge.
Mr. Premier, much has been written, studied, reviewed and “controlled” in rental housing, yet these controls have not produced more rental stock but, in fact, less. And the existing stock is crumbling.
Yet the divide between the “protected consumer” and the purpose-built rental developer is not that far apart. Rent controls were reset last year in the fair housing plan at an annual increase limit of 2 per cent. Rental buildings are financed over a 20 to 30 year project life period. An extra 1.5 per cent in annual rental increase would make the difference between thousands of projects being cancelled and thousands being built.
Mr. Premier, allow annual rent increases to rise to 3.5 per cent and you will be amazed at the amount of rental activity that will produce.
The tax component of a new home was recently outlined in an excellent C.D. Howe Institute study — over $100,000 per unit in Ontario and over $150,000 per unit in the GTA. If we truly want greater affordability, it can be delivered with lower taxes and greater supply. As sales volumes have declined drastically in the last two years, the municipalities’ response to declining revenue is to increase the development charge. A Catch 22 when it comes to affordability.
Mr. Premier, examine municipalities’ ability to finance infrastructure with an underlying purpose to reducing taxes on new construction. Let’s look for alternatives. One might look at sewer and water infrastructure, currently financed by 30 to 40 per cent of the development charges on new homes. The real cost, in fact, subsidizes existing homeowners. Raise sewer and water rates on all housing to properly reflect the cost, which in turn will lead to greater conservation and more affordable new housing.
Replace the OMB
Mr. Premier, the new system introduced in the dying days of the Wynne government eliminated the OMB and replaced it with a Local Planning Appeal Tribunal (LPAT), where “not in it in my backyard” reigns supreme. This will further delay the approval process. Create a Provincial Dispute Resolution Panel with the oversight to look at the “bigger picture,” the provincial vision for housing density and affordability.
Mr. Premier, re-introduce the office of the Development Ombudsman so that disputes or delays are resolved or arbitrated before reaching the OMB or its replacement body.
Modify the Planning Act
Re-introduce the ability of a developer to bring forward a plan from outside an urban boundary. Let the developer front the cost of services. The municipality can still say no. This provision was removed from the planning act in 2004, further constricting supply.
The Hidden Supply – Employment Lands
Currently, Mr. Premier, employment lands are untouchable. They cannot be considered for residential use yet the very nature and scope of industrial commercial lands has changed dramatically in the last 15 years.
Introduction of Robotics and AI have modified the design and formation of today’s employment spaces. Malone Givens Parsons points out we have used only 34 per cent of available employment lands in the GTA. Conversely, we have used or allocated over 57 per cent of available residential lands. Integrating mixed-use development into employment lands would open up supply dramatically from the current rigid lines drawn on our municipal maps.
Just take a walk around existing older employment designated lands today and the potential supply jumps right out. An instant supply solution is available by potentially converting employment land to mixed-use residential.
Mr. Premier, study the implication and provide the supply solution.
So, there you have it, Mr. Premier, seven steps to improving housing affordability in the GTA.
Mr. Premier, start with theses simple Seven Steps and perhaps another “promise made, promise kept” is possible on the affordable housing file in your first term. Good Luck Mr. Premier!
Andrew Brethour is chairman and CEO of PMA Brethour Realty Group. http://www.pmabrethour.com/