Construction set to start on Housing Now project, as questions remain

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By Michael Lewis

Special to Ontario Construction News staff writer

Toronto says construction is to begin in July near the Kipling TTC subway station in Etobicoke at the city’s first Housing Now affordable housing project with work to start at two other shovel-ready sites, 50 Wilson Heights Blvd. and 140 Merton St., before the end of the year.

In a statement Friday the city said additional city support has been approved to unlock the sites, adding that Toronto continues to work “as quickly as possible” with non-profit and private sector developers to get shovels in the ground while navigating a number of external challenges.

Toronto City Council in May adopted recommendations of the Housing Now 2023 Progress Update calling for urgent actions from all levels of government to “unstall” the Housing Now program launched by Mayor John Tory in 2019 but which has yet to see any construction begin.

Toronto says impacts of the COVID-19 pandemic, increases in construction costs and interest rates, labour shortages and global supply chain disruptions have delayed Housing Now projects, as well as other residential projects in Toronto and across Canada.

The city says the program has also faced headwinds due to changes to the federal National Housing Co-Investment Fund that resulted in grant funding being capped at levels too low to support the cost of developing new affordable housing in Toronto. At the same time, Bill 23, More Homes Built Faster Act, eliminated housing services from development charges revenues, which the city calls its primary funding tool to support the delivery of new affordable rental housing supply. The Ontario PC government’s Bill 23 waived the fees builders pay to municipalities as part of an effort to lower costs for developers and help them meet ambitious home construction targets. But Toronto says the move will cost it $1.2 billion in lost revenue over 10 years.

A spokesperson for Municipal Affairs Minister Steve Clark said after the province eliminated the fees on affordable and non-profit housing it commissioned an external audit of municipal finances, including reserve funds and the administration of development charges. Nazaneen Baqizada in an email said Ontario is moving forward with the audit of six municipalities, including the City of Toronto.

She said Toronto recently approved the audit’s terms of reference and “further information will be provided as it becomes available.” She did not say when the audit will be completed and if lost development fees will then be released to the municipalities.

“The province and the city will use this process to get the facts, make improvements to how municipal funds are managed, and work towards a sustainable long-term solution for city finances.”

Ontario has said that municipalities will be compensated for the lost development fee income, but the city had said that it was requiring written conformation this summer before the first three shovel ready Housing Now projects in Etobicoke, North York and Scarborough can proceed.

Housing Now aims to deliver 10,000 affordable rental homes – one third of the total homes that will be delivered through the program – within mixed-income, mixed-use and complete communities by 2030.

Mark Richardson, technical lead of volunteer housing advocacy group HousingNowTO, which has been monitoring the progress of sites proposed for Housing Now, said Bill 23 takes away the city’s ability to use fees charged on market rate developments to offset discounts on affordable housing. But he said the province has unspent, unallocated budget dollars that could make up for the loss, adding that province and Ottawa need to step up with grants and zero or low interest loans to fund the multi-year build out of the Housing Now project. “It only gets more expensive every month you wait.”

Richardson also said that while early blocks of Housing Now sites will break ground this year after Toronto’s mayoral election in late June developers will not fully buy in until they see long term financial commitments from Ottawa and Queen’s Park. He added that a new mayor in Toronto and the city’s recently appointed deputy city manager for development could help build trust among developers in the long-delayed Housing Now program.

Arguing that the Ontario Housing Supply Action Plan along with Bill 23 sets up roadblocks to new affordable rental housing, the city has recommended enhancements to federal programs including those managed by the CMHC and the Canada Infrastructure Bank.

A CMHC spokesperson said the Crown corporation is working with all levels of government “to create more positive housing outcomes in Toronto,” noting that the application intake window for funding through the $4 billion Housing Accelerator Fund announced in the 2022 budget will open in coming weeks. “Applicants are invited to think outside the box and develop housing action plans with supply growth targets and initiatives to grow housing supply and speed up housing approvals,” Claudie Chabot said in an email.

A key component of the city’s HousingTO 2020 2030 development plan, Housing Now was to expedite construction of affordable rental housing in a city where about 40 per cent of renter households live in unaffordable accommodations. The city also faces   pressure to expand rental housing supply to support population growth through immigration, with federal immigration targets of 500,000 annually by 2025, and a sizable portion likely to settle in Toronto.

Housing Now aims to use surplus city owned land to build units in transit-oriented, mixed-income communities via a streamlined development process with quicker approval times. The program also offers incentives including relief from development charges, building permits, planning applications and parkland dedication fees.

The city has offered effectively free land from its real estate portfolio under 99-year leases including acres already zoned for mixed use residential and the Housing Now model requires that a minimum 33 per cent of the units be operated by city agencies. At least one-third of the units would be available at no more than 80 per cent of market rent.

Deputy Mayor Jennifer McKelvie calls Housing Now an innovative way to increase the supply of permanent and affordable rental housing but said “new and enhanced investments” are needed from the federal and provincial governments to deliver the full program.

The city says it has committed more than $1.3 billion in land value, capital funding and financial incentives through measure such as the forgiveness of property taxes on affordable units and has allocated 21 sites to Housing Now, with 10 re-zoned and market offerings completed for six of them. The original plan was to hand the projects to city housing agencies for management within four years. That has not happened, with some blaming the city’s approval process for delays.

Richard Lyall, president of the Residential Construction Council of Ontario, points to a study by think tank C.D. Howe that says regulatory barriers and “other market dysfunctions” in Toronto have pushed up the cost of building up by $350,000.

“Instead of contributing to the problem, though, and creating insurmountable hurdles to building new homes, we need municipal policies that support construction.”

“The original sin of the Housing Now program is that on those first 11 sites they were all designed to follow existing city hall planning requirements,” Richardson added. He said the city has since “learned from the mistake” and is allowing far greater density and heights of developments on sites selected in subsequent phases, as well as modelling project financing based on today’s costs. “They are acting like more like real world developments. We just wasted a lot of time.”

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