Toronto should slash taxes and fees to help kick-start the construction of 20,000 new rental homes, city staff said in a new report backed by Mayor Olivia Chow.
But the city can’t do it alone.
Staff said the federal and provincial governments need to provide money to help make up for forgone revenues and ensure the proposed program can reach its goal. If the other levels of government don’t step in with the requested $8.3 billion, the program would only see up to 7,000 new units built.
“Toronto is facing a significant shortage of purpose-built rental homes due to insufficient investments from all orders of government since the early 1990s,” staff said in a news release.
“Demand for new rental homes is only expected to grow due to population growth and a home ownership market that remains out of reach for most moderate and low-income residents.”
Chow said the new program unveiled on Wednesday is meant to remedy those problems.
“Half of the city are renters and they need support,” Chow said. “So we need to build rental homes and not just condominiums,” because condo rent is often too high for many Torontonians to afford.
The plan, which will go before city council next month for approval, includes a mix of tax and fee cuts on rental units.
Staff recommended the city defer development charges on purpose-built rental homes, so long as the homes stay as rental properties. That move could cut developers' per-unit costs by nearly $38,000, according to staff.
Property taxes on those units should also be reduced by 15 per cent for 35 years, which could deliver over $20,000 in savings per unit. Taken together, the two measures could cut development costs on purpose-built rental homes by nearly $60,000.
To qualify, projects would need to include at least 20 per cent affordable units that meet the city’s income-based definition of affordability and remain affordable for at least 40 years.
According to the city, an affordable one-bedroom unit would cost $1,090 per month. A two-bedroom would cost $1,661 per month while a three-bedroom would cost $1,858 per month.
Construction would also need to start by the end of 2026.
Staff admitted it’s a fairly tight timeline to get shovels in the ground considering the development sector has dramatically slowed in the face of rising interest rates and other cost pressures. That’s why the program is targeting projects that are already in the pipeline.
“Many of the projects that we’re aware of are in the process of trying to get financing. We feel that the 2026 timeline is appropriate for the first 7,000,” staff said in a briefing with reporters.
The program will go ahead in two phases. The first phase — which aims to build 7,000 units, 1,400 of which would be affordable — is entirely funded by the city while the second is contingent on extra funding.
Neither the federal nor provincial governments responded to requests for comment on Wednesday. Chow, however, said she’s been in talks with Ottawa and Queen’s Park.
Coun. Gord Perks, chair of the city’s housing committee, said the point of the city doing the first step without help from other levels of government is to provide “proof of concept.”
“We're saying that with the correct interventions, we can get rental housing built in the city of Toronto,” Perks added.
“We're doing a limited amount that we can do within our resources, but to really make this work, the other two orders of government have to come in” because Toronto has limited fiscal capacity and the proposed measures are costly, Perks said.
Taken together, the measures unveiled on Wednesday would mean the city is foregoing nearly half a billion in lost revenue.
Coun. Brad Bradford criticized the proposal on the grounds that 13,000 of the promised 20,000 units would come in the second phase, which is contingent on more money from other governments.
“Phase two is completely pie in the sky,” he said.
Bradford was also critical of the first phase, which is entirely funded by the city.
“I think this will help a couple projects on the margins, but it's really only projects that have already received federal funding,” he said.
David Wilkes, president of the Building Industry and Land Development Association, said the proposal “is a good first step.”
He’d like the program to be expanded to include other types of rental housing, like condos, because narrowly tailoring it “is too limited for the needs of the city.”
“I encourage the city not to look at too little of a solution that doesn't include the complete range of housing options that Torontonians are looking for.”
