In a big win for Mayor Olivia Chow, city council voted overwhelmingly to approve a new program that incentivizes building at least 7,000 new rental homes by cutting fees and taxes. Chow courted the city’s renters in her run for the city’s top job last year.
The city will launch a portal for interested developers to apply on Nov. 18 and will keep it open until Nov. 29.
The program has two phases. The first phase, which is expected to deliver 7,000 new purpose-built rental units, will cost the city nearly $400 million in forgone revenue.
The second would deliver another 13,000 units but is contingent on the city securing low-cost financing and extra money from the federal and provincial governments to help pay for lost revenue from the tax and fee cuts.
The city will defer development charges on purpose-built rental homes, so long as the homes stay as rental properties. The move could cut developers' per-unit costs by nearly $38,000, according to a staff report.
Property taxes on the units will 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, developers need to ensure at least 20 per cent of the units offer “affordable” rental prices for at least 40 years, according to the city’s income-based definition of affordability.
According to the city, an affordable one-bedroom unit would cost $1,090 per month. A two-bedroom would cost $1,661 per month and a three-bedroom would cost $1,858 per month.
Chow wants the program to deliver results quickly. The plan will only consider housing projects that have gone through the city’s approval process but are sitting idle because building costs — like construction and development charges — are too high, rendering the project economically unviable.
The projects need to break ground by the end of next year.
Federal Housing Minister Sean Fraser recently told TorontoToday he’s “willing to work with the city” and potentially provide some of the requested money.
Chow asked the federal government to “immediately allocate” $7.3 billion over three years through the Canada Mortgage and Housing Corporation (CMHC) to help prospective developers get low-cost financing at competitive rates.
She also asked Ottawa for an additional $225 million in grants to build and subsidize the affordable rental units.
The money could be made available through the CMHC or the Canada Housing Infrastructure Fund, a new $6-billion program unveiled in the 2024 federal budget, Fraser’s spokesperson said.
On the provincial side, Chow is asking for $1 billion to help the city pay for the tax and fee cuts on the other 13,000 rental units, plus another $225 million in grants to subsidize the affordable units.
Chow recently met with Ontario Housing Minister Paul Calandra to discuss the program.
It was “very encouraging,” Chow said on Wednesday.
Calandra’s office has not responded to a request for comment.
Chow said she’s open to changing the program’s ambitions if either level of government doesn’t come forward with all the requested money.
“If they want to give us only half, we'll do half … whatever the dollar amount they provide, we will spend it all,” she said.
The city recently hosted a roundtable with dozens of developers to gauge interest in the program. Parkdale—High Park Coun. Gord Perks said the conference rooms were overflowing.
“They want in,” he said.
One of those interested developers is Sierra Corporation.
Rob Kansun, Sierra’s vice-president of acquisitions and development, told TorontoToday his company will submit applications as soon as possible.
Sierra has a condo project on Eglinton Avenue East that’s gotten all the necessary approvals but has been stalled because pre-construction sales have cratered.
The new program means Sierra will convert the project from a condo to a purpose-built rental and finally get shovels in the ground. It’s also the company’s first foray into the purpose-built rental market.
“This program, in conjunction with others, including attractive financing offered by CMHC, will help us move forward with projects that are otherwise waiting for market conditions to improve,” he said on Wednesday.
“We think this is a step forward. Mayor Chow and the City of Toronto are doing what needs to be done in order to get these units built, especially in these challenging economic times.”
The lone dissenting vote was from Etobicoke Centre Coun. Stephen Holyday.
He said the city is only a “small cog in the overall housing industry” and the incentives offered — which come at a big cost to city coffers — don’t deliver enough benefits to justify the high price.
Staff will report back to council in December with an update on developer uptake.
