As Toronto grapples with a shortage of rental housing for a growing population, city staff say council needs to incentivize the development of 20,000 new rental homes through tax and fee reductions — and they have a plan to do it.
“Toronto is facing a significant shortage of purpose-built rental homes due to insufficient investments from all orders of government since the early 1990s, amongst other factors,” city staff said in a release Wednesday.
The shortage is likely to get worse, the release says, due to high interest rates, inflation and rising construction costs, along with the expectation that rental demand will continue to grow.
“Recent actions by all levels of government to support new rental homes have not proven sufficient to significantly increase rental housing supply,” city staff said in the release.
In a new staff report, Build More Homes: Expanding Incentives for Purpose-Built Rental Housing, staff recommend ways the city should encourage the building of 20,000 new rental homes, including 16,000 purpose-built rentals and a minimum of 4,000 affordable rentals.
Developments must include affordable rentals: staff
To incentivize rental development, staff recommend the city defer development charges on purpose-built rental homes so long as the development includes the necessary rental requirements. That could save developers nearly $38,000 per unit, according to the release.
Other recommended incentives include a 15 per cent property tax reduction for 35 years for eligible developments and even forgone taxes and fees for affordable rental units, estimated at nearly $100,000 per unit in the release.
Eligible developments would need to set aside at least 20 per cent of units as affordable rental homes, the release says, under the city’s new income-based definition of affordable housing. The units would be required to stay affordable for at least 40 years.
Projects will also be required to start construction by the end of 2026.
The incentive plan was developed in partnership with all levels of government, the release says, and will help Toronto hit its target of 41,000 affordable rental homes and 285,000 housing starts by 2031.
Toronto’s rental market is in dire need of more supply. But back in the 1960s and 1970s the city had a healthy stock of apartment buildings. So what happened? CBC Toronto’s Shannon Martin explores the timeline of when Canada’s biggest city started running out of rentals.
“Our city has reached a critical point in the need for stable, rental housing, and today’s steps will lay the foundation for creating secure, long-term housing options for all income levels, including middle-income earners and essential workers,” Coun. Gord Perks, chair of the city’s planning and housing committee, said in the release.
To further encourage rental development, the release says city staff also recommend council approve a 15 per cent municipal tax rate reduction for eligible rental developments, a tax reduction that would apply to all new rental housing.
Staff say city needs help from province, Ottawa
The city is looking to kick start the Build More Homes program by immediately releasing applications to identify and approve 7,000 new rental homes, including 5,600 purpose-built rental homes and at least 1,400 affordable rental homes, according to the release.
But the city will need help, staff say. The proposed incentives would need to be partially funded by the provincial and federal governments, according to the release.
The Bank of Canada has announced the fourth straight cut to Canada’s key interest rate. Economists have blamed high interest rates and construction costs for the slowdown in new condo and rental housing builds. But as CBC’s Shannon Martin explains, even with rates trending downward, developers say Toronto is falling behind.
Staff are recommending the city call on the province to provide a “Build More Homes” rebate of about $1 billion, which staff say would be equal to the value of development charges and 85 per cent of the value of property taxes for 35 years for new purpose-built rental homes. That would help fund the second phase of the program, incentivizing the development of the other 13,000 rental homes, the release says.
Staff also recommend a request to the federal government to immediately allocate a $7.3 billion portfolio of low-cost financing to support the delivery of the 20,000 new affordable and purpose-built rental homes, as outlined in the report.
Council is set to consider the recommendations on Nov. 5.