Overused and Misunderstood: Affordable Housing in Canada

A term that gets thrown around liberally when referring the residential housing markets in Toronto and Vancouver is affordable housing, with the common complaint that housing should be more affordable. But what does that mean in today’s context?

A 2015 Ontario Provincial Policy Statement defines housing ownership as affordable if “the purchase price results in annual accommodation costs which do not exceed 30 per cent of gross annual household income for low and moderate income households” or if it “is at least 10 per cent below the average purchase price of a resale unit in the regional market area.”

If we adopt the second definition, 10 per cent below market price in Toronto would be about $720,000, and in Vancouver that would be approximately $975,000. That doesn’t seem very affordable to me. How did we get here?

A number of major factors have driven up house prices in major Canadian cities over the last 10 years: low interest rates; anti-sprawl legislation; increased domestic and foreign investor interest; and a lack of social housing construction being just a couple.

In Toronto, the Greenbelt Act and Places to Grow Act have directed growth to areas with greater transit access, but many of those areas have exceeded construction and population targets, straining existing infrastructure. Additionally, the costs associated with higher-density built forms like mid-rise and high-rise development is much greater, because of higher equity requirements, less land leverage, higher construction costs (concrete, underground parking), NIMBY planning disputes that delay approvals, and elevated land costs in most urban areas. More upward price pressures are coming too, as Toronto

Ben Myers, affordable housing
Ben Myers is president of Bullpen Research & Consulting.

development charges will nearly double in 2018. Lastly, in expelling the current zoning appeals board in Ontario, the consensus is that supply will decline further. Needless to say, the market is not going to be delivering much housing that is affordable in Ontario and especially Toronto in the near future.

Outgoing Housing Minister Peter Milczyn worked on policies around inclusionary zoning. This concept or vehicle for delivering affordable housing units can only work if the trade-offs for developers are revenue-neutral, and the cost to deliver these below-market homes is not greater than what the province or the municipality has given the developer in exchange for building them (in the form of faster approvals; higher approved densities; lower fees; or some cash equivalent). So far, developers have not been pleased with the progress in Ontario so far, and some have suggested that inclusionary zoning could do more harm than good by driving up costs of new development, resulting in “cost-push” price inflation.

Infrastructure Ontario recently entered into a partnership with Dream, Kilmer and Tricon on a 99-year land lease to develop 1,500 rental apartments in the West Don Lands area, of which 30 per cent of the suites will satisfy the Province’s affordability requirement. This is the first initiative that I believe will have any substantial impact on the creation of affordable housing that won’t have unintended consequences elsewhere.

Unfortunately, while several governmental agencies have been working to create new social and affordable housing units, other agencies are undermining those goals by creating (sometimes well-meaning) policies that drive up house prices and rental rates even further. Restrictive zoning, rent control (non-inflation adjusted), and requirements for a certain mix of units or minimum commercial requirements in new buildings all make development less feasible, requiring higher and higher prices to make the sites work financially. As much as it must pain them to do so, if you want more housing of all prices and rental rates, you need to listen to the needs and requirements of developers, and not to people without a working knowledge of the economics of new development and locals with a financial incentive to prevent less housing construction. Only then will we get more affordable housing in Canada’s major cities.


Ben Myers is president of Bullpen Research & Consulting, a boutique real estate advisory firm that works with land owners, developers, and lenders to better inform them of the current and future macroeconomic and site-specific housing market conditions that can impact their active or proposed development projects. Follow Bullpen on Twitter at @BullpenConsult or find Ben atwww.BullpenConsulting.ca.

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