On May 2, 2019, the Ontario government announced proposed changes to address barriers getting in the way of new ownership and rental housing throughout the province. Recommendations of industry experts, including the Building Industry and Land Development Association (BILD) and the Ontario Home Builders' Association (OHBA), influenced the government's new policy. The recommendations are centered on themes of speed, cost, mix, rent, and innovation.
Jameson Bouffard, BDO National Real Estate Industry Leader weighed in: “With the Ontario government's announcement, we're excited to see the steps proposed to enhance the supply side of housing. Our construction and development clients are going to see a positive impact with plans to accelerate approvals, reduce red tape, and reduce costs of building new homes.”
Our Real Estate and Construction team would like to highlight these five key areas and give clients an idea of what the recommended changes mean for their business.
Anyone who's dealt with real estate development knows how common delays are. The first area of change addresses reducing time for clearing paperwork and red tape. Getting through development approvals quicker is key to a more seamless process. The Ontario government wants to improve this area by speeding up planning time, eliminating “planning by negotiation” wherever possible. On the rental housing provider side, they are also increasing adjudicators at the Landlord and Tenant Board to aid in the backlog of 2+ month wait times.
Added costs and permits have a tendency of popping up when you least expect them. Making costs more predictable to encourage building new housing is one of the proposed ways to help the planning process. As permits and approvals add to overall costs that heavily slow down building, developers want to be able to anticipate this and prepare accordingly. Additionally, the Ontario government wants to increase the authority of the local planning appeal tribunal. This is a committee that adjudicates land-use planning disputes between local governments, citizens, and property developers.
For development charges in particular, proposed changes will allow for rates to be locked in at the time of complete site plans or zoning applications. Provisions that defer development charges for rental buildings until occupancy are also to be put in place; another policy change aimed at increasing rental housing supply.
From single-unit apartments, to semi-detached town homes, to larger fully-detached properties; the type of housing availability should ultimately be in line with the growing demographics that demand it. In recent years, for multiple reasons, new builds have been heavily focused on ownership properties, while there is still a demand for affordable rental units. The proposed changes are beginning to address this disconnect and focusing on making it easier to build different types of housing to ensure variety is available.
To address this growing demand for rental unit availability, the proposed changes want to help in expanding development charge exemptions to include second units in new homes. Moreover, effort is going towards increasing the variety of housing in areas of Ontario that are least affordable.
Despite the greater demand to buy, protecting tenants and making it easier to build controlled rental housing will contribute towards bridging the affordability gap. Among making it easier for tenants is encouraging small-unit landlords to create new rental units, like basement apartments, by adding secondary suites to existing ones. This starts with helping all relevant parties navigate complex building code approval processes.
Many of these changes are in favour of building new rental housing. Now builders pay development charges up front; home developers and/or condo builders can offset these charges by preselling units. A developer who builds a rental can't do this. So by postponing development charges until buildings are rented, developers are encouraged to start building rental housing again.
When it comes to physically building new units, developers are becoming more and more creative. The Ontario government's proposed changes are in favour of innovating existing processes without the government standing in the way. This means more creative designs, architecture, materials that promote sustainability, and nurturing green spaces.
Moreover, there's a heightened effort to protect environmentally sensitive land like cultural heritage sites, Ontario's Greenbelt, and agricultural areas. To improve accessibility, there will also be a focus on building new housing developments close to transit lines.
While the changes in the Ontario Housing Supply Action Plan have been proposed, the final definitive details of legislation are still pending. Overall, these are positive changes as seen by developers, as well as real estate investors.
George Dube, Real Estate Industry Leader for Central Canada comments, “Real estate investors are a large segment of our clients. We've seen in the last number of years that many of our developers and investors have gotten out of the rental market, or reduced their intended portfolio expansion, and into condo development or non-rental sales of new or rehabilitated properties or vacation properties. This is because of the costs and difficulty of regulation, rent control, the myriad of fees associated with building a rental unit, annual municipal levies on rental properties, and the perceived imbalance of rules and decisions at the Landlord and Tenant Board which are almost universally seen by rental housing providers as favouring "bad" tenants. This plan has the potential to begin to reverse that trend.”
The plan's intention is to boost housing supply while increasing affordability and accessibility. If these changes are, indeed, put in place, the results could be game-changing.