Last Updated on May 27, 2024 by CREW Editorial
If we are to put a significant dent in the housing crisis, we must tear down the overabundance of ridiculous and unnecessary barriers as well as bureaucracy and red tape standing in the way.
Despite recent positive policy shifts, substantial obstacles still hinder housing development. Varied and substantial layers of regulation and approvals surrounding housing only add to costs.
Developers looking to build homes must have deep pockets to absorb the price associated with navigating the labyrinth of approvals. The larger the project, the more likely it is to require changes to zoning and site plan control, thus bigger costs for staff and external consultants.
More than 42 types of technical studies can apply among GTA municipalities, ranging from engineering studies which are specific to a site to market impact studies, according to Altus Group.
The cost of holding properties over the duration of the development process can be astronomical. Developers must foot the bill for staff, property taxes, interest on loans, and operating costs.
Timelines for development approvals have been increasing, which has profoundly affected the feasibility of building homes, according to a report called Barriers to Housing Supply in Ontario and the Greater Toronto Area prepared by Steve LaFleur, a senior fellow of the Fraser Institute.
The report cites an analysis of 600 development projects across 16 GTA municipalities done by Altus Group in 2022. The study found that approval timelines ranged from 10 to 34 months, with an average of 20 months in 11 of the 16 municipalities. Each month spent in the approvals process is estimated to have added $2,600 to $3,300 per unit in high-density developments.
Fees and taxes too high
Another main policy barrier to housing supply highlighted in the report is the fees and taxes on development. The fees include processing costs for each stage in the development approvals process, such as building permits and site development plans among many others.
Development charges, which are one-time fees slapped on new housing to fund the costs of infrastructure like sewers, drainage, roads and water distribution and treatment, are also exorbitant.
All this creates uncertainty for the developer and builder and, in the end, a higher price tag to be paid by the homebuyer.
The provincial government in Ontario is taking steps to cut red tape and make it easier for developers and builders to build homes.
Presently, Bill 185, the Cutting Red Tape to Build More Homes Act, 2024, is in second reading before the Standing Committee on Finance and Economic Affairs. It proposes changes to regulations under the Planning Act and Development Charges Act and addresses the issues of development charges and planning services and would eliminate the requirement for a pre-consultation process.
Legislation needs to be tweaked
In broad terms, RESCON is supportive of the overall objective of Bill 185 as it is a comprehensive legislative tool that prescribes policy measures and modification of 15 different pieces of existing legislation to support the government’s goal of building 1.5 million homes by 2031.
However, we are concerned that the proposed legislation would only freeze development charges for a period of 18 months from the date of application for development applications. Even under the timeframe the new regulation is replacing, two years is already a challenge for builders.
There can be myriad legitimate reasons why a builder would not secure a building permit within 18 months of approval. This should be considered rather than establishing an arbitrary timeline.
We are also worried that the legislation also proposes repealing the phasing of development charges by municipalities as the move would impede the construction of new homes and just add cost to the building process and ultimately result in the home purchaser footing the bill.
Charges boost cost of a home
We have very serious concerns about regressive and excessive development charges. They are one of the main reasons builders are unable to construct housing that purchasers can afford.
Development charges, as well as taxes, fees and levies, are an impediment to those wishing to purchase a new home. In the City of Toronto, for example, these add-ons account for roughly 31 per cent of the cost of a new home. On a $1-million home, that’s $310,000. Amortize that amount over 25 years at six per cent and it amounts to nearly $600,000 more in interest.
Development charges are one of the only tools that municipalities have to pay for infrastructure, but this type of financial impact on homebuyers – especially first-time buyers – can be a deal breaker. Therefore, we continue to advocate for more predictable and ongoing support for municipal infrastructure from both the provincial and federal governments.
Allowances must also be made to permit municipalities to run budgetary deficits and enable them to implement a municipal infrastructure corporation model that would allow for amortization of the cost of residential development infrastructure over a period of time. This would lead to more efficient use of infrastructure budgets and expedited residential construction.
Change is needed. Heading down the same path will only produce similar results. We must chart a different course.
Richard Lyall is president of the Residential Construction Council of Ontario (RESCON). He has represented the building industry in Ontario since 1991. Contact him at media@rescon.com.
Richard Lyall is president of the Residential Construction Council of Ontario (RESCON). He has represented the building industry in Ontario since 1991. Contact him at media@rescon.com.
