Last year, Ontario’s Fair Housing Plan announcement was implemented to moderate the housing market. Well, it worked. Activity varied from market to market, but overall, sales were down in Ontario for both resale and new construction. With that in mind, we want to take a look at a few more housing moves the government made this year, which will surely impact 2019.
When a development was contested by a community, it would go to the Ontario Municipal Board. This year, it was announced that the Land Planning Appeal Tribunal would replace the OMB. The LPAT system gives municipalities much more power with regards to the approval process.
The OMB would use zoning and regulations to determine if a development was suitable for a site; it’s possible that municipalities may take a more emotional approach to the approval process since constituents are the ones fighting developments. It could lead to less high-density developments, when what we need is more in order to accommodate population growth.
This past spring, the province of Ontario created new inclusionary zoning bylaws which allow municipalities to mandate how many affordable units are required in a new residential development, how long the units must remain affordable, and whether the affordable units can be built on another site if necessary. Again, we’re seeing municipalities given more power, and they answer directly to the community, so this could result in fewer or more affordable housing units - it’s tough to call and will likely depend on the neighbourhood.
The stress test was actually announced in 2017 but it kicked into action at the beginning of this year. So far, it’s definitely slowed down sales, as was intended. Requiring all buyers to qualify at 2% higher than their contracted rate means that everyone’s borrowing power was weakened. There’s been some talk of repealing the stress test or scaling it back now that interest rates are on the rise.
The TOcore plan requires developments with 80+ units to have 40% two- and three-bedroom units. The goal is to create more family sized housing in Toronto.
We asked Ben Myers, President of Bullpen Research & Consulting Inc. about this policy, and he said, “It is well intentioned, but will have unintended consequences in the market. If the preconstruction demand is not there for larger units, a developer will have to discount those suites and raise the price of the smaller units to offset the decrease in overall revenue, which hurts first-time buyers, and lowers investor interest. With fewer investors you’ll get fewer units in projects, and with fewer units and fewer investors you’ll get fewer rental units.”
Toronto now allows for secondary units to be built on low-rise properties - these units are referred to as laneway suites. They can be built and rented out to generate rental income. It sounds great because it would help homeowners afford their mortgage and add to the rental pool. The problem is that the parameters are very specific and there is a limited number of sites that qualify, and then the owners of that property have to decide to make the big investment. So we don’t see the new regulations being super impactful, but it does open the door for potentially more creative housing solutions in Toronto.
The province of Ontario recently announced the Housing Supply Action Plan. The goal is to tackle a number of barriers preventing or limiting housing ownership and opportunities. A few of the barriers include the lengthy development approval process, the need for different housing types, high development costs, and the general lack of innovation in the industry and in the government. The province wants to hear your ideas, which you can share before January 25, 2019.
This is just a handful of the different courses of action the government has taken to influence/improve the housing market. We’re interested to see how these changes carry over into 2019!