Homes and Condo Mississauga

RPT-INSIGHT-Toronto’s housing supply challenge and the growth plan paradox


(Repeats for larger dissemination)

By Nichola Saminather and Matt Scuffham

TORONTO, February 28 (Reuters) – Toronto, the largest city in Canada and one of the world's most popular real estate markets, has a supply problem and the nation housing agency admits that it is not entirely certain why rising prices have not led to more construction.

New homes replace demolished copies considerably faster than at the beginning of this decade, the lead times for multi-family projects have doubled and potential buyers have far fewer new homes to choose from than just a few years ago.

The reason may be partly in an ambitious growth plan for the larger area of ​​Toronto that the Ontario province forged more than ten years ago.

With new "density" goals in favor of multi-family homes, designated urban growth areas and stricter environmental regulations, the 2006 plan sought to curb the proliferation in cities while supporting the further growth of the area. as the main economic hub of North America.

However, the market did not follow that view.

Free-standing houses are still the most sought-after and their tight supply keeps prices high, even if some apartment buildings and multi-family projects languish. (Graphic: tmsnrt.rs/2sxnlR6 )

Developers say that the growth plan, which was updated in 2017 with higher density targets, both created a supply-demand mismatch and low new municipal regulations adds.

"The growth plan has slowed growth strongly," said Matthew Cory, principal at the planning consulting firm Malone Given Parsons.

Ryerson University economist Frank Clayton said that part of the problem was the plan's emphasis on protecting the environment and heritage sites at the expense of development.

"That on top of more planning on a planning structure that was already bureaucratically heavy," he said in an interview.

Toronto's problems are of national concern given its role as Canada's most important financial and technological center, which, along with neighboring cities, accounts for a fifth of the country's economy.

The city, next to Vancouver, the third largest city in Canada, is also one of the top destinations in North America for international real estate investors and an important attraction for Chinese capital.

So far, the authorities have tried to cool what they call speculative demand with stricter rules for loans and by taxing foreign buyers. Now they are also starting to look at bottlenecks in supply as drivers for prices that have risen by 43 percent in Toronto in the last three years and 63 percent in Vancouver.

"If I were to worry about anything from the long-term housing market point of view, then that is the supply of properties in Toronto and Vancouver," Evan Siddal, head of the federal housing agency, told Canada Mortgage & Housing Corporation, Reuters.

"We are replacing homes in Toronto at a much slower pace than we were five or six years ago," he said.

The data from the agency, first published by Reuters, show just over 20 new homes built in Toronto for each building that was scrapped in 2016, compared to around 70 to one in 2011. (Graphic : tmsnrt.rs/2BIeqjM )

Data from real estate research firm Altus Group offered a different perspective: according to estimates made last year, potential buyers had around 11,000 properties to choose from in the larger area of ​​Toronto, less than half of just two years earlier. tmsnrt.rs/2BfZo3K )

"LAND BANKING" AND RED TAPE

Siddal said that "simpler, more flexible" approval procedures would help, but developers also contributed to the bottlenecks by "country" Banking "- Project deferral in anticipation prices will continue to rise.

However, in a report this month, the agency said it needed more data to fully understand the factors behind supply restrictions.

Representatives from the industry said that complex regulation, instead of speculation, the delays caused.

Michael Pozzebon, vice president of the low-rise developer DG Group, said his company sold homes once it got approvals because it knew in the past how long projects would last

"To sell at that time, there is a risk that we can not deliver the product on time. So there is a perception that we are sticking to land without developing it, "he said.

A 2016 survey of land use regulations by the Fraser Institute, a government policy think tank, confirms the developers' assessment. It turned out that Toronto was the most regulated city in Canada, with approval periods nearly doubling in other centers and the highest compliance costs, followed by Vancouver, Edmonton, Calgary and Montreal. (Image: tmsnrt.rs/2BfRvLI ) [19659002] Developers now have to meet approximately 200 conditions, from protecting risk types to transportation requirements, to obtaining municipal approval, according to Bryan Tuckey, former head of the Toronto lobby and development hall, compared to around 25 at the start of the last decade, he said

East Gwillimbury, a city just north of Toronto, is a good example. [19659002] The plan described it as an important growth area, but the municipality is at least six years behind with the construction of a new wastewater treatment plant that was needed to grow the population of the city from 30,000 to 86,000 in 2031. The reason? A shortage of municipal funding and delayed environmental impact assessments by the province, says James Young, city councilor and former mayor.

"Without the maintenance we stop, it was very frustrating," Young said.

Developers said that municipal resources are in part limited because planned apartments take longer than expected, or are not built at all, and that means less development costs that help finance infrastructure.

The municipality acknowledged that it depended on development costs to repay infrastructure debt, but said that the fees did not play a role in the delay of the plant.

Despite the preference of the growth plan for multi-family homes, such projects can now take more than three years, double what it was 15 years ago, due to a strong increase in the required documentation, obsolete municipal zoning regulations and residents oppose high-rise projects, according to development lobby BILD.

Larry Clay, of Ontario's Growth Secretariat at the Department of Municipal Affairs, rejected criticism that there was too much regulation, but said that new guidelines to be implemented this year ensure consistent interpretation by municipalities.

LEAVING TORONTO

The housing shortage poses a major challenge for Toronto and the surrounding cities, with the Ontario government predicting that the population will rise to 9.6 million in 2041 from around 6.5 million in 2016

A study published by the Toronto Region Board of Trade this month showed that 42 percent of young professionals are considering leaving because of the lack of affordable housing.

Matthieu St-Pierre, a developer of videogames with a 3-1 / 2-year-old son, is an example. With his wife, a marketing assistant at the University of Toronto, he now rents a one-bedroom apartment and plans to move to Quebec City after a fruitless search for a home that is large enough for his family within their budget.

"If you have a child, you need more than 900 square feet of space," said St-Pierre. Ontario's focus on housing with higher density was logical, he said, but developers parted in too many small one-bedroom units.

Housing will play a central role in the provincial elections in June, with progressive progressive conservatives accusing the ruling liberal party of contributing to rising house prices with excessive regulation.

According to an Ipsos survey commissioned by the Ontario Real Estate Association last year, 85 percent of the residents want political parties to tackle the affordability of housing and 63 percent want less regulation.

David Caplan, author of Ontario's "Places to Grow" plan in 2006, served as Minister of Infrastructure, said that the role of provincial and municipal governments in planning was better defined and focused on healthy mix of living options.

But Caplan, now chief operating officer of the Ontario Road Builders Association, recognizes that so 12 years later the province was still looking for the right balance between growth in suburbs and cities.

"It is still a work in progress."

Reporting by Matt Scuffham and Nichola Saminather; Edit with
Tomasz Janowski


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