Toronto has taken a significant step to tackle its enduring rental housing crisis. Last Wednesday, the city council approved the much-anticipated Toronto Rental Housing Incentive Plan, which promises to deliver around 20,000 new rental homes by providing monetary incentives to private developers. The vote was overwhelmingly supportive, passing 23 to 1, reflecting the urgency of the housing needs facing the city.
The initiative, articulated by Mayor Olivia Chow, seeks to convert the private sector's potential for growth and expansion of rental housing. Chow emphasized, "We need to build more rental homes now. We can't afford to have the housing pipeline dry up because of the difficult market conditions. We need to see these rental homes built, and we will work with the industry to make it happen." Currently, about 50% of Toronto's population rent their homes, signaling the pressing demand for affordable and accessible housing options.
The first phase of the plan is bold and ambitious. The city aims to kickstart the project by committing its own resources to construct 7,000 rental units. This first stride includes promising to strategically build 5,600 purpose-built rental homes along with at least 1,400 affordable rental units. Plans for the second phase involve seeking additional funding from provincial and federal partners to help complete the remainder of the 13,000 rental homes to meet the total goal.
Applications will be sought shortly for the initial phase, with the administration eager to move forward quickly. Gord Perks, the chair of the council's planning and housing committee, expressed confidence, stating he anticipates overwhelming interest from builders: "We’re taking a bit of a risk and going out by ourselves. Municipal governments typically don’t pay for affordable housing. That first phase, I think, is going to be oversubscribed. I think it will sell out almost as fast as a Taylor Swift concert!"
Despite this optimistic outlook, not all voices are aligned behind the plan. Some council members raised concerns about whether the proposed incentives would be sufficient to motivate developers. Coun. Brad Bradford, vice-chair of the planning and housing committee, articulated the hesitancy of industry players, noting, "The feedback has actually been very clear. The incentives proposed are not enough. It’s mild. It’s meek. It’s inadequate to unstick the 29,000 to 37,000 housing units approved, but currently sitting on the sidelines, stuck in the pipeline."
The debate may lend itself to skepticism among numbers of the council who are against diverting substantial taxpayer funds to support the building of new housing. Coun. Stephen Holyday voted against the initiative, stating, "This is a cost of hundreds of millions of dollars to the taxpayers, which puts significant strain on our ability to deliver important infrastructure you see all around you." Notably, several councillors questioned whether this strategy would lead to successful outcomes, which might indicate more hesitation than outright opposition.
To qualify for the incentives, key requirements include at least 20% of the units being designated as affordable rentals, adhering to the city’s newly defined standards based on income. These units must remain affordable for up to 99 years, ensuring long-term viability and sustainability.
The proposed financial incentives provided by the city are significant and structured strategically to alleviate some financial barriers developers face. They include:
- An indefinite deferral of development charges on purpose-built rental homes, which equals about $37,636 per unit, as long as the property remains as rental housing.
- A proposed 15% property tax reduction for 35 years, totaling around $20,396 per purpose-built rental unit.
- Full financial incentives for projects identifying affordable rental units, providing up to $97,264 per unit.
While these financial benefits are geared to nudge developers toward action, the effectiveness of the Rental Housing Incentive Plan will be closely monitored. City staff will report back to council by December with updates on which projects qualify for funding, indicating the progress being made toward meeting Toronto's housing needs.
It is now up to the developers and local governments to navigate these new waters effectively, as the urgency for housing solutions grows increasingly palpable across the city. With plans on the table, the vitality and response of Toronto's rental housing market will only become apparent as this initiative rolls forward.
