By Richard Lyall
Bureaucratic red tape, along with exceedingly lengthy development approvals processes and hefty taxes, fees, levies and other charges are taking a significant toll on housing affordability and supply.
Estimated approval timelines in Toronto are now at 33 months, up from 21 in 2020, according to a municipal benchmarking study done by Altus Group for the Canadian Home Builders’ Association.
The city ranked last among 20 Canadian municipalities in approval timelines. In addition, the cost of municipal government charges on low- and highrise housing in Toronto has risen considerably.
If we are to meet the provincial goal of building 1.5 million new homes by 2031, steps must be taken to address these issues.
In essence, we have pretty much killed the first-time homebuyer via the exorbitant taxes, fees and levies. A survey done by the Canadian Centre for Economic Analysis found that they now account for 31 per cent of the cost of a new home in Toronto. On a $1-million home, a buyer is paying $310,000 in taxes and fees. Over the life of a mortgage, it adds hundreds of thousands of dollars in interest.
You now need about $263,000 in gross annual income to be approved for an average home priced at $1.1 million in Toronto. In Vancouver, where the average cost of a home is priced slightly higher at $1.2 million, an income of about $285,000 is required.
The federal and provincial governments recently announced they will be cutting the GST and HST, respectively, on construction of new purpose-built rental buildings. That was a good start. Now they must extend the policy to owner-occupied housing as well. Additionally, governments should also permit RRSP funds to be used for buying principal residences – at least for first-time domestic buyers.
Overtaxing new housing
Presently, we are taxing new housing like alcohol. New-home owners are also footing the bill for public infrastructure – unlike other sectors. Motorists, for example, do not have to ante up specific levies to pay for roads.
Red tape and bureaucracy are also stymieing new housing development. By the time a residential construction project gets to the approvals stage, developers and builders have often invested years of time, as well as substantial funds. Then they must wait for building permits to be issued.
Significant efforts must be made to streamline and shorten the process. But despite all the talk, the situation seems to have worsened. Improvements are moving at a glacial pace.
One Ontario, a research project of AECO Innovation Lab and sponsored by RESCON, is working on a research project to streamline the development approval process. The goal is to provide a mechanism to standardize and connect digital systems across the development approval ecosystem.
Unfortunately, we have one of the most inefficient processes in the developed world. This only raises the price of housing and has a chilling effect on new projects. If you can’t predict when a project will get approved, you can’t accurately price a project.
The federal government recently rolled out measures to tackle the problem, namely $15 billion in new loan funding for builders of rental properties and $1 billion to support the building of affordable housing, but it’s just a drop in the bucket compared to what’s needed to rectify the problem.
The fixes sound impressive, but there remains an apparent lack of urgency in light of the massive scale of the housing issue that’s hitting our country right now. We need a Marshall plan-styled strategy to deal with the chronic housing supply shortfall. The enormous infrastructure funding gap faced by municipalities is also an impediment to new home construction and must be addressed.
Strained supply system
The feds are in the best position to fund the necessary infrastructure to support housing. A study done earlier this year shows the feds collect 39 per cent of the tax revenue from new housing yet, disappointingly, only seven per cent of every dollar collected is invested in infrastructure in Ontario.
Our housing supply system is severely strained. Some would argue it is broken. Until we get the issue sorted out, governments should be making efforts to reduce red tape and the excessive taxes and fees and reduce inefficiencies in the approvals process as it only adds to the problem.
We are at a breaking point that has been decades in the making. But if we tackle the problems choking housing supply and seize the moment by making inroads to spur badly needed modernization and innovation, we can turn this grave situation around. Can we do it? Only time will tell.
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 firstname.lastname@example.org.