Markets

Ontario’s Housing Challenge: Single Family Homes, Yes, But What Else?

By Condos HQ - Nov 28,2022

The debate around housing in Ontario has come a long way in about five years. The huge increase in the cost of real estate during the Covid-19 pandemic sealed the deal and just about everyone agrees there is an outright shortage of homes in the province. 

Now that everyone agrees on the basic problem, the hunt for solutions is on and the Ford government (recently re-elected to a larger majority) has put forward one of the most substantial packages of housing reform in Ontario’s history in the form of the “More Homes, Built Faster” act.

No matter where you stand in the contentious political debate currently underway with regards to housing in Ontario, the result for the residential real estate market is that the odds of many new pre-construction single family homes hitting the market have greatly increased. Other kinds of projects like new pre-construction townhome developments are clearly enabled by the proposed legislation. 

Virtually everyone can find something they like in the Ford government’s housing bill but two different visions of housing will continue to compete to shape Ontario’s real estate future. An overall clash between a vision of “intensification” and a preference for outlying single family home development (sometimes called “sprawl”) has only been intensified by the Ford government’s proposals which means that Ontario’s housing future is being written in real time.

After all, it’s not just the supply of housing in the abstract but the affordability of housing that many are concerned with. The Ford government and many home builders in Ontario want to build single family homes in outlying areas of the GTA. Pursuant to this goal, Ford has decided to open Ontario’s “Greenbelt” (a region-wide swath of protected land) to development. 

Before he was first elected in 2018 Ford said that his government would open the Greenbelt specifically to address the affordability of housing but after pushback he recanted and said he would leave the Greenbelt untouched. The key thing to keep in mind no matter where you stand is that Ford’s early position was clearly his preference and as long as Ford is in power the Greenbelt will be developed.

Major areas of the Greenbelt that have been opened to development include a very large portion of land in the north of Pickering as well as parts of Hamilton, Markham, King, Vaughan, Richmond Hill, Ajax, Clarington and Grimsby. Expect new pre-construction single family homes in these cities over the coming years.

In addition to this major step towards increasing the supply of housing, the Ford government’s “More Homes, Built Faster” act also proposes overriding municipal zoning so that property owners can create three units “by right” on a residential lot, a reform intended to produce “gentle density”. Duplexes and Triplexes are also to be allowed by right. 

While these changes may seem significant, they mostly mirror reforms that the City of Toronto has already introduced and are unlikely to produce much housing in any event. The province has aimed at an overall goal of building one and a half million homes in a decade and these types of “gentle density” are just a drop in the bucket.

Other reforms included in the “More Homes, Built Faster” act include the reduction and consolidation of environmental review processes and reforms that will reduce public meetings and appeals with regards to new developments. Under the potential legislation, municipalities will have housing targets to hit with Toronto itself given a significant target of over a quarter million homes. 

Targets for home building are an understandable approach given that even a large city like Mississauga has stagnated in terms of population in recent years. Ongoing intensification, partly thanks to transit, will undoubtedly increase Mississauga’s population but the subject of transit raises still more considerations when it comes to housing. There is already some effort made to densify around transit, and “More Homes, Built Faster” continues in this direction, but just how much the GTA will densify around transit is a major outstanding question.

One key consideration for the pre-construction residential real estate market is that the “More homes, Built Faster” act would increase fines for “bad actors” in the building game who fail to deliver on pre-construction homes. 

In the big picture, the Ford government is aiming to take power away from municipalities and local groups that slow and halt development and consolidate power at the provincial level. This is especially true when one considers the “More Homes, Built Faster” act in conjunction with Ford’s intention to give some Ontario mayors so-called “strong mayor” powers they can use to override majority votes on council.

Another still wider part of the context for the Canadian real estate market is the high and increasing level of immigration that Canada is attracting. It’s generally agreed that a high level of immigration keeps the Canadian housing market buoyant and the federal Liberal government has leaned into a high level of immigration by setting a target of half a million immigrants for the year 2025. 

Overall, Ontario is in a very tight spot with regards to housing. Given increasing levels of immigration, doubts about the efficacy of “More Homes, Built Faster” in actually producing more housing, criticisms about the inefficiency of suburban single family home development and the financial and material challenges faced by homebuilders, the road ahead is very rocky. 

Home builders face fundamental problems like obtaining financing, the expense of labour and materials as well as the uncertainty and pain of interest rate increases. The fact that “More Homes, Built Faster” would greatly reduce development charges and requirements is therefore not a silver bullet. 

The reduction in development charges raises still other questions as the loss in revenue for cities may have to be made up by increasing property taxes. Finally, some critics of the Ford government completely reject the approach of opening the greenbelt to build new pre-construction single family homes and have a vision of ending “exclusionary zoning” in established low-rise neighbourhoods through measures like adding four units “as of right”.