Ontario’s bid to build new affordable housing amid a cost-of-living crisis is hitting a bump as builders turn their noses up at a list of affordable sale prices released by the government for developers who want to qualify for rebates.
At the beginning of June, the Ford government released its definitions of affordable housing for every municipality in the province, setting the price developers would need to sell at if they want to have some taxes and fees refunded.
The definition is broken down by housing type and location across the entire province. In Toronto, for example, a detached house would need to be sold at $366,500 for it to be considered an affordable home and therefore excluded from some development fees. It would need to sell for $438,300 in Ottawa and $434,800 in Mississauga.
Richard Lyall, president of the Residential Construction Council of Ontario, said it was “impossible” for developers to avoid losses on any house built at those prices, even if they had fees waived.
“I don’t see that in Toronto,” he told Global News.
A spokesperson for the Ministry of Municipal Affairs and Housing said the affordable definitions were deliberately geared toward income and had been widely consulted upon.
“The general feedback was that to truly help more moderate-income Ontarians find homes, the definition of an affordable residential unit needs to reflect market conditions and incorporate income factors,” they said.
“The definition of affordable housing was revised to better reflect the ability of local households to pay for housing while recognizing the diversity of housing markets across the province.”
A case study of the costs for a home in Vaughan shared with Global News by the Building and Industry and Land Development Association (BILD) suggests a developer could lose hundreds of thousands of dollars if they sell a detached house at the government’s affordable rate.
To qualify for fee rebates, developers would need to sell a detached house for $531,000 in Vaughan, the government says.
The average price of land for a single-family home in the city is $482,527, while the midpoint of construction costs is estimated at $495,000. Municipal fees sit at around $168,375, with provincial and federal taxes coming to $139,823. The land transfer tax is calculated at just $25,000. In total, the average costs calculated by BILD come to just over $1.3 million for a home that would have to be sold at $531,000 or less.
“In the GTA, no, I don’t think you’re going to get a lot of take up,” Justin Sherwood, BILD’s SVP of communications, research and stakeholder relations, said.
The province isn’t simply facing pressure from the development community over its definitions. Ontario NDP housing critic Jessica Bell said she feared the affordable housing definitions had been “set up to fail” and would not yield the units needed to solve the province’s housing crisis.
“I doubt that developers are going to build affordable housing to sell because it costs more to build the home than they’re able to sell it for,” she said. “We’ve heard from developers that these definitions of affordable housing are just not going to work. They need to make a profit and going by this definition, they will be actually losing money if they buy into the program.”
Bell pointed out that representatives from the building industry had raised their fears about the definition during committee meetings at Queen’s Park.
“Homes cost a lot to make. They just do in this climate,” Bell added.
She said she wanted the Ontario government to follow in the steps of the NDP-led Government of British Columbia by building affordable housing on government land and offering grants and cheap financing for deeply affordable projects.
“When we lower the costs, we can sell homes far more cheaply and we rent them out more cheaply as well, and that really is the goal,” Bell said.
Both Lyall and Sherwood agreed that taking the cost of land out of the equation could help.
The Ford government has consolidated public land under the Ministry of Infrastructure with high-level plans to offer surplus lands for affordable housing projects, though few details have been published.
Lyall said government land would reduce a key cost but maintained there would still be challenges for a developer to make money at Ontario’s affordable housing prices.
“It all depends on where the land comes (from),” he said. “Say if it’s a piece of government land where you’re getting the land for very low then there is a possibility of hitting something there but it isn’t going to be anything on any scale because construction costs, labour costs, material costs have increased dramatically in the last number of years.”
Sherwood suggested that the affordable housing plan “becomes more realistic” with more density, midrise and highrise homes, where the costs — particularly of land — can be spread across a larger number of units.
“If you were to take out the cost of land and then do other adjustments in terms of the fees, taxes and charges, you may be able to get close to the price point and it may be more feasible,” he said.
The Ministry of Municipal Affairs and Housing said in its statement both industry and municipal experts had been quizzed when it came up with the methodology it used to calculate affordable rates.
“As the (municipal development-related charge) exemptions and discounts for affordable residential units have only been in effect for 12 days, the government will monitor the implementation of the exemptions and intends to publish a new bulletin annually.