Municipal housing policy is key to supply and affordability

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Every election season, I use this space to provide voters with insights, perspectives and outlooks into important housing issues impacting residents of the Greater Toronto Area (GTA).  

Since we are less than a month away from voting day, I’d like to use this edition to discuss how predictability and certainty in municipal housing policy is key to ensuring positive outcomes in terms of supply and affordability.  

For voters, it is very common to hear municipal politicians and mayors refer to the thousands, tens of thousands, or even in some cases, the hundreds of thousands, of new units that have received planning approval and are awaiting construction to become new homes ready to be lived in.  

These figures are often touted as markers of success and that residents should take comfort that these potentially hundreds of thousands of new units – or whatever number being quoted that day – are on the way and just around the corner.  

However, history has demonstrated that these numbers cannot be relied upon as an accurate predictor of what actually might be built.  

Why is that so? 

It comes down to a few key factors including the length of time it takes to develop and build a new home, changing rules around construction and shifting market conditions.  

The reality is that there is a substantive difference between what gets approved and what actually gets completed. 

In some jurisdictions, often larger and more complex regions, the approval to completed ratio can be substantially lower – 70 per cent, 60 per cent, or even lower.  

There are two interconnected and key variables that influence this ratio.  

The first being the length of time it takes to develop and build a residential project.  

In many of my previous columns, I have outlined that in the GTA it takes on average 11 years to complete a high-rise project, and 10 years to complete a low-rise project.  

The longer this takes, the more opportunity there is for legal, policy, economic or market conditions to impact the viability of the project and therefore, a reduced likelihood of turning an approved project into actual homes citizens can live in.  

The second variable impacting the approval-to-built-housing ratio are those very legal, policy, economic and market conditions themselves. Simply put, when a development application is submitted, it is a proposal to build housing under certain assumptions. 

However, when the realities of those assumptions change – for instance, municipalities introduce new rules or requirements, macroeconomic and trade conditions change, input or labour costs increase – the viability of the entire development can be put at risk and the likelihood of new housing getting built can be materially altered.   

To give you an example, as municipal development charges (DCs) in the GTA skyrocketed in the late 2010s and early 2020s, project viability eroded.  

Now, with the new federal and provincial Development Charge Reduction Program, DCs are coming down temporarily in many municipalities and project viability should increase.  

All of this to say, predictability between application, approval and actual construction is very important. The more predictable the outcomes, the higher the likelihood that the completion ratio between planning, approval and actual built housing, will increase.  

With all of this in mind, we come back to municipalities and the upcoming election.  

Municipalities are the single most important level of government when it comes to determining what gets built – they determine housing type, quantity and location.   

If municipal governments want to increase what actually gets built, they must enhance predictability – or even consider freezing the requirements, rules, or municipal costs for projects at time of application, or time of approval, to provide “in-stream protection” for projects. This would lead to a greater likelihood that those projects could maintain viability and ultimately increase housing supply in their cities and towns. 

So how do we move to a culture of “getting to yes” when it comes to speedier approvals? Many municipalities like Mississauga, Vaughan and Burlington have realized the culture change necessary to bring a greater degree of collaboration on applications and have formalized a process to “get to yes” in the spirit of getting homes built sooner for their residents. 

There will always be factors beyond the control of governments, but in this election, municipally-elected officials should commit to the greatest extent possible to control what they can control, because in the end, young families and future home owners will thank them for it. 

Dave Wilkes is President and CEO of the Building Industry and Land Development Association.