Ontario’s bid to build new affordable housing amid a cost-of-living crisis has hit a bump as builders thumb their noses at a list of affordable sales prices released by the government for developers who want to qualify for rebates.
The Ford government arrived in early June has released its definitions of affordable housing establish for each municipality in the province the price at which developers must sell if they want to be reimbursed for certain taxes and fees.
The definition is broken down by housing type and location across the entire province. In Toronto, for example, a detached house would have to sell for $366,500 for it to be considered affordable housing and therefore excluded from some development costs. It should 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 homes built at those prices even if fees were waived.
“I don’t see that in Toronto,” he told Global News.
A spokesperson for the Ministry of Municipal Affairs and Housing says the definitions of affordability are deliberately focused on income and have been widely consulted on.
“The overall feedback was that to truly help more moderate income earners in Ontario find a home, the definition of an affordable housing unit must reflect market conditions and include income factors,” they said.
“The definition of affordable housing has been revised to better reflect the ability of local households to pay for housing while recognizing the diversity of the province’s housing markets.”
A case study of the cost of a house 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 he sells a detached house at the government’s affordable rate .
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To qualify for compensation rebates, developers would have to sell a detached house in Vaughan for $531,000, the government says.
The average land price for a single-family home in the city is $482,527, while the midpoint of construction costs is estimated at $495,000. Municipal costs are approximately $168,375, while provincial and federal taxes are $139,823. The land transfer tax is calculated at only $25,000. In total, the average cost calculated by BILD is just over $1.3 million for a home that should sell for $531,000 or less.
“No, I don’t think you’re going to get a lot of attention in the GTA,” said Justin Sherwood, BILD’s SVP of communications, research and stakeholder relations.
The province is not only facing pressure from the development community over its definitions. Ontario NDP housing critic Jessica Bell said she feared the definitions of affordable housing were “set up to fail” and would not deliver the units needed to solve the province’s housing crisis.
“I doubt developers are going to build affordable housing to sell because it costs more to build the house than they can sell it for,” she said. “We’ve heard from developers that these definitions of affordable housing are just not going to work. They have to make a profit and by this definition they will actually lose money if they participate in the program.”
Bell pointed out that construction industry representatives had raised concerns about the definition at committee meetings at Queen’s Park.
“Houses cost a lot to make. In this climate, they just do,” Bell added.
She said she wanted the Ontario government to follow in the footsteps of British Columbia’s NDP-led government by building affordable housing on government land and offering subsidies and low-cost financing for highly affordable projects.
“If we lower costs, we can sell houses much cheaper and rent them cheaper, and that’s really the goal,” Bell says.
Both Lyall and Sherwood agreed that taking the cost of land out of the equation helped.
The Ford government has consolidated public lands under the Department of Infrastructure with high-level plans to offer surplus lands for affordable housing projects, although few details have been published.
Lyall said public land would reduce a key cost, but insisted there would still be challenges for a developer to make money at Ontario’s affordable housing prices.
“It all depends on where the country comes from,” he said. “Suppose it is a piece of government land where you get the land for a very low price, then there is a possibility that you will hit something there, but it will not be anything on any scale because construction costs, labor costs and material costs have increased. has increased dramatically in recent years.”
Sherwood suggested the affordable housing plan “becomes more realistic” with more mid- and high-rise housing, where costs – especially land – can be spread over a greater number of units.
“If you were to take out the land cost and then make other adjustments in terms of fees, taxes and charges, you might be able to get close to the price and it might be more feasible,” he said.
The Ministry of Municipal Affairs and Housing said in its statement that both industry and municipal experts were questioned when it came up with the methodology it used to calculate affordable rates.
“As the exemptions and discounts for affordable housing have only been in effect for twelve days, the government will monitor the implementation of the exemptions and intends to issue a new bulletin annually.
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