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Bridge Beat

Dec 19, 2019

Costs for Affordable Housing, Transit to be Shared by all Torontonians

There have been 2 major municipal initiatives announced by Mayor Tory over the last few weeks which are intended to address the pressing needs of affordable housing, infrastructure upgrades, and transit expansion.   

The first relates to an increase in the existing City Building Fund which would rise from the current 1.5% surcharge on property taxes to 10.5% in 2025.  The City Building Fund was established 2 years ago to create funds specifically earmarked for transit and housing.  It began as a 0.5% levy on property taxes rising to 2.5% in 2021. 

Mayor Tory indicated at a recent Canadian Club luncheon, that because the City was unable to raise additional revenues by putting tolls on the Gardiner and Don Valley Parkway, increasing the City Building Levy Fund "was the only way, given the limited current tools available to us" to create further funding for these major initiatives.

Interestingly, Mayor Tory conveniently forgets that in 2009, pursuant to the newly enacted City of Toronto Act legislation, a municipal land transfer tax was implemented for the first time and which has raised between $600M and $800M per year since 2010.  This almost $1-billion of revenue a year has clearly not been enough to even cover operating expenses, let alone major infrastructure projects. 

Where has this approximately $5-billion of additional revenue gone?  It is certainly not reflected in infrastructure, affordable housing or transit. 

The question remains as to whether or not these additional levies will be kept out of the general tax fund and used specifically for worthwhile capital projects. 

On the other hand, Mayor Tory has to be commended for finally breaking his steadfast opposition to any increase in residential property taxes by increasing the City Building Fund.  The City of Toronto has notoriously low residential property taxes and extremely high commercial taxes, which makes doing business in the City expensive and uncompetitive, and drives many businesses into the 905 area. 

Although this new levy increase will not impact on the commercial tax rates (save in the same manner as residential taxes), at least it might ameliorate further unfair increases to the commercial mill rates.

Moreover, it is finally recognition that it is not only new home purchasers that have to bear the load of major infrastructure costs via development charges and other City levies. 

All citizens of Toronto should be bearing the cost of affordable housing and transit, not only new home buyers. We need to provide housing at many different price points, not just luxury condos and single, detached homes for new immigrants, people who work in the service sectors, and more.  

Again, development charges and other levies will not reduce as a result, but hopefully having this additional fund increased substantially will perhaps reduce the appetite of City Council to focus on new home buyers as the main source of major capital expenditure revenues. 

City Council has approved yesterday Mayor Tory's proposal to increase the City Building Fund, so that the total levy on top of existing property taxes will rise to 10.5% from the existing 1.5%.  It is expected that the average home owner will pay an additional $326 per year resulting in additional billions of dollars for the City to spend on infrastructure, affordable housing, and transit projects. 

It took dire predictions of financial calamity from City managers to convince both the right and left wing portions of City Council to approve this significant tax increase with the vote coming in at 21-3.  A rare display of unanimity from an otherwise fractured Council.

At almost the same time, a major affordable housing initiative was announced by Mayor Tory with a projected cost of $23.4-billion.  Presumably, some of the City Building Fund will be used to implement the housing plan (City's projected contribution is $8.3-billion). 

However, the reality is that this ambitious housing plan which projects construction of potentially 40,000 affordable units over the next 10 years, is underpinned by major contributions from the province and the federal government of almost $15-billion.  To-date, none of these commitments have been made by the other 2 levels of government and without them, the affordable housing plan will merely be another unrealized City initiative. 

On a positive note, the plan recognizes that the cost of affordable housing cannot be funded strictly by loading it onto the cost of new housing through inclusionary zoning or other means.  To do so, results in the price of regular housing for middle class people simply going up to pay for the creation of "affordable housing" for those who cannot afford current rental costs to housing costs.

The answer is not to saddle new housing with the costs of affordable housing, but with global governmental initiatives like Mayor Tory's plan or housing supplements to assist those in need to bridge the income and rental cost gap.

Mayor Tory is again to be commended for having the vision and desire to create a real affordable housing plan to make a dent in the huge waiting lists on TCHC properties and others.  It is therefore critical for the provincial and federal governments to come to the table.  Toronto's housing problem is a national problem, not a strictly municipal one.  An announcement from all 3 levels of government on this issue is expected today.

In future blogs, I or my partner, John Fox, will be doing a closer analysis of Mayor Tory's Affordable Housing Plan.

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