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Dec 9, 2022

Bill 23 - More Homes Built Faster Act, 2022 - WoodGreen Submission

I collaborated with my friends at Woodgreen Community Services to submit comments on Bill 23 – The Build More Homes Faster Act. The Bill has one binding philosophy: increasing the supply of housing. And, through the Bill the government is doing what it can to increase supply. If I can generalize our recommendations, it is that the supply created needs to be deliberately made available across broader income brackets than is contemplated.

Hope you enjoy the read.  

- John Fox, Managing Partner in Real Estate at Robins Appleby LLP

Click here to read the submission as a Word document

Bill 23 - More Homes Built Faster Act, 2022 - WoodGreen Submission

About WoodGreen:
WoodGreen is one of the largest social service agencies in Toronto, serving 40,000 people each year. WoodGreen offers over 75 programs and services tackling the social determinants that affect the health and well-being of individuals in our community.
WoodGreen offers a number of services that help people find safe and affordable housing, supports seniors to live independently, assists internationally-trained professionals entering the Toronto job market, provides parents with childcare, delivers programs for children and youth, assists newcomers with settling into Canadian life, and helps homeless and marginalized people get off the streets.
Managing over 1,000 units, WoodGreen is Toronto’s largest non-municipal affordable housing provider offering seniors, newcomers, youth, individuals with disabilities and people with a long history of homelessness the opportunity to thrive in safe affordable housing.

Summary:
Bill 23 is intended to support the government’s goal of building 1.5 million new homes by 2031, through various initiatives including tax incentives, eliminations of fees, and further measures to deregulate and streamline the planning processes. The focus of this bill is to increase the supply of housing and make it easier and less expensive for developers to deliver housing over the next ten years. The rationale is first year economics: with more supply of homes in the market, market prices and rents should decrease.

These actions and incentives in the proposed legislation may help speed up development of housing but falls short in effectively incentivizing the development of affordable rental housing for vulnerable populations. Bill 23 reduces the cost of development to non-profit builders through the elimination of development charges and other levies, but does not commit to directly investing into the creation of community and supportive housing.

Reducing development costs for non-profit housing providers may, at first blush, appear to contribute to the creation of more affordable housing options by non-profit developers, however, this is off-set by the bill’s deletion of housing services as a legitimate use of development charge levies. Since the municipal contribution to our projects is greater then development charges, which are often waived in any event, for most non-profits, the aggregate result will make below market housing more difficult to create. Programs such as Open Door and Housing Now rely on these contributions and are utilized by non-profit housing providers to develop affordable housing.

We are also concerned by the Bill’s threat to rental replacement, we believe this will reduce the municipality's ability to protect existing stock of affordable rental housing units in all areas of the City. We believe that rental replacement now is well understood by developers who are building nonetheless with the rental replacement obligations. We see no reason for this program to be eliminated, though we are open to any way that eases compliance with the program’s objectives.

WoodGreen supports legislation that will develop more affordable homes for vulnerable populations and we look forward to further details on the new attainable housing stream to be defined in Regulation. WoodGreen also appreciates the government's willingness to develop more homes by increasing density in established neighbourhoods and continuing to ensure government owned surplus lands are used for affordable housing.

We have set out below our recommendations for amendments to the legislation to ensure we protect existing rental housing stock and the residents who reside in them; ensure there is balance between
incentives to remove fees for development, while still making certain there is adequate City revenues to support infrastructure and existing housing programs; and increase the inclusionary zoning affordability maximum period from 25 years to 50 years to provide a longer lasting contribution to the affordable housing stock. We are also recommending changes to support our understanding of your vision for Attainable Housing to allow for permanent affordable ownership.

WoodGreen Recommendations:

1. Building below market housing should not be made more difficult by the legislation.
The government should provide alternative funds to municipalities to make up for the loss in revenue that contributes to important housing programs, such as Open Door and Housing Now. WoodGreen relies on these programs for the development of our affordable housing portfolio.

2. Protect Existing Affordable Rental Stock.
The government and Ministry should not restrict the rental replacement policy in Toronto or other municipalities seeking to ensure the retention of existing stock. This policy ensures that rental stock will remain in existence and spread throughout the City.

3. Make Inclusionary Zoning Count. That the legislation be amended to increase the maximum affordability period for inclusionary zoning to be increased from 25 years to 50 years. We believe market developments are a logical place to focus affordable units for nurses, teachers and others who are priced out of the market. We do not believe this population should rely on non-profit development and Inclusionary Zoning provides the opportunity to deliver housing across a wider income band then market housing alone. WoodGreen also recommends an increase of the proportion of units provided at an affordable rate currently set as 5 percent. This 5 percent rate will not meet the needs of the Toronto population. We would support a more gradual phase in of the proportionate unit requirements then currently contemplated by the City, leading to a minimum of 15%.

WoodGreen Supports:

1. Denser Development. Increased density in established neighbourhoods and areas around transit stations as a way to provide more housing.

2. Attainable Housing. WoodGreen looks forward to further details in the Regulation on this new attainable housing program how this may benefit the housing system. To support a program of permanent affordability, please consider exempting options to secure a non-profit right to recover an affordable unit from the Perpetuities Act.

3. Surplus Lands. WoodGreen also supports the government's continued goal to provide non-profit developers with access to surplus or underutilized lands for development of affordable housing.

WoodGreen Recommendations:

1. Make Sure Below Market Construction Remains Viable
This Bill is focused on increasing the supply of housing as its primary means of influencing the pricing of that supply. The proposed Bill would require municipalities to provide financial incentives through discount and in some cases full removals of development charges, community benefits charges and parkland deductions for affordable rental and ownership housing, attainable housing and for Inclusionary Zoning units. For most non-profit developments, those incentives are already in place through concessions municipalities are entitled to make to Municipal Capital Facility. The Bill proposes to have all non-profit developers be exempt from development charges, even if developing with market rental units. The gain to non-profit pro-forma of the legislation is therefore the savings associated with market units.

However, the Bill threatens the ability of a municipality to raise funds to assist non-profit developers. The proposed Bill would remove "housing services" from the list of eligible development charges services. The City of Toronto uses these charges to generate funding for non-profits. To be clear, our concern relates to the availability of a municipal contribution, not to its source. We understand the objection to the use of development charges to fund housing on the grounds that “development should fund development”. To the extent the funding is replaced through other means, we would have no objection to the removal of housing services from the Development Charges Act.

Of major concern to WoodGreen as a non-profit housing provider, is how the reduction of fees impacts the City's ability to provide affordable housing supports, invest in new shelter services, and meet the 40,000 affordable rental approval targets outlined in the HousingTO 2020-2030 Plan. The City of Toronto preliminary analysis estimates the potential financial impact is $130 million annually, for the removal of the housing development charge services.

As soon as the loss of funding to our developments exceeds the development charge reduction on market units, it becomes more difficult to build below market housing. In effect, to make the pro forma work, Woodgreen will be forced to build more market units to make up the difference. In the name of creating market supply, the government will have forced non-profits to reduce the below market supply that is needed, leaving people who might otherwise have been housed relying on shelters and temporary accommodation.

Examples:

The city needs revenue to continue to deliver the Open Door, Housing Now and Multi-Unit Residential Acquisition programs, all programs WoodGreen has benefited from in our housing portfolio and continues to need for the development of new units. Projects such as our 1117 Gerrard Street East building was a $16 million project where governments and community support came together to develop an affordable housing unit. The city joint funding from the Open-Door Program, with a social impact fund and the Canada Mortgage and Housing Corporation’s (CMHC) National Housing Co-investment Fund (NHCF) developed a mixed a Rent-Geared-to-Income and Market Rent units for seniors 59+ which would not have been possible without financial contributions from the city. Without the City of Toronto contributions, the project would have been at least partially a market building.

We believe the ability of non-profits to partner will also be impaired. For example, WoodGreen in 2021, we signed a public-private partnership agreement with Sun Life and The Daniels Corporation (Daniels) and the City of Toronto to integrate long-term, affordable, rental living for single mothers in their multi-family residential development. The City of Toronto contributed $5.1 million to WoodGreen for the project. WoodGreen was able to lease and manages 34 affordable housing units in this 346-unit building (10 percent). Under the agreement, Sun Life and Daniels established a 40-year lease commitment with WoodGreen, allowing for the creation of long-term affordable housing in downtown Toronto. A project not possible without municipal contributions. This kind of program is creative, entrepreneurial and opportunistic. It needs local response and support. By removing the municipality from this equation, the proposed Bill will have the effect of slowing the supply of below market housing.

WoodGreen has a pipeline to add 2,000 more units over the next 10 years. Other non-profits are doing the same and are looking to develop below market units. Supporting below market housing creation is a necessary corollary to the Bill. If the Bill slows that creation, then it simply cannot be said to target all Ontarians and is aimed solely at addressing housing as a middle-class issue. We do not believe this is the intent of the government.

Recommendation:

We support a balance between providing exemptions for affordable developments, however, the government must provide alternative funds to municipalities so that they can continue to contribute to important housing projects and programs, such as Open Door and Housing Now.

2. Existing Stock Matters - Diminishes Housing Affordability and Rental Housing Replacement Protection
Under the new Bill, the Minister has the authority to make regulations imposing limits and conditions on the powers of a local municipality to prohibit and regulate the demolition and conversion of residential rental properties. The Minister’s intention to increase supply and support developers by potentially introducing regulations that would eliminate municipal replacement policy is very concerning.

The Bill would give the Minister the ability to introduce a Regulation limiting the City of Toronto’s ability to protect existing rental stock. These protections have been in place since 2006 and have successfully prevented a net loss of thousands of rental units through demolitions and rental conversions. Through rental replacement by-laws, municipalities, including the City of Toronto, can require developers or landlords to replace rental units that have been impacted by renovation or redevelopment at an equivalent affordable rent.

This replacement and protection policy is important to maintain existing stock of affordable rental housing units. This Bill as written, could result in increased rates and increased demand for homeless services if the existing stock is not protected. Over the last 5 years, the City's rental replacement policy framework has secured the replacement and renewal of almost 2,200 private market existing rental units, however, under the new legislation these would have been lost.

Recommendation:

WoodGreen recommends that the government and Ministry not limit the rental replacement policy in Toronto. This policy ensures the replacement of units where they exist and protects the stock of affordable rental housing for low income Ontarians. We understand the government's intention is to increase supply of housing and eliminate red tape for developers, however, rental replacement is in place now and development continues to occur in Toronto. We have seen no evidence that retaining rental replacement will deter otherwise viable project from proceeding. In fact, every development with rental replacement is evidence to the contrary. We do support any changes which make compliance for developers easier and more straightforward – provided the units are ultimately replaced.

3. Standardized Inclusionary Zoning Rules
The proposed Bill reduces the amount of affordable housing units required to be provided in new market developments and allows a maximum affordability period of only 25 years and five percent cap for the proportion of units provided at an affordable rate in an inclusionary zoning development. For the City of Toronto this is a decrease in affordability period currently at 99 years. Also, of concern is the decrease in the portion of units in Toronto from 20 percent to 5 percent. This would directly impact the City's ability to deliver housing targets for below market housing.

The inclusionary zoning measures proposed in Bill 23 significantly limit The City of Toronto’s ability to develop inclusionary zoning based on the local needs of the population and current economic conditions. The City of Toronto adopted their inclusionary zoning policy with targeted rates based on building type and geography, with higher portions of develop units being affordable. Since the Bill caps the limit of affordable new units at 5 percent, it is likely that developers' available affordable units may only be studio units, the least attractive to many working-class populations also in need of affordable units. We would support a more gradual phase in of the proportionate unit requirements then currently contemplated by the City, leading to a minimum of 15%.

Recommendation:

WoodGreen recommends that the Bill be amended under the maximum affordability period for inclusionary zoning to be increased from 25 years to 50 years, the affordable maximum used by WoodGreen. Inclusionary zoning is a key tool for development of affordable housing and 25 years is not nearly enough time for to build a material stock of affordable units.

WoodGreen also recommends an increase of the proportion of units provided at an affordable rate currently set as 5 percent. This 5 percent rate will not meet the needs of the Toronto population.

WoodGreen Supports:

1. New Attainable Housing Program
The proposed Bill has created a new category of housing called “attainable housing”, which will be defined in Regulation. WoodGreen is interested in the intention to develop a new "attainable housing" program that will leverage provincial surplus or underutilized lands and commercial innovation. Should attainable housing be defined as housing provided to residents with various income levels, the program could potentially provide opportunities for non-profit housing providers looking to develop affordable or attainable housing on surplus lands.

Recommendation:

WoodGreen looks forward to further details in the Regulation on this new program. WoodGreen supports the government's continued goal to provide non-profit developers with access to surplus or underutilized lands for development of affordable housing.

To the extent the government seeks to create permanent affordable ownership opportunities, it will need to provide non-profits with the tools they need to ensure that affordability. The easiest means of doing this is through an option agreement, allowing the unit to be repurchased at a set price. Attainable and Affordable housing programs by non-profits should be exempted from the Perpetuities Act so that such option agreements are not at risk and affordability can be maintained.

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