RESCON: Home construction in the GTA has hit the wall

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Too many building projects are mired in the site review process

As American statesman Benjamin Franklin once said, “If you fail to plan, you are planning to fail.”

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Sadly, when it comes to the housing affordability and supply crisis, successive governments have fallen into that trap and, over the years, fallen short. Now, with housing starts falling, we are seeing the results of that inaction. My fear is that the situation will get worse before it gets better.

To emerge from this crisis, governments must embrace policies that allow builders to build. That means reducing red tape and excessive taxes, fees and levies and pumping money into infrastructure to support construction of new housing. These are major hurdles that must be overcome.

Unnecessary bureaucracy just gets in the way of progress and stymies the residential construction industry’s efforts to build housing quickly and decisively – and at a price tag people can afford.

The approvals process is dismally long and can add months and years to any new building project, and particularly purpose-built rentals. We have outdated planning regulations, an inefficient approvals process and simply can’t get things built quickly.

We are near the bottom of the barrel when it comes to the average time it takes to get a project approved in Canada.

Our country has the second highest ratio of house prices to income among all Organization for Economic Co-operation and Development countries. Meanwhile, a recent survey showed 44 per cent of young Canadians adults have given up on home ownership. Less than 30 per cent of Canadians have sufficient income to buy a single-family home, according to Royal Bank of Canada.

Apartment builders in particular are facing numerous obstacles that are stifling development. No new shovels will be hitting the dirt unless governments and policymakers are prepared to make changes, according to panelists who spoke at the Canadian Federation of Apartment Associations Rental Housing Conference that was held in Toronto recently.

While there have been some positive changes introduced by all levels of government, we have a lot of ground to make up if we are to reach the homebuilding targets they have set.

As a prime example of bureaucracy and government policy getting in the way of development, let me refer to Toronto’s Housing Now initiative, launched in 2019 under then-Mayor John Tory.

The program is designed to activate city-owned lands and stimulate the development of affordable rental housing within transit-oriented, mixed-income communities and is a key program that supports the city’s target of building 285,000 homes by 2031.

However, the latest housing tracker report shows work has been started on only one project. Three more are expected to get under way this year but the start date of 14 more is still to be determined.

The city has said it “continues to work as quickly as possible with non-profit and private sector developers to get shovels in the ground while navigating a number of external challenges.”

However, the project has been a debacle. Nothing has been built. And the clock is ticking on the targets. Many of the projects are mired in the site plan review process, or are in the process of seeking minor variances, Official Plan or zoning amendments, or stymied by other matters.

Meanwhile, the residential construction industry has hit a wall of fees that discourage homebuying.

Governments continue to pile on with excessive taxes, levies and development charges. They are like a runaway train. The add-ons account for 31 per cent of the cost of buying a new home, according to a report done last year by the Canadian Centre for Economic Analysis.

In the Greater Toronto Area (GTA), for example, development charges were hiked in May and again in June. In less than a year, the rates went up 42 per cent. On a one-bedroom condo, the charges increased to $52,676 in June from $37,081 in August 2023.
These fees are paid up-front by the builder and ultimately passed on to homebuyers in the form of higher prices.

Lukasz Wywrot, a professional engineer and CEO of LCH Developments, recently put the fees into perspective in a post on LinkedIn. He ran an experiment to find out what the development charges and other fees would be in various cities on a hypothetical new development with 220 units and gross floor area of 150,000 square feet. He found that Toronto was the most expensive of 13 North American cities at $18.1 million, followed by Vancouver at $15.98 million.

Austin, Texas, was the cheapest at $810,000, followed by New York City at $1.43 million and Halifax at $1.65 million. The fees did not account for HST, which is an additional cost on a new home.

If we are to climb out of this crisis, we must right the wrongs of the past. That means removing the bureaucratic hurdles and exorbitant costs to building. The time to do this was yesterday.

Richard Lyall is president of the Residential Construction Council of Ontario (RESCON). He has represented the building industry in Ontario since 1991. Contact him at media@rescon.com.