Toronto and surrounding areas need 30% more new housing units per year to meet demand: report

Why aren’t new homes being built? Because of the region’s lengthy building approval process and the amount of fees, taxes, and charges on new homes, developers say

nationalpost.com
Jan. 26, 2022
Jessica Mundie

A new report has found that the Greater Toronto Area and Hamilton (GTAH) needs 30 per cent more new housing units per year to meet population demand.

Previous inaccurate and outdated forecasting of population and housing completions have contributed to a low housing supply and affordability challenges in the GTAH and outer ring communities, says the report conducted for the Building Industry and Land Development Association (BILD) by Smart Prosperity Institute. The report, titled “Forecast for Failure,” found that over the past seven years, the Ontario government’s “Growth Plan for the Greater Golden Horseshoe” has underestimated population growth and overestimated housing completions.

“Forecasts of population growth and housing completions are the foundation on which municipalities base their projections of future housing requirements,” said David Wilkes, BILD President and CEO. “If the forecasts that inform the plan are inaccurate or not up to date, then the housing supply that comes to market in the future may not match demand.”

There are a number of reasons why this imbalance in population and demand has occurred, said Mike Moffatt, senior director of policy and innovation at Smart Prosperity Institute. The main issue being population growth from international sources that was not accounted for in the growth plan.

There were two main policy changes that affected growth from international sources, said Moffatt. The first happened in 2014, when the federal government reformed regulations surrounding international students’ ability to work while studying in Canada -- they could now work to pay for school. Many international students end up staying in the country after graduating, which contributed to a rise in population. The second change was in 2015, when the Harper government introduced the Express Entry program, which sped up the immigration process for skilled workers.

Moffatt said that despite the growth plan coming after these big policy changes, it was based on population data and forecasts that predate these changes. Between 2016 and 2021 the GTAH’s population growth from international sources was over 120,000 more than forecasted in 2012, yet it has 26,000 fewer housing units than were forecasted.

“So, you’ve got more people than anticipated and fewer homes than anticipated, that’s going to get you a housing shortage,” he said.

This imbalance has affected young families the most, said Moffatt. They are getting priced out of homes in the GTAH and having to “drive until they qualify” in other parts of the province. In 2012, the forecasts expected that 36,000 people would move out of the GTAH to other parts of the province from 2016 to 2021. In reality, that number was over 100,000.

So, why aren’t new homes being built? Housing developers say it is because of the region’s lengthy building approval process and the amount of fees, taxes, and charges made on new homes and developments.

Jason Sheldon, executive vice president of land development at Remington Group, said that layers of reviews at the local level between departments, stakeholders, provincial ministries, and conservation authorities can add months -- and sometimes even years -- to their building timelines.

Taxes on rental units and new homes are also hindering development said Stephen Diamond, chief executive officer of DiamondCorp. He said builders must pay HST on new housing units when their first tenant moves into the building, even though the rest of the building may remain vacant. There are also significant taxes on the purchase of a new home in Toronto, which are put on the buyer said Diamond.

The “Forecast for Failure” report outlines two important recommendations that could help solve this housing imbalance. The first is that the Ontario government should prepare an annual forecast that considers population, employment, and housing stock projections in the GTAH to create a unified, more accurate set of numbers to base their development on.

The second recommendation is that the growth plan should account for population estimates that are higher than forecasted to allow for errors.

“We’re never going to get the forecast completely right,” said Moffatt. “We’re better off erring on the side of allowing more building than having too few houses.”