Toronto needs housing. Should the city get back to building it?

Thestar.com
June 19, 2023

Richard Lyall has a professional interest in how the city tackles its severe lack of affordable homes. As the president of the Residential Construction Council of Ontario (RESCON), his members are directly involved in building housing.

But as the dad of four kids, aged 15 to 23 -- all of them still living at home -- it’s young people’s future that most concerns him. Even young people with jobs can’t find or afford apartments.

“They’re depressed. Starting off is very difficult,” he said.

The current housing crisis can’t be allowed to slide into a full-blown catastrophe, warns Lyall.

If the undersupply and lack of affordability are challenging on a personal level, they are also the chief preoccupation of this month’s mayoral election.

The city’s cornerstone program, Housing Now -- a plan in which private developers are supposed to build thousands of affordable homes on leased city land -- has yet to break ground on a single project four years after it was launched.

That has led some candidates to campaign on the idea of putting the city back into the property development business, something that helped build housing in the past. Their political rivals warn such a move risks creating another layer of bureaucracy that could create an even more glacial housing approval process.

It’s a choice between the accountability of a government system that is responsible for making sure people are housed but is already seen as inefficient when it comes to approving development, and the private sector that isn’t subject to the same oversight and is open about the fact that it needs to profit from what gets built.

Residents and industry experts alike understand the impulse to look at whether the solution lies in the city taking more responsibility for building on its own land.

“It’s a nice idea, creating an actual building operation,” said Lyall. “But that’s kind of doubling down on the current problems.”

He is in the camp that some candidates say has ruled city hall too long -- the side that says Toronto needs the private sector to get housing built.

But the public sector has built thousands of homes in Toronto -- much of the older housing stock the city relies on. Government has done it before. It can do it again, says John Cartwright, past president of the Toronto and York Region Labour Council.

Although it always was and always will be private companies that construct the homes, he says the current housing crisis is an opportunity for governments, including the city, to get back into the business of homebuilding. Precisely what role the city would play remains unclear and differs according to the candidate.

Jeff Evenson, vice-president at non-profit developer Options for Homes, has spent much of his career advocating for and working on government housing initiatives. In the past, he said, Toronto had a housing department that not only managed rental properties but assembled property and carried projects through the planning, design and zoning process.

That’s what happened before what Cartwright calls “the mantra that everything has to be done by private developers, everything’s about the market.”

Toronto had little choice but to retreat from homebuilding when the provincial Progressive Conservative government of Mike Harris downloaded the cost of maintaining affordable housing on municipalities in the mid-1990s.

The federal government’s abandonment of the tax and incentive policies for developers that built most of Toronto’s rental stock in the 1970s and 1980s has created a dearth of market rentals, filled in large part by condos that offer less security of tenure for tenants than traditional purpose-built apartments.

But Cartwright says, “It was other periods of our history where the market had driven housing out of affordability that governments were forced to step in and create substantial social or public housing programs.

“This is a similar moment,” he said.

In the postwar period, CMHC built housing for returning vets. In the 1960s, Ottawa and the province stepped up to build housing in a big way. Then in the 1970s, cities got involved and the notion of municipal housing blossomed. It was the city that proposed Regent Park in 1974 although it was built with 75 per cent CMHC and 25 per cent Ontario funding, according to the University of Toronto PhD thesis by Gregory Suttor in 2014.

Cartwright believes that “you cannot solve a housing affordability crisis unless you take land and housing out of the speculative market.”

He was working as an apprentice carpenter on a bank in a mall across the street from a housing construction site in Malvern in the 1970s. The homes were part of a federal program designed to ease the way to ownership. Units were sold at a lower than market price with a proviso that they couldn’t be flipped for 10 years. If the owner sold within that period they had to repay all the profit to the program, he said.

“Ten years and a day later, that evaporated and today the houses in Malvern cost the same as any other housing in the rest of Scarborough -- completely outside of affordability for anyone.”

The 1970s and 1980s were also the heyday of co-ops in the city -- a viable, common sense housing option that requires government seed money. Four decades ago, the Labour Council Development Foundation was building about 3,000 co-op units a year. If you maintained 3,000 a year for the last 25 years you’d have 80,000 more affordable housing units -- permanently affordable units, said Cartwright, who points out that one benefit of co-ops is the absence of stigma attached to other kinds of public housing.

If he were running the city, he said, any city or government-owned lands being eyed for residential development would be exclusively co-ops or non-profits administered through Toronto Community Housing Corp. or some other municipally owned body.

David Hulchanski, a professor of housing and community development at the University of Toronto, thinks the housing crisis is being mischaracterized when it is framed as a supply or affordability issue. He says it’s an insecurity issue.

Relying on the market to house 96 per cent of households, he said, “is producing widespread housing insecurity, regressive income and wealth redistribution, racialized intergenerational wealth inequality, and institutionalized mass homelessness.”

Housing and profit simply don’t mix, he said.

“They do not add up via some innovative mechanism to produce ‘affordable’ housing. We know this about our health-care system. We need to explicitly recognize this about our housing system,” he said.

Developers were reluctant to speak on the record when asked by the Star whether the city should get back to building itself.

One senior executive said that, based on his experience, the city would not do a good job of managing its own development.

“I don’t think it makes sense for them to create a new construction company,” he said, citing the expertise and economies of scale that large private-sector developers bring to construction projects.

He also described a municipal system of building approvals that he said should, in many cases, be achievable in six months but instead take years. A lack of leadership means there’s no one at the city quarterbacking development applications. Municipal departments that need to sign off on projects often operate in isolation of other civic areas.

“There is no accountability to get things done. It’s always, ‘We’re trying.’ There’s nobody to crack the whip,” he said.

Daniels Corp. CEO Mitchell Cohen, whose company took on the challenge of redeveloping the old Regent Park, declined a phone interview. But in a brief email to the Star, he said there are many reasons the city should not set up its own development corporation and he referred to an op-ed he wrote, published in the Star on June 6.

In it, he said, Toronto has squandered opportunities to build affordable housing and needs to exploit the tools already at its disposal, including higher property taxes.

Although several candidates are touting sped-up building approvals, Cohen said, “No matter how fast the approval, demand will outstrip supply and market values will continue trending upward.”

What candidates aren’t talking about, however, is how they can strengthen regulatory tools, nor are they talking “about creating an inclusionary zoning regime that will deliver the desired result,” he wrote.

Heather Tremain runs Options for Homes, a non-profit development company that builds affordable ownership units. If the city were to take on a larger development role, she thinks there could be a risk of further politicizing the already high-profile housing file.

“You’ve got one group that’s a developer and then you’ve got the planning department on the other side that’s the regulator. That’s fraught with potential conflict.”

There is a role for municipalities, and provincial and federal governments to put land into housing projects, especially to achieve deeper levels of affordability. But the cost of the projects is enormous and the economics have to work at a time when the industry is caught in a squeeze right now of higher financing and construction costs, she said.

“It’s probably better in the hands of a for-profit developer or non-profit developer who has very strong connections to the industry, understands how you design these buildings to make them affordable and has a good relationship with builders or is a builder,” said Tremain.

For Lyall, the answers to building more affordable housing is about speeding up approvals, particularly in the direction of purpose-built rentals. Opening up more brownfield -- commercial or industrial land that has fallen vacant -- is critical, he said.

As much as construction costs have risen, they are still only 35 to 40 per cent of the cost of building homes.

“The rest of it’s all taxes and a whole bunch of cost in the time wasted -- the 30 to 33 months to get things approved. That’s what affected housing,” said Lyall.

When he looks at the cost of homes relative to incomes the numbers are “terrifying.”

“A lot of the people that are in the decision-making capacities aren’t feeling this,” he said. “They’ve got their homes. But at the ground level, working people, middle class (people) in Toronto -- we’ve got a massive, massive problem -- catastrophic.”