Toronto has a new plan to incentivize much-needed development of 20,000 rental homes | CBC News

As Toronto grapples with a shortage of rental housing for a growing population, city staff say council needs to incentivize the development of 20,000 new rental homes through tax and fee reductions — and they have a plan to do it.

“Toronto is facing a significant shortage of purpose-built rental homes due to insufficient investments from all orders of government since the early 1990s, amongst other factors,” city staff said in a release Wednesday.

The shortage is likely to get worse, the release says, due to high interest rates, inflation and rising construction costs, along with the expectation that rental demand will continue to grow.

“Recent actions by all levels of government to support new rental homes have not proven sufficient to significantly increase rental housing supply,” city staff said in the release.

In a new staff report, Build More Homes: Expanding Incentives for Purpose-Built Rental Housing, staff recommend ways the city should encourage the building of 20,000 new rental homes, including 16,000 purpose-built rentals and a minimum of 4,000 affordable rentals.

Mayor Olivia Chow announced the plan Wednesday, saying condos make up most of the rental housing being built in the city right now, though they are on average 40 per cent more expensive than purpose-built rentals.

Developers aren’t building the kind of rentals low- and middle-income Torontonians can afford because they don’t feel there’s any profit in it, she said.

“Half of the city are renters and they need support,” she said. “Today, we are taking action.”

Developments must include affordable rentals: staff

To incentivize rental development, staff recommend the city defer development charges on purpose-built rental homes so long as the development includes the necessary rental requirements. That could save developers nearly $38,000 per unit, according to city staff.

Other recommended incentives include a 15 per cent property tax reduction for 35 years for eligible developments and even forgone taxes and fees for affordable rental units, which city staff estimate would reduce costs by nearly $100,000 per unit.

Eligible developments would need to set aside at least 20 per cent of units as affordable rental homes, staff say, under the city’s new income-based definition of affordable housing. The units would be required to stay affordable for at least 40 years.

Projects will also be required to start construction by the end of 2026.

The incentive plan was developed in partnership with all levels of government, city staff say, and will help Toronto hit its target of 41,000 affordable rental homes and 285,000 housing starts by 2031.

WATCH | When and why did Toronto start facing a shortage of rental housing?: 

When did Toronto run out of rentals?

Toronto’s rental market is in dire need of more supply. But back in the 1960s and 1970s the city had a healthy stock of apartment buildings. So what happened? CBC Toronto’s Shannon Martin explores the timeline of when Canada’s biggest city started running out of rentals.

“Our city has reached a critical point in the need for stable, rental housing, and today’s steps will lay the foundation for creating secure, long-term housing options for all income levels, including middle-income earners and essential workers,” Coun. Gord Perks, chair of the city’s planning and housing committee, said in Wednesday’s release.

To further encourage rental development, city staff also recommend council approve a 15 per cent municipal tax rate reduction for eligible rental developments, a tax reduction that would apply to all new rental housing.

Staff say city needs help from province, Ottawa

The city would kick-start the Build More Homes program by immediately releasing applications to identify and approve 7,000 new rental homes, including 5,600 purpose-built rental homes and at least 1,400 affordable rental homes, Chow said.

“These are projects that are stuck in the pipeline,” Chow said. “Our new program will make them viable.”

Chow said the city would pay for the incentives to develop those rental homes, but would need help from the province to cover lost revenue to incentivize development of the remaining 13,000. 

WATCH | Will lower interest rates speed up Toronto housing builds?:

Do lower interest rates mean Toronto can speed up building housing?

The Bank of Canada has announced the fourth straight cut to Canada’s key interest rate. Economists have blamed high interest rates and construction costs for the slowdown in new condo and rental housing builds. But as CBC’s Shannon Martin explains, even with rates trending downward, developers say Toronto is falling behind.

Staff are recommending the city call on the province to provide a “Build More Homes” rebate of about $1 billion, which staff say would be equal to the value of development charges and 85 per cent of the value of property taxes for 35 years for new purpose-built rental homes. That would help fund the second phase of the program, city staff told reporters Wednesday.

Staff also recommend a request to the federal government to immediately allocate a $7.3 billion portfolio of low-cost financing to support the delivery of the 20,000 new affordable and purpose-built rental homes, as outlined in the report.

Council is set to consider the recommendations on Nov. 5.