Toronto approves incentive plan for developers building affordable rental housing

Michael Lewis
Special to Ontario Construction News

Toronto has approved a plan offering hundreds of millions in incentives for the development of affordable rental homes. Mayor Olivia Chow said private builders are eager to get started.

“A huge number of developers and builders can’t wait to get started,” Chow said at a Toronto city council meeting last Wednesday.

Chow’s comments came before a vote in which council adopted a staff recommendation committing the city to build 7,000 rental homes, including 5,600 purpose-built rentals and at least 1,400 affordable units.

Under the plan’s second phase, the city is calling on the provincial and federal governments to contribute more than $8 billion in funding for the construction of 13,000 additional rental homes. The goal is to fast-track the first phase of the program and immediately release a call for applications.

“By Thursday, the portal to apply opens, and city staff have been given a mandate to just say ‘yes’ if projects meet the criteria,” Chow said. “We are ready to start, and there’s no red tape.”

To tackle Toronto’s ongoing housing crisis, the city released a report recommending the creation of 20,000 new rental homes. The plan, titled Build More Homes: Expanding Incentives for Purpose-Built Rental Housing, includes up to 16,000 purpose-built rental units and at least 4,000 affordable homes.

“Toronto is taking bold action to address the housing crisis. We’re offering incentives to build thousands more purpose-built rentals and affordable homes,” Chow said. “With partnership from the provincial and federal governments, we can build thousands more homes and reshape the housing landscape for a more inclusive and affordable Toronto for everyone.”

Despite high interest rates, inflation, and rising construction costs stalling new developments, demand for rental housing is expected to increase due to population growth and a homeownership market that remains unattainable for many residents.

A new incentive for purpose-built rental homes aligns with targets set by federal and provincial housing initiatives, which aim to create 41,000 affordable rental units as part of 285,000 housing starts in Toronto by 2031.

Eligible projects will benefit from financial incentives to private builders, amounting to about $400 million in potentially foregone revenues for the city.
Incentives include:

• An indefinite deferral of development charges, estimated at $37,636 per unit, for purpose-built rental homes.
• A proposed 15 per cent property tax reduction for 35 years, estimated at about $20,396 per unit.
• Full financial incentives for affordable rental units, potentially reaching $97,264 per unit.

To qualify, projects must dedicate at least 20 per cent of units as affordable, according to the city’s new income-based criteria, and must commence construction by the end of 2026. Most of the new units are expected to be built on privately held land.

The report also recommends that council establish a multi-residential property tax subclass, offering a 15 per cent municipal tax rate reduction for eligible developments, starting in the 2025 budget.

City officials are also seeking provincial and federal funding, including $7.3 billion in low-cost financing to support the creation of these rental units, and joint funding from all levels of government to establish a Canada-Ontario-Toronto Build program.

Coun. Gord Perks, chair of the city’s Planning and Housing Committee, stressed the urgency of the situation: “Our city has reached a critical point in the need for stable, rental housing. This is a crisis that has been decades in the making, and now we are asking other levels of government to join us at the table.”

Perks said a recent breakfast meeting between builders and city officials, including the mayor, to discuss the program required a second meeting room and a webinar because of the overwhelming interest.

“Just about every developer in the City of Toronto wants in,” he said.

Michael Cooper, president of the Toronto-based Dream Group of builders, echoed that sentiment in an interview with property news site RENX, calling the incentive program a potential lifeline for stalled rental unit projects.

He added that Dream Group has land in Toronto already approved for rental housing development. “I think the waiver of development charges is going to make a big difference to get things started,” Cooper said. “We could start building between 2,000 and 3,000 purpose-built rental units in Toronto before the end of 2026 if the incentives are introduced and we qualify.”

But Coun. Brad Bradford, vice-chair of the Planning and Housing Committee, said some developers have raised concerns. Letters to council from builders’ associations, including the Residential Construction Council of Ontario (RESCON), argued that the qualifying conditions for the incentives are too restrictive.

RESCON also expressed skepticism about whether billions in new funding from Ottawa and the province will materialize.

“The feedback has been very clear,” Bradford said. “The incentives proposed are not enough. It’s mild. It’s meek. It’s inadequate to unstick the 29,000 to 37,000 housing units that are approved and sitting on the sidelines, stuck in the pipeline.”

Coun. Stephen Holyday voted against the plan, arguing that spending taxpayer dollars on incentives does not guarantee success and that the funds could be better used to improve city parks and roads.

“This is a cost of hundreds of millions of dollars to the taxpayers, an enormous strain on our ability to deliver the important infrastructure in the city that you see all around you.”

Neighborhood Pods TO, a network of community groups, also voiced concerns in a written submission, arguing that eliminating development charges and taxes for developers could reduce funds for Toronto’s parks, recreation facilities, and other public spaces. City staff acknowledged the need for a balance, but said the incentives would not detract from infrastructure obligations.

In a separate motion, council, in a 24-to-2 vote, adopted a recommendation supported by Mayor Chow that will allow new mid-rise residential buildings — the so-called missing middle — to be built along major streets designated as avenues. The approval amends existing zoning bylaws to permit added height along these streets.

In an Oct. 29 letter to the Planning and Housing Committee, Chow emphasized that policies to address the housing crisis need to be “bold and ambitious.”

She supports widespread “as-of-right” zoning along Toronto’s avenues, meaning developers could build within specified height limits without needing a rezoning application. Chow believes this will streamline the approval process, reduce costs, and allow new homes to be built more quickly and affordably.

“This is a big step in the right direction, but I believe we can go further,” Chow said. “We can allow for even more homes along these avenues and give more people the opportunity to live in our city.”

Chow proposed three key recommendations for city staff:

• Update mid-rise urban design guidelines to provide flexibility for taller and denser mid-rises along avenues. Staff are to report back by the December 5 Planning and Housing Committee meeting.
• Re-examine older avenue studies to align height, density, and built form permissions with as-of-right zoning for mid-rise buildings, with a report due in the third quarter of 2025.
• Identify additional opportunities to increase housing supply along existing and proposed avenues served by frequent transit, with a report expected by the first quarter of 2025.

“Building more mid-rise buildings on Toronto’s avenues is an important strategy for unlocking more housing quickly,” Chow said. “Avenues are in highly liveable areas, near transit, employment, schools, parks, grocery stores, and other amenities. It’s a crucial step to make housing more accessible.”