Toronto is facing two housing crises – one where there is a lack of deeply affordable and supportive homes for low-income, marginalized, and vulnerable residents, as well as those experiencing homelessness — and a more recent one in which rising rents have made it increasingly unaffordable for middle income earners, key workers and professionals to live in the city. To respond to this dual crisis, City Council has pledged to meet the Provincial housing target of 285,000 housing starts in Toronto by 2031, and has expanded its HousingTO 2020-2030 Action Plan (HousingTO Plan) targets to approve 65,000 rent-controlled homes, including rent-geared-to-income (RGI) and affordable rental homes, by 2030. An adequate supply of purpose-built rental homes is central to a well-functioning housing system that can meet the housing needs of current and future residents. However, Toronto is facing a shortage of purpose-built rental homes as a direct result of insufficient investments from all orders of government since the early 1990s. As governments stepped back from investment in new purpose-built rental homes, new private investment in condominiums increased leading to a situation where 85% of all new rental homes created in Toronto in the past 10 years are from the secondary market (wherein condominium investors rent out their units). These homes provide less security for renters than purpose-built rentals, and on average have rental rates that are over 40% higher than existing purpose-built rental homes. The current lack of purpose-built rental housing in Toronto is likely to worsen due to high interest rates and financing costs, inflation, and increasing construction costs which have resulted in a significant slowdown in new residential development. Housing starts in the City of Toronto for August and September, 2024, are down 75% and 81% respectively over the same months last year, indicating a significant slowdown in new housing development. Further, industry data indicate that between 18,000 to 26,000 purpose-built rental homes are currently stalled due to challenging market conditions. All orders of government have historically played a larger role in shaping the housing system to create new purpose-built rental homes than they do today. While there have been recent federal and provincial actions aimed at supporting new rental housing development (including GST/HST waivers on purpose-built rental homes, and development charge discounts for rental units), these have not proven sufficient to significantly increase purpose-built rental housing supply. While the City has made significant investments in housing in recent years, particularly affordable rental housing, the constraints on the City’s finances are considerable and it cannot trade-off investments in infrastructure with un-capped incentives for purpose-built rental housing. Much more action is required from the federal and provincial governments to achieve the level of rental housing growth needed in Toronto, Ontario, and Canada. The City is prepared to take a number of actions and lead the way in building a housing system that delivers the new rental homes Toronto’s current and future residents and economy needs to thrive. This report recommends City Council unlock 20,000 new rental homes comprised of 16,000 new purpose-built rental homes, and 4,000 affordable rental homes, primarily on private land. This report also recommends City Council invite other orders of government to collaborate with the City in making a generational shift in the housing system, where governments influence the housing system and work with private land-owners and investors to make the delivery of purpose-built rental housing a priority. As directed by Council in June, 2024, staff have undertaken consultation with industry stakeholders, and conducted extensive analysis with an independent third-party consultant, in order to inform the development of the recommendations in this report. These 20,000 new homes will be delivered under a new Purpose-Built Rental Homes Incentives stream (as part of the recently approved Rental Housing Supply Program). A minimum of 20% of these homes will be provided as affordable rental homes, meeting the City’s new income-based definition of affordable rental housing, and be secured for a target of 99 years and a minimum of 40 years. To move immediately to action, this report also recommends City Council: - Support 7,000 new rental homes comprised of 5,600 purpose-built rental homes, and at least 1,400 affordable rental homes, to be identified through a rapid call for applications which will be released immediately upon Council approval — - Approve a New Multi-Residential Property (Municipal Reduction) Tax Subclass consistent with EX16.8, and direct staff to implement a 15% property tax reduction for all new purpose-built rental developments for a 35-year period as part of the 2025 budget process — and - Immediately support the 5,600 purpose-built rental homes by deferring development charges otherwise payable in respect of an eligible development, for as long as the development maintains the rental tenure. The estimated value of the deferral of developments changes for 5,600 purpose-built rental homes is $210.8 million. Like all new purpose-built rental homes, they will also benefit from the 15% reduction in property taxes for 35 years (estimated value of $114.2 million). The City’s contributions towards these purpose-built rental homes will complement financial incentives for the at least 1,400 affordable rental homes to be delivered through this call (estimated at $136.2 million, including foregone property taxes for 40 years and waived planning and building fees). Subject to adoption of this report, staff will report back to Council on an implementation tool to provide incentives for purpose-built rental homes. To this end, staff will consider the use of a Community Improvement Plan, among other options. The City’s jurisdictional and financial capacity to shift the housing system is limited, and it cannot act alone. As such, this report recommends City Council: - Request the Province immediately establish a Build More Homes Rebate estimated at $1.0 billion, for the value of development charges and 85% of property taxes for 10,400 purpose built rental homes. - ---- Upon approval by the Province, the City will release a call for applications to offer incentives for the next 13,000 rental homes, including 20% affordable rental homes (2,600 units) — - Request the federal government to immediately allocate a $7.3 billion portfolio of low-cost financing to support the delivery of the new affordable and purpose-built rental homes described in this report (20,000 homes total) — and - Request the federal and provincial governments work with the City in implementing a Canada-Ontario-Toronto Builds program that will align efforts and resources across three orders of government including land, funding & financing, partnerships, and approvals processes, to build more affordable and purpose-built rental homes for low- and moderate-income residents. The proposed two-phase strategy to reach 20,000 new rental homes, including 4,000 affordable rental homes, is summarized in Table 1 below. Table 1 – Summary of Rental Housing Outcomes Proposed through this Staff Report Min. Affordable Rental Homes Up to Purpose-built Rental Homes Total New Rental Homes Phase 1 - City–supported Quick Start 1,400 5,600 7,000 Phase 2 -Subject to Intergovernmental Support 2,600 10,400 13,000 Sub-total 4,000 (20%) 16,000 (80%) 20,000 (100%) New federal and provincial housing programs including the Housing Accelerator Fund (HAF) and Building Faster Fund (BFF) have made capital funding contributions contingent on municipalities achieving targets for new housing starts. In addition to meeting the demand for rental homes, increasing new rental housing supply can support the City in accessing much needed capital funding which can be directed to funding new rent-geared-to-income and affordable rental homes, and housing enabling infrastructure. Without immediate action by all orders of government to shape the housing system by ensuring sufficient supply of purpose-built rental homes, more residents, specifically renters, will experience housing instability and potentially homelessness — Toronto’s health and social service sector will face a deepening key worker staffing crisis — and Toronto’s businesses will be unable to attract the workforce and labour supply they need to grow, thereby limiting our economic growth.
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