Interest charge

Development charge exemptions for multiplexes are good, but not enough

Toronto City Council recently implemented a new development-related policy that has the rare honor of being applauded by both builders and housing advocates: development charge exemptions for multiplexes.

At their July meeting, Council voted to increase development fees – the fees paid by a developer when a building permit is issued – by nearly 50%, adding more than $40,000 in fees to some development application process. But an amendment introduced by Councilwoman Ana Bailão and later passed by council provides exemptions for multiplexes of four units or less so that development fees are waived on the second, third and fourth units of a single property.

Bailão, who is also chairman of the Planning and Housing Committee, presented the exemption as a way to encourage more missing intermediate housing.

“We have to be smart about how we use these tools to make sure that growth happens where we want it to and that the kind of units we need in the city are the ones that are built,” Bailão said. during a meeting. .

The decision to raise charges came amid warnings from developers that higher charges would discourage construction in the city. Housing advocates, on the other hand, have warned that the cost will simply be passed on to buyers and renters, making an already unaffordable housing market even more inaccessible. The exemption for multiplex units, however, is seen as a step in the right direction.

“It’s a welcome change”

Justin Sherwood, senior vice president of communications and stakeholder relations at the Building Industry and Land Development Association, said the decision was a positive step, noting that development charges often make up a significant portion of construction costs. construction in the GTA.

“Any time you move to reduce extra costs on homes, that’s a positive thing,” Sherwood said. “After the HST, accommodation charges are the second largest charges, so this is obviously a welcome change.”

Owner, property manager and Small Ownership Landlords Ontario board member Varun Sriskanda echoed those remarks, saying the exemption is likely to help at a time when many small landlords are struggling and have to sell their rental properties, thus eliminating the rental stock. of the market.

“The city is finally doing its part to encourage landlords to stay in business and encourage existing landlords to build more rental units,” Sriskanda said. “Having a cap on charges related to building and owning rental property will certainly help encourage landlords to stay in the business.”

Members of the Ontario Landlord Association (OLA) feel the same way, with a spokesperson confirming to STOREYS that in a recent discussion with members, “the consensus is that exemptions are helpful and a good start to encourage more owners to invest and build. . But this is only a first step and not a game changer.”

More to do for the missing middle

While there appears to be broad support for exemptions, those on the building and landlord side all agree the City could do a lot more to encourage missing mid-rise units.

Missing mid-rise homes, characterized as buildings with a higher density than a single family home but a lower density than a mid-rise building, can manifest as lane homes, duplexes, triplexes, quadruplexes , townhouses and other low-rise apartment buildings. Toronto has already taken some steps to strengthen this type of housing. In 2018, the City changed its bylaws to allow laneway housing as of right in most of Toronto, and earlier this year the City won an appeal against its decision to allow garden suites in through Toronto.

But when it comes to building low-rise multiplexes, Sherwood says builders still face tough zoning regulations that result in a lengthy development application process.

“If you remove the fit-up fee, that’s a positive step because it takes away tens of thousands of dollars for those extra units, but you still have to go through all the zoning hoops and the fit-up committee and all these other scheduling requirements. it takes so much time and adds cost and delays to adding supply,” Sherwood said. “It makes it a little cheaper, but it does nothing to solve this bureaucratic nightmare that exists to be able to build a secondary or tertiary unit.”

Sherwood points to the province’s Affordability Task Force recommendation to allow zoning as of right for residential dwellings of up to four units and up to four stories, on a single residential lot as an important consideration. Although this idea of ​​allowing increased density in residential neighborhoods has received an inevitable backlash fueled by NIMBYism, Sherwood says it’s a positive and logical next step.

“I think we have to consider that if we want to be able to add more housing to existing communities, which makes sense from an infrastructure and densification perspective… the best way to do that is to allow some form of rightful construction in existing communities,” said Sherwood.

For Sriskanda, the general question of where the burden of building purpose-built rental housing lies needs to be answered.

“The city allows developers to redevelop huge shopping malls – Woodside Mall, Bridlewood Mall, Agincourt Mall, Malvern Mall – but they don’t give them any incentives or mandatory requirements to build purpose-built rental properties,” Sriskanda said. . “The City continues to expect small family landlords to shoulder the burden of providing housing while large institutional developers redevelop huge tracts of land with little or no rental unit requirements.”

Although the City of Toronto offers financial incentive programs for developers to build affordable rental housing in their developments, there are no requirements for those who choose not to participate.

OLA members, many of whom rent secondary units in their own homes, have expressed interest in expanding their rental business into multiplex buildings. But concerns about their ability to deal with problematic tenants have given some pause.

“The most significant concerns relate to the Residential Tenancies Act,” the OLA spokesperson said. “Especially with the time it takes to evict a tenant who doesn’t pay, and landlords aren’t allowed to get a security deposit to protect against large and costly damages.”