City staff are suggesting that Toronto City Council defer development charges on thousands of condo units in order to spur housing development amid a climate of economic uncertainty.
“Toronto is experiencing a continued housing supply slowdown as a result of high construction and financing costs, higher interest rates, and declining pre-construction sales and rents,” city staff say in a report set to go before Mayor Olivia Chow’s Executive Committee next week. “Foreign trade risks and immigration changes add significant uncertainty to the growth outlook of housing supply.”
The report warns that the slowdown in housing development could have a “generational negative impact” on Toronto’s ability to accommodate current and future residents, and a “potential permanent loss of development capacity if capital and labour are reallocated.”
Staff are proposing deferring development charge payments for up to four years for up to 3,000 condo units where construction is expected to start within the next two years.
The projects would have to include at least five to 10 per cent affordable units and have submitted a complete Site Plan Application by March 1. Staff are recommending that projects which include a higher percentage of affordable housing be given priority.
The deferred charges would eventually be payable, interest free and at June 2024 rates.
The move comes as the housing industry grapples with multiple challenges. Tarion, the consumer protection organization that administers Ontario’s new home warranty program, said in a report Thursday that the total amount related to deposit losses incurred over 2023 and 2024 exceeds $100 million.
“In 2024 Tarion provided the highest amount of consumer support in its history aiding over 1,000 homeowners who had lost deposits because of builder receiverships,” the report stated.
The group noted that almost 80 per cent of those losses related to agreements of purchase and sale “that had not complied with the regulatory approval process.”
In discussions with the city, the staff report says, the Building Industry and Land Development (BILD) Association had asked Toronto to fully exempt all condo units from development charges.
In a recent release the group estimated that the GTA will need to see 30,000 ground-oriented homes and 20,000 apartment units built each year just to keep up with demographic changes and called on government “to act quickly to address barriers to new home construction in the region.”
While the city report does not recommend a full exemption, staff say the proposed measures aim to “improve the financial viability of condominium housing projects” by lowering upfront costs while at the same time “considering the financial constraints of the City of Toronto” as well as the fact that the projects will boost the supply of affordable housing.
City staff note the average payable development charges for a condominium unit in the city today is $60,716. They estimate a deferral could provide a financial benefit of up to $18,792 per unit.
That would costs the city up to $9,426 per unit, staff estimate, mainly from lost investment opportunities associated with getting the deferred charges later. While there would be a short-term cash-flow deferral, staff say the cost can be accommodated within the 10-year capital plan.
“This would represent a maximum upset limit for the city of $182.1 million in deferred cash flow and $28.3 million in foregone investment returns, which can be accommodated without impacting planned capital investments,” staff say in the report.
If council decides to move forward with the proposal, staff are expected to report back on the implementation process sometime in the second quarter of this year.
