Mission accomplished! This week ends with the news that the average cost of a home in Canada declined in 2022 for the first time in 14 years — since 2008 and global financial crisis. According to the Royal Lepage house-price survey, the cost of a home declined by 2.8 per cent last year. In the GTA, specifically — the molten core of Ontario’s overheated housing market — prices decline 4.6 per cent, faster than the national average. After a decade of policymakers fretting about the rapidly escalating cost of housing, we’re finally getting a reprieve. Hallelujah! Deliverance! Etc.! Right?
Don’t get your hopes up. Royal Lepage (a real-estate firm with an obvious interest in finding the silver lining in any wisp of grey clouds, for the record) doesn’t expect the modest price decline to last very long. “Once interest rates stabilize and consumers adapt to their new normal, many of today’s sidelined buyers will be back — sooner than many analysts are predicting,” CEO Phil Soper said in a release.
So anyone hoping that the Bank of Canada’s interest-rate policy for the last year will do the hard work of solving the housing crisis should probably curb their enthusiasm. What we have in Canada’s, and Ontario’s, housing markets is likely a temporary reprieve.
The Ontario government’s stated policy for years has been that the ultimate solution to the housing shortage is ending the shortage — that is, getting more homes built. This has been used to justify everything from the government’s reforms to zoning and planning rules to the removal of protections from some lands in the province’s Greenbelt. Despite the sometimes head-spinning number of changes to policy last year, getting more homes actually built and occupied is going to be harder still: the government’s projections in the last budget show housing starts falling in future years.
On this point, the Canadian Home Builders Association has a new report (conducted by Altus Group) out this weeklooking at the relative burden of planning and design rules imposed by Canadian municipalities. And, despite four-going-on-five years of a Progressive Conservative majority, Ontario cities still rank near the top (or bottom, if you like) in the ranking of places where it’s expensive and time-consuming to get something built.
In Toronto, according to Altus, it takes 32 months to get a new project approved — and that’s up from 21 months the last time Altus conducted this analysis in 2020. Of the 20 cities surveyed, Ontario municipalities make up six of the bottom 10, with Toronto dead last. When it comes to government charges levied on new homes — development charges and other types of fees intended to cover the costs of new infrastructure and services — Vancouver at least displaces Toronto as the most expensive city on the list. But, after the number-one spot, the story is familiar: Ontario cities are eight of the 10 most expensive cities.
On development charges, at least, things are changing quickly: municipalities around the GTA are already adding substantial property-tax increases to their budgets to cover the impacts of last year’s Bill 23, the More Homes Built Faster Act, arguing that the law — which limits the ability of cities to impose charges on some types of affordable housing — will impose massive new costs on city budgets.
Agenda segment, November 9, 2022: Will Ontario's new housing plan work?
We’ll see in more detail what the budgetary impact of Bill 23 will be and whether the province or federal government will find a way to make cities whole. But the cash charges on new homes are only one part of the problem identified in the Altus report: the long — and growing — approval timelines are the other side of the coin.
The CHBA report talks about a big hurdle that smaller housing projects, in particular, need to clear: a small project (under 50 units) is usually approved more quickly than a large one, but not that much faster — a large, complicated development can take as long as 700 days, while a smaller and simpler one might still take 500 days. But, because it delivers fewer units, the per-unit time cost of the approval process is huge: a small project endures 20 days of bureaucratic review per unit delivered, while larger projects have a per-unit time cost of as little as 1.2 days.
That’s right — the modest projects planners and policymakers all say they want more of in Canadian cities face a vastly higher tax in the form of approval purgatory than the massive tower-based projects that have dominated development in the GTA.
There’s another model, one we’ve discussed here at TVO.org and one cited approvingly by the CHBA. In New Zealand, the national government broadly expanded building rights for exactly the kind of small, “missing middle”-type homes that have captured so much discussion in recent years. The policy — substantially identical to a proposal from Green Party leader Mike Schreiner in the last election — has done what Ontario hasn’t, so far: massively increased the number of new homes being built, several years in a row.
The Tories opted not to pursue this model in 2022. We’re now in a new year — here’s hoping there’s room for better ideas in 2023.
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