Toronto and surrounding areas need 30% more new homes a year to meet demand: report

Why are no new homes being built? Due to the region’s long building approval process and the amount of fees, taxes and duties on new homes, developers say

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A new report has found that the Greater Toronto Area and Hamilton (GTAH) need 30 percent more new housing units a year to meet population demand.

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Previously inaccurate and outdated forecasts for population and completion of housing have contributed to a low housing supply and challenges in relation to affordable prices in GTAH and external ring communities, says the report conducted for the Building Industry and Land Development Association (BILD) by the Smart Prosperity Institute. The report, titled “Forecast for Failure,” found that over the past seven years, the Ontario government’s “Growth Plan for the Greater Golden Horseshoe” has underestimated population growth and overestimated housing completion.

“Forecasts for population growth and housing completion are the basis on which municipalities base their projections of future housing needs,” said David Wilkes, BILD’s president and CEO. “If the forecasts informing the plan are inaccurate or out of date, then the housing supply coming on the market in the future may not match the demand.”

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There are a number of reasons why this imbalance in population and demand has arisen, said Mike Moffatt, senior director of policy and innovation at the Smart Prosperity Institute. The main problem is population growth from international sources, which was not taken into account in the growth plan.

There were two main policy changes affecting growth from international sources, Moffatt said. The first happened in 2014, when the federal government reformed the rules around the ability of international students to work while studying in Canada – they could now work to pay for school. Many international students end up staying in the country after graduation, which contributed to an increase in population. The second change was in 2015, when the Harper government introduced the Express Entry program, which accelerated the immigration process for skilled workers.

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Moffatt said that despite the growth plan that came after these major policy changes, it was based on population data and forecasts that precede these changes. Between 2016 and 2021, GTAH’s population growth from international sources was over 120,000 more than expected in 2012, yet it has 26,000 fewer housing units than expected.

“So you have more people than expected and fewer homes than expected, that will give you housing shortages,” he said.

This imbalance has affected young families the most, Moffatt said. They are being priced out of housing in the GTAH and must “run until they qualify” in other parts of the province. In 2012, forecasts predicted that 36,000 people would move out of GTAH to other parts of the province from 2016 to 2021. In reality, that number was over 100,000.

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So why not build new homes? Housing developers say this is due to the region’s long building approval process and the amount of fees, taxes and duties on new homes and developments.

Jason Sheldon, executive vice president of land development at Remington Group, said layers of reviews at the local level between departments, stakeholders, provincial ministries and conservation authorities can add months – and sometimes even years – to their building timelines.

Taxes on rental units and new homes are also hampering development, says Stephen Diamond, CEO of DiamondCorp. He said builders must pay HST on new homes when their first tenant moves into the building, even though the rest of the building may remain vacant. There are also significant taxes on the purchase of a new home in Toronto, which is put on the buyer, Diamond said.

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The “Forecast for Failure” report outlines two important recommendations that can help address this housing imbalance. The first is that the Government of Ontario should compile an annual forecast that takes into account GTAH population, employment and housing projections in order to create a comprehensive, more accurate set of figures to base their development on.

The second recommendation is that the growth plan should take into account population estimates that are higher than expected to account for errors.

“We’ll never get the forecast quite right,” Moffatt said. “We are better placed to make the mistake of allowing more construction than having too few houses.”

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