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Development Charge Exemptions For Multiplexes A Good Step, But Not Enough

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

During their July meeting, Council voted to increase development charges — the fee paid by a developer when a building permit is issued — by nearly 50%, adding more than $40,000 in fees to some development application processes. But an amendment brought forward by Councillor Ana Bailão, and subsequently passed by Council, provides exemptions for multiplexes with four or fewer units so that development charges would be waived on second, third, and fourth units on a single property.

Bailão, who is also the chair of the Planning and Housing Committee, introduced the exemption as a way to encourage more missing middle housing.

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

The decision to increase the charges came amidst warnings from developers that higher fees would discourage building in the city. Housing advocates, on the other hand, cautioned that the cost would simply be passed onto buyers and renters, making an already unaffordable housing market even more inaccessible. The exemption for multiplex units, however, is being seen as a step in the right direction.

“It’s a Welcome Change”

Justin Sherwood, Senior Vice President of communications and stakeholder relations for 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 building costs in the GTA.

“Anytime that you’re moving to reduce added costs on homes, it’s a positive thing,” Sherwood said. “After HST, development charges are the second-largest charge that go into it, so obviously it’s a welcome change.”

Landlord, property manager, and board member of Small Ownership Landlords Ontario, Varun Sriskanda, echoed these remarks, saying that the exemption is likely to help at a time when many small landlords are struggling and having to sell their rental properties, thereby removing rental stock from the market.

“The city is finally doing its part to encourage landlords to remain in the business and encourage existing property owners to build more rental units,” Sriskanda said. “Having any cap on charges relating to the building and owning of rental properties will certainly contribute to encouraging landlords to remain 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 the exemptions are helpful and are a good start to encourage more landlords to invest in and build. But it’s only a first step and not a game-changer.”

More To Be Done For The Missing Middle

Although there appears to be wide-spread support for the exemptions, those on the building and landlord side all agree that there’s much more that the City could do to encourage missing middle housing.

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

But when it comes to building low-rise multiplexes, Sherwood says that builders are still faced with challenging zoning bylaws that result in a lengthy development application process.

“If you’re removing the development charges, that’s a positive step because it’s removing tens of thousands of dollars for those additional units, but you still have to jump through all of the zoning hoops and Committee of Adjustment and all of those other planning requirements that take so much time and add cost and delays to adding supply,” Sherwood said. “It makes it a little bit cheaper, but it doesn’t do anything to address that bureaucratic nightmare that exists in order to be able to build a secondary or tertiary unit.”

Sherwood points to the province’s Affordability Task Force recommendation to allow as-of-right zoning for residential housing up to four units, and up to four storeys, on a single residential lot as an important consideration. Although this idea of allowing increased density within residential neighbourhoods has received inevitable NIMBYism-fuelled pushback, Sherwood says it is as a positive, and logical, next step.

“I think we have to consider that if we want to be able to add more housing in existing communities, which makes sense from an infrastructure and intensification perspective… the best way to do it is to enable some form of as-of right buildings in existing communities,” Sherwood said.

For Sriskanda, the overall issue of where the burden of building purpose-built rental falls needs to be addressed.

“The city allows for developers to redevelop massive 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 buildings,” Sriskanda said. “The City is continuing to expect small mom and pop landlords to carry the burden of providing housing while the big institutional developers are redeveloping massive parcels of land with little to no requirements of rental units.”

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

Members of the OLA, many of whom rent out secondary units in their own homes, have expressed interest in expanding their rental business into multiplex buildings. But concerns over their ability to deal with problem tenants have caused some to hesitate.

“The larger concerns are with the Residential Tenancies Act,” the OLA spokesperson said. “Particularly with the amount of time it takes to evict a non-paying tenant, and that landlords aren’t allowed to get a damage deposit to protect against expensive extensive damages.”

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