Adam Zivo: Toronto’s new affordable housing strategy is set up to fail – National Post

If Toronto wants to make housing affordable for most of its citizens, rather than just the small minority that can access subsidized housing, it will need to remove artificial barriers that strangle growth

Author of the article:

Adam Zivo

A condo is seen under construction in the Junction neighbourhood in Toronto, in 2018.
A condo is seen under construction in the Junction neighbourhood in Toronto, in 2018. Photo by Tyler Anderson/National Post

Last week, Toronto moved forward with implementing an “inclusionary zoning” (IZ) policy that will force developers to set aside a percentage of new units for affordable housing. Since this policy will only apply to housing built near transit stations, it will be a Band-Aid solution at best. Without further reforms, it may even make housing less affordable for many potential buyers.

Advertisement

The housing affordability crisis is fundamentally driven by an under-supply of units — there are too many people bidding on too few homes, which drives up prices. If Toronto wants to make housing affordable for most of its citizens, rather than just the small minority that can access subsidized housing, it will need to remove artificial barriers that strangle growth.

Toronto must address the fact that it is illegal to build denser housing in much of the city. This policy, which is known as “exclusionary zoning,” crams almost all residential development into the downtown core and a few other disparate pockets of land. This kills many potential projects that would otherwise bring much-needed housing to the market.

Advertisement

The city does this because it prioritizes the “character” and “stability” of low-density neighbourhoods over housing affordability — essentially, it believes that existing homeowners should be spared any minor inconvenience, such as slight increases in traffic or noise, even if that deprives many others of a chance at prosperity.

Implementing inclusionary zoning without addressing exclusionary zoning is like being on a slowly sinking ship, finding lifeboats to save a handful of the most vulnerable and then spending so much time congratulating yourself that you neglect to plug the hole that is causing the ship to sink in the first place.

Maybe that comparison isn’t apt, however, because there’s another factor at play: if implemented poorly, inclusionary zoning can also make housing less affordable for everyone else by making residential development unprofitable. When developers are forced to sell too many of their units below market rates, they struggle to meet their required profit margins. Consequently, they stop building new housing.

Advertisement

That isn’t some myth perpetrated by greedy businessmen — there is a deep body of literature exploring this problem. It’s recognized by politicians, too. Denzil Minnan-Wong, Toronto’s deputy mayor, has publicly stated that he hopes IZ will slow down new housing supply . This should infuriate anyone who feels priced out of the housing market.

Toronto needs to be careful not to follow in the footsteps of San Francisco and Portland. In both cities, overaggressive IZ caused new development to dry up. That kind of irresponsible policymaking creates two-tiered cities where housing is available only to the affluent (who can afford high prices) and a small slice of the poor (who can access subsidized units), leaving out everyone in between.

Advertisement

This outcome can be avoided by compensating developers for providing affordable housing. Sometimes that’s done through tax breaks, but the most common-sense and popular approach is simply to allow developers to build taller buildings, as the profits they make from the extra units offsets the costs of providing affordable housing. This kind of solution has the added benefit of further boosting the overall housing supply, helping make homes more affordable for everyone.

However, Toronto has provided no such allowances for higher densities, to offset the increased costs of providing affordable housing units. It’s not hard to see why: many of Toronto’s city councillors are beholden to NIMBY (not in my backyard) activists, and work toward sabotaging new housing with the aid of a complicit municipal bureaucracy. For example, as I wrote about earlier this month, Toronto city planners recently used bad-faith arguments  to defy provincially mandated density targets near some transit stations.

Advertisement

Earlier this year, Toronto commissioned a flawed report claiming that the city’s new affordable housing mandates would not reduce the supply of housing. It used several unjustifiable assumptions to come to its conclusion — such as ignoring the possibility that new costs will be passed on to buyers — and likely grossly underestimated potential reductions in new housing. I suspect that the report is just another example of the city producing flawed research to justify predetermined outcomes — why worry about evidence-based policymaking when you can create politics-based evidence?

Unfortunately, this flawed report has led some advocacy organizations, such as ACORN Canada, to push for an even more aggressive inclusionary zoning policy than what the city is already committing to. There would be nothing wrong with this if costs were absorbed by allowing for higher density, but that isn’t happening. Instead, the city seems to have created a policy that is set up to fail .

Advertisement

Unfortunately, many city councillors seem happy to ignore this, as it saves them from having to confront anti-development homeowners in low-density neighbourhoods who, unfortunately, have much more political clout than those who are struggling to put a roof over their heads or break into the city’s overpriced real estate market.

Affordable housing is important. We need it, but we need it done in the right way. The costs of affordable housing mandates need to be taken seriously and offset with more density. Simultaneously, we need to unlock more housing opportunities throughout the city. None of that is happening at the moment.

National Post

The big issues are far from settled. Sign up for the NP Comment newsletter, NP Platformed.

More On This Topic

  1. None

    Adam Zivo: Toronto goes to war with the province to keep housing prices high

  2. None

    Adam Zivo: How Toronto’s progressive politicians keep housing unaffordable

Posted Newsletter logo

NP Posted

Sign up to receive the daily top stories from the National Post, a division of Postmedia Network Inc.

By clicking on the sign up button you consent to receive the above newsletter from Postmedia Network Inc. You may unsubscribe any time by clicking on the unsubscribe link at the bottom of our emails. Postmedia Network Inc. | 365 Bloor Street East, Toronto, Ontario, M4W 3L4 | 416-383-2300