Zoning Reform Ideas

[allengeorge]

Announcement of new housing legislation scheduled for today:

Ontario Newsroom

news.ontario.ca

I’m expecting some pretty bare-minimum reform. I hope I am wrong and MTSAs are moving forward.

Agreed. I’m not imagining much is coming - especially after Ford’s talk down on fourplexes. For actual housing reform we have to look at BC and dream.

Ford’s backpedaling on fourplexes is why I’m also taking a “wait and see” attitude towards the latest batch of EHON work. I’m not sure if the city will be as ambitious given that the province seems to have taken its foot off the planning gas.

 

[Northern Light]

I must admit to getting very tired of hearing how desperately we need planning reform as if there hasn't been tons of it already, isn't lots underway, in the city building more housing than other on this continent.

Its such a non-sequitur, such a deep feat of illogic, its other worldly.

Particularly when there is no reform which will build even one more housing unit per year.

Zero.

While there are some reforms that may result in some slightly larger/more functional units, and some which may reduce developer costs at the margins, there are none that will reduce the retail cost to the end consumer in rent/purchase price.

 

[allengeorge]

I must admit to getting very tired of hearing how desperately we need planning reform as if there hasn't been tons of it already, isn't lots underway, in the city building more housing than other on this continent.

Do you think the city should pause its EHON work then?

 

[Northern Light]

Do you think the city should pause its EHON work then?

No, I support that work, and have been involved in the process. But the province has nothing to do with it. This is my point.

Outside of the fact the province should kill the required refund of application fees which has caused the spike in Refusal Reports there is no reason for them to muck about more. The uncertainty they cause in doing so actually delays projects. When people in the industry know something is coming, but they aren't sure what, everyone pauses their process.

Stability and clarity have great value to industry.

EHON can and will go forward.

 

[goodcitywhenfinished]

Surely there are very tangible gains to be made from simply allowing more units as of right.

 

[Northern Light]

Surely there are very tangible gains to be made from simply allowing more units as of right.

Yes, to a point.

You will get some increase in process speed, potentially; reduced application fees if an OPA or ZBA are not required, and you may see some greater diversity of unit form/location.

But what you won't see is more total units or lower prices.

No builder is going to build at a loss, nor sell or rent at anything other than the maximum the market will bear.

Since we keep driving demand faster than we can possibly deliver supply, it follows that prices will continue to rise, even just stabilizing them requires declining demand.

Also, the reduced DCs will blow a hole in the City of Toronto's pocket book (as it will other cities too); that will then result in service reductions or drastic tax increases just to maintain what we have.

 

[Undead]

For actual housing reform we have to look at BC and dream.

Ah yes, BC, a shining example of housing affordability.

 

[T-Bor]

Yes, to a point.

You will get some increase in process speed, potentially; reduced application fees if an OPA or ZBA are not required, and you may see some greater diversity of unit form/location.

But what you won't see is more total units or lower prices.

No builder is going to build at a loss, nor sell or rent at anything other than the maximum the market will bear.

Since we keep driving demand faster than we can possibly deliver supply, it follows that prices will continue to rise, even just stabilizing them requires declining demand.

Also, the reduced DCs will blow a hole in the City of Toronto's pocket book (as it will other cities too); that will then result in service reductions or drastic tax increases just to maintain what we have.

This seems to be an overly pessimistic take, that prices will just always be high no matter what zoning reforms are introduced.

Places that have implemented wide-ranging zoning reform, i.e. Calgary and Edmonton, have house prices PSF roughly 60% less than the GTA. It's not because materials and labour are cheaper. It's because land is cheaper. Because in most of both of those cities, any detached house can be bought and turned into 2 semis, and any corner lot can be turned into 4 townhouses.

You increase the supply of land, the price drops, it leads to lower prices for homes. Not overnight obviously, but there's a reason why the average price of a house only just reached levels from around 15 years ago, despite incomes continuing to rise.

Now, I'm not clear on whether these Toronto zoning rules actually make it easier to turn one detached into 2 semis, as these multiplex rules (which are helpful), seem to only apply to units built on top of each other.

But if it becomes much, much easier to turn a 1950s Don Mills bungalow into 3 townhouses, you'll see prices drop, or at least stabilize

 

[Northern Light]

This seems to be an overly pessimistic take, that prices will just always be high no matter what zoning reforms are introduced.

Places that have implemented wide-ranging zoning reform, i.e. Calgary and Edmonton, have house prices PSF roughly 60% less than the GTA. It's not because materials and labour are cheaper. It's because land is cheaper. Because in most of both of those cities, any detached house can be bought and turned into 2 semis, and any corner lot can be turned into 4 townhouses.

Edmonton housing prices have not declined post zoning reform:

Calgary's have only accelerated:

Just so we don't get into .....but that's only SFH ; here's the Calgary chart for apartment units:

Sorry to tell you, but zoning reform hasn't impacted prices in the least in either city.

You increase the supply of land, the price drops, it leads to lower prices for homes. Not overnight obviously, but there's a reason why the average price of a house only just reached levels from around 15 years ago, despite incomes continuing to rise.

Again, the prices in both these cities have not dropped.

But also, they are vastly more sprawling than Toronto.

Edmonton's population density is 1/4 that of Toronto; while Calgary is 1/3

The City of Edmonton (proper) is larger than the City of Toronto in area with about 1/3 the population.

The City of Calgary (proper) is much larger than Toronto at 825km2, (about 1/3) with 1/3 of the population.

But if it becomes much, much easier to turn a 1950s Don Mills bungalow into 3 townhouses, you'll see prices drop, or at least stabilize

This would be true if population growth matched new housing starts. But it does not. There is no capacity in the housing industry in Toronto to build anymore units than has been the norm the last few years.

But population grew faster than ever last year.

Changing the form of home does alter this fundamental fact, that demand not only exceeds supply, its getting worse.

Additionally, most developers have a back inventory of land, both greenfield (farm) and urban assembly that have already been paid for, and any development must price that in, developers will not build at a loss.

 

[T-Bor]

Very helpful reply. But you're partly proving my point. No, prices may not have gone down. But in addition to those charts that you showed, there are also a few additional things that need to be remembered

1) Between 2007, the last peak, and 2024. Inflation has been 44%.

2) Over that same time period, average weekly wages in Alberta have gone up 53%

3) By roughly eyeballing the charts, the average Edmonton house has gone up from $410k to $450k - an increase of 10%. For the Calgary apartment chart, it went up maybe 3%

To me, the fact that housing prices have stayed flat while wages have increased at least partly proves my point. I admit the Calgary detached house figure is different, but even there, we're talkin about a single family detached house. Honestly, probably nothing is going to make those cheaper. But your average person doesn't say 'Detached house or nothing', they look at semis and townhouses as well.

Your point on the density is right - these cities sprawl way more. But it doesn't change the fact that the GTA, even just the Toronto yellowbelt, has an incredible amount of land and SFHs that could be made easier to be turned into semis and townhouses.

It's not THE answer, but it seems like a lost opportunity that we're all collectively debating the pros/cons of whether we should mandate a 4-plex as-of-right in Sudbury, ON, vs a 3-plex, that is primarily used for rentals.

Yet nobody is talking about the fact that it's perfectly acceptable to build a 3,000SF house in the Toronto yellowbelt, but hard/impossible to put a second front door on that exact same building, and sell it as 2 separate 1,500SF semis

 

[Northern Light]

Very helpful reply. But you're partly proving my point. No, prices may not have gone down. But in addition to those charts that you showed, there are also a few additional things that need to be remembered

1) Between 2007, the last peak, and 2024. Inflation has been 44%.

2) Over that same time period, average weekly wages in Alberta have gone up 53%

3) By roughly eyeballing the charts, the average Edmonton house has gone up from $410k to $450k - an increase of 10%. For the Calgary apartment chart, it went up maybe 3%

To me, the fact that housing prices have stayed flat while wages have increased at least partly proves my point. I admit the Calgary detached house figure is different, but even there, we're talkin about a single family detached house. Honestly, probably nothing is going to make those cheaper. But your average person doesn't say 'Detached house or nothing', they look at semis and townhouses as well.

There are lots more charts.; Alberta is also an outlier because of the relationship to oil prices, their economy is very boom/bust.

There are also a host of other different issues one encounters. (Alberta has no sales tax, it also has no land transfer tax)

Yet nobody is talking about the fact that it's perfectly acceptable to build a 3,000SF house in the Toronto yellowbelt, but hard/impossible to put a second front door on that exact same building, and sell it as 2 separate 1,500SF semis

Um, this can be done as-of-right in Toronto now, in the yellowbelt.

There are requirements, but they are pretty reasonable over all.

We'll need a couple of years of the changes to see the effect.

 

[T-Bor]

There are lots more charts.; Alberta is also an outlier because of the relationship to oil prices, their economy is very boom/bust.

There are also a host of other different issues one encounters. (Alberta has no sales tax, it also has no land transfer tax)

Yeah for sure, there are other, substantial differences. Boom/bust so people generally don't pay to their max, less of a 'prices can only go up' mentality. The zoning laws are just one explanation.

Um, this can be done as-of-right in Toronto now, in the yellowbelt.

There are requirements, but they are pretty reasonable over all.

We'll need a couple of years of the changes to see the effect.

Was this part of the 2023 reforms? If so, that's great news. Agreed it'll take a while for people to start to notice it, but once people start to see new semi-detached houses in the yellowbelt, it'll help chip away at the current perception that there are only so many semi-detached houses, so you need to pay whatever it costs

 

[Northern Light]

On that note.........here is the latest Zoning Reform from the Ford Gov't:

Ontario housing bill would bring in ‘use it or lose it’ rules to spur construction

Universities would be exempt from rules, while third parties such as residents or environmental groups would be barred from land tribunal appeals

www.theglobeandmail.com

From the government's backgrounder:

@HousingNowTO will like this one........ I'm not sure it won't be the subject of a court fight.

I said this one would be walked back:

This one effectively increases DCs, albeit modestly.

Here's the big one............. I'm calling it the Kingsett Rule:

Edit to add; we so need to hear from @ProjectEnd on these.

 

[goodcitywhenfinished]

@Northern Light is the logic behind use it or lose it essentially to make rezoning and flip less viable?

 

[Northern Light]

@Northern Light is the logic behind use it or lose it essentially to make rezoning and flip less viable?

Yes.

In part, because the planning process itself consumes lots of time and money of cities/towns; but also because there is a need to plan for what sewer/water, roads and schools are required, and if builders just sit on their sites, it makes a hash of trying to built to the right standard at the right time.,

There is; of course, the actual desire to push more units into construction.

As I've noted many times, there isn't much slack capacity to be had, nor is there much room financially in the market to take advantage if there were.

But this may, prompt the odd builder to try, which in turn might prompt some moves to invest in productivity which could strengthen capacity at the margins.

But the government must take measures to:

Build non-market housing

Raise incomes both for the middle class and low-income earners

Reduce demand to a point where supply cannot only catch-up, but overtake. Developers won't really do the latter on their own, on purpose, but if they had the capacity, and there was a market, government might be able fudge the lines enough to achieve something.