Huge news coming out of Toronto— Doug Ford just handed Olivia Chow a massive $114 million bonus for crushing our housing targets set by the province!
- What does this bonus incentive structure tell us about where Toronto’s housing policy is headed?
- And what’s in it for Toronto real estate investors?
For us as real estate investors in Toronto, we personally prefer to take on projects, so this news is music to our ears — and to anyone who shares our mindset. Want to hear more? Stick around, because we’re about to break it all down.
Ontario Building Faster Fund
Ontario created a Building Faster Fund to encourage more new housing and here’s how it works. If a city hits 80% of their targets, then you get a chunk of it.
And when you exceed your targets then you get more – Toronto exceeding its goals by 51% and this is how Olivia Chow got a $114 million cheque from Doug Ford.
Here’s the lowdown: this bonus is a game-changer for Toronto, and it’s going to really shift how the city approaches funding for new builds.
Before this change, most of the money for new builds from the city came from housing creators through huge development charges and fees and that’s actually shot the city in the foot.
But now with this reward system from the province, Toronto will be way more incentivized to make it easier for housing creators to crank out new housing and cash in on those province dollars.
Shift In Toronto's Housing Policy
So, how do they make it easier? It’s all about cutting the red tape and sweetening the deal for people who want to help expand the city’s housing stock.
The first one is zoning and we’ve tackled a bunch of that in the past couple of years, and that’s probably a reason why our housing starts shot up in Toronto.
As of last year, each house in Toronto is allowed to build up to four units plus and backyard house. Hopefully sometime later this year, homes on major streets could be allowed to build up to 30 units – huge process.
Parking requirements are scrapped now, which is another big move forward.
Let’s talk about one of the biggest hurdles moving forward: development charges (DCs). In our opinion, it’s the ultimate red tape, and it’s got to go and we’ve seen a lot of progress already to be honest.
As of last year, hefty DCs waived for developments of up to four units, and for backyard homes, they’re either waived or deferred for a long time.
As for what’s in store for the 30 units on major streets, it’s still up in the air, but given the new bonus system, it seems likely that the city will want to slash DCs here too.
Just take a look at the City of Toronto’s income statement from 2021 and 2022. In 2021, the City of Toronto raked in $365K from DCs, followed by $344K in 2022.
Now if they scrap DCs, they might lose out on the $300K to $400K an year, but in return, they’re scoring a massive bonus from the Province—over 300 times more. That’s totally worth it.
On top of this, hopefully the City of Toronto will work on speeding up the permitting and inspections process too (but maybe that’s too much to ask for!)
The bottom line is that the investment landscape is improving and for Toronto real estate investors willing to take on the work, it’ll start to look more and more worth it.
In the end, it’s a win-win for the province, Toronto, and those willing to actually create more housing units.
Toronto Real Estate Market Update
It seems like housing policy is heading down the right path, and interest rates are also moving in the right direction to benefit real estate investors.
The Toronto real estate market’s been busy since the start of the year – it was a flip of the switch really:
- Demand shot up first
- As of end of February, listings are following which helps us actually find deals on the buy side.
- Unfortunately, we’re also seeing a lot more list low plus offer date situations again.
- And in the starter markets that we typically invest in Toronto, selling prices have hot up pretty quickly – around 10 to 15% since the start of the year already!
It might sound like we’re trying to induce FOMO, but it’s just an honest Toronto market update. We actually prefer a calmer market!
The purchase price ends up a lot more predictable and it’s easier to snag really good deals when the market was quicker.
But because the market has been changing quickly, the numbers have changed a lot since just a couple weeks ago. So here’s a quick update on how a top Toronto deal on our list looks like this week.
How Returns Look Like If You Create More Units In A House
We’re looking at a $870,000 listing with an offer date – so realistically, it will probably sell higher than that, closer to $950,000.
Once you put in $150,000 of work, you can split this single family home into 3 one-bedroom units, which will get you combined rents of $5,900 a month.
And after operating expenses and mortgage payments, you’re looking at pretty strong positive cash flows of $700 a month.
So why does this deal look good to us?
- By adding more units, you end up getting much better rental income and cash flows for better holding power compared to a single family home.
- And if you look at market comparables with a turnkey 3 unit home, it might be valued at $1.2M so you also get a $100,000 value add bump when you create 2 new units yourself.
How We Can Help
And if you want more info on this deal or if you’re curious about what Toronto real estate investments would suit you best, just give our team a shout!
We’re not your typical real estate sales brokerage. Instead, we focus on using numbers to make better real estate investing decisions in Toronto. That can mean looking for stronger investments with positive cash flow, thinking about risk management, and looking for ways to boost returns like value-add renovations and gentrifying areas.
If you want to discuss your private real estate situation with us, just go to this link below to set up a time to chat!
