Toronto Passes New 2023 Housing Action Plan: Rooming, Houses, Multiplexes, And Strong Mayor Powers
While everyone else is slowing down for the holidays, the government is actually quietly ramping up their housing plans. So in this video, let’s recap what’s happened so far, what we’re expecting for the next year or two, and what it means for you as a real estate investor.
Bill 23, More Homes Built Faster Act, 2022
It started with Bill 23, which was introduced at the end of October with a goal for Ontario to build 1.5 million more homes in the next 10 years.
The most important thing here, in our opinion, is that there w ill be a greater focus on the low-rise homes and more lenient rules to allow single-family homes to have up to three units in them: either two units in the main house and another unit in a separate building on the property, or three units in the main house.
There was so much controversy, but Bill 23 got approved somewhat quietly at the end of November. Now, municipalities in Ontario have one year from that date, so the end of November 2023, to incorporate this into their bylaws.
What also happened around the same time was that our Mayor John Tory also got some new special super powers, which allow him to pass building-related by-laws with just 1/3 of the support of the city council if it comes down to it.
Toronto's 2023 Housing Action Plan: Rooming Houses, Multiplexes, Port Lands & Waterfront
All of this is coming together in Toronto this month. Earlier this month, Mayor Tory introduced a new 2023 housing plan for Toronto, which aims to build at least 285,000 new homes in the city within the next 10 years. He aims to do it by reviewing how things are right now and figuring out how to fully optimize housing density. And then loosen up zoning requirements to actually make this happen.
Again, this is seen as another bold move. For example, legalizing rooming houses got rejected twice in the last year and a half, and it was part of this plan. But this time around, it finally got okayed by city council without John Tory needing to use his special mayor powers, and now we have a concrete timeline to see a draft of this new housing plan by March 2023 and a tentative implementation date of March 2024.
So let’s dig into what they are aiming to do.
The first task, like I mention, is to legalize rooming houses. Here’s the thing: even though it’s not legal in many parts of our city right now, the reality is that they do exist illegally. And because the city can’t track where they are right now, it’s hard to keep them well maintained. And in the last 10 years or so, it looks like there were 16 incidents of fire-related deaths in rooming houses, and 14 of them were in illegal rooming houses. So legalizing this helps our city regulate them and ends up providing a safer living environment for the most affordable housing options here in Toronto.
The second task on this plan is to allow multiplexing in single-family homes. This is in line with what Doug Ford requires us to do, but I think we’re actually going to go one step further. In fact, our city actually has a multiplex team that has been looking into this even before Bill 23. We’re probably going to build on that, and if that’s the case, Toronto’s probably going to allow four units in each single-family home inside what they call “neighbourhoods,” which are houses not on major streets. There are going to be separate regulations for houses on major streets, and it’s possible that they will be even more lenient because they have easier access to transit.
The third task that they will look at is to review the port lands, waterfront, and other possible areas where housing density might be able to grow more quickly and optimize it. Of course, a lot of details still need to be ironed out, but it is likely to happen in the next couple of years. and, in our opinion, a step in the right direction.
What This Means For Toronto Real Estate Investors
The first thing we see is that the government recognizes that most immigrants will choose to live in Toronto, which is why housing in Toronto is a priority and our mayor gets special powers to get things done more quickly. Once we see even more residents and more housing, this allows our governments to invest more in infrastructure. This ends up being more attractive for businesses, jobs, and workers. And all of this will help support higher, more sustained growth in our city for at least the next 10 years.
The second thing is stability. When you’re looking at smaller towns, a lot of them rely on single or limited economies. What happens during a recession is that they are more likely to experience higher unemployment, which can translate to higher renter risk. In Toronto, we already have a more diverse economy. And as our city continues to grow, this will further strengthen it. Trends in the past tell us that in a recession, people living in rural areas tend to move back to the city.
Travel costs and time will go up if they end up having to work in the city, so it makes more sense to just live closer and get higher pay too. So if more of the renter pool stays employed in Toronto and if renter demand in the core actually goes up, then Toronto landlords will actually continue to see lower tenant risk go out as our city improves.
Finally, right now, if someone wanted rent a two-bedroom home, they might have a choice between a high rise apartment or a basement apartment; in other words, there are not many options if they want a small but nicer unit in a house. So from a tenant standpoint, this multiplex change is positive because it will open up more affordable options instead of being forced to rent a 4-bedroom house in order to live in a neighbourhood.
From a landlord standpoint, even though there are more lower-priced rental units, the total rent actually improves compared to before. From the city standpoint, they’re able to provide more new affordable housing. So it’s actually a win-win for a lot of people.
We don’t expect all houses to convert into multiplexes. But if just 2% of the 400,000 houses in Toronto turn from one unit to four units per year over the next 10 years, that’s over 240,000 new units created, so it’s possible. If the city actually wants to get this done, we expect more incentives for homeowners to get this done, and because of this, we expect to see a continued spotlight on Toronto houses, which will eventually generate increasing investor demand in the low-rise market moving ahead.
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