Toronto’s plan for affordable housing? Tax new homes more
Providing housing for those in need is an obligation we all share. Ideally, below-market housing is paid for by tax dollars from general revenue. This way, we all pay a little and our society is fairer and more equitable as a result.
But what happens when this societal responsibility is unfairly placed on only one group?
In the coming weeks, the City of Toronto will consider a proposal to expand the creation of below-market housing — known as inclusionary zoning — that puts the burden entirely on new home buyers. If this proposal is accepted, the building of new housing may move elsewhere, defeating the goal of building affordable housing, exacerbating the GTA’s housing supply challenge and putting at risk economic activity that development creates and our region needs as we recover from the pandemic.
Or, if housing does get built, purchasers of market-rate units will be on the hook for another $61,000 in costs.
Why is housing affordability such a challenge in the City of Toronto in the first place? There are two reasons. The first is that housing supply is not able to keep up with demand. New supply is severely limited by restrictive zoning and is slow to come to market due to an overly bureaucratic approval process.
Second, a full 25 per cent of the cost of a new housing unit in the GTA consists of government fees, taxes and charges. These costs on new development are passed on to the new homebuyer, in the same way that increases in the cost of steel or labour are reflected in the price of a new car.
The City of Toronto adds costs onto new projects in the form of parkland charges, development charges, planning fees, section 37 charges, property taxes and municipal land transfer taxes. Of the roughly $186,000 in taxes and fees added to the cost of a new one-bedroom condominium in Toronto, the city takes 43 per cent. The city’s inclusionary zoning proposal, if approved, will add yet more costs for new homeowners — on average, $61,000 more per one-bedroom unit.
Inclusionary zoning rules were established by the province as a means to encourage denser and hopefully more affordable housing around major transit station areas. It has worked in other jurisdictions, where municipalities work in partnership with builders and developers and provide incentives to reflect their role in this social good and to offset the added costs of building units to sell or rent for below-market rates.
Unfortunately, the City of Toronto is not offering any such concessions as part of its inclusionary zoning proposal. This means its approach amounts to yet another tax on new homes — a tax that threatens to undermine the goal of building more housing, whether it’s affordable housing or market-rate.