The Ontario government’s strategy to build more affordable housing is facing backlash from some developers who say they would have to sell houses at a loss to qualify for rebates.
The Ford government released its definitions of what constitutes affordable housing earlier this month. Prices were set for every municipality across the province, broken down by location and housing type.
The prices outlined are what developers would be required to sell at to receive refunds on certain taxes and fees from the Ontario government.
For example, a detached house in Toronto would have to be sold at $365,000 to qualify as an affordable home, in Ottawa that same house would have to sell at $438,300 and $434,800 in Mississauga.
Selling higher than the government-set price would result in being excluded from rebates on certain development fees.
However, some developers argue that the government’s approach is misguided and that the root of the problem is ignored by this strategy.
“The fundamental error being committed by the province is in not understanding that housing is made affordable over time through depreciation and filtering,“ real estate developer Chris Spoke told True North.
“Just as we don’t expect new cars to be the most affordable, neither should expect new housing to be the most affordable.”
There is also the issue of asking developers to sell low at a time of high interest rates and ballooning inflation.
The Building and Industry and Land Development Association released a report in March detailing the significant impact inflation has had on the construction industry in recent years.
“Since 2019, there has been significant inflation to the cost of construction due to increasing labour and material costs. Between Q1 2019 and Q1 2023 construction costs for a typical single family home have increased by 85% and by 64% for high rise apartments,” reads the report.
For example, the government set the affordable price for a detached house in Vaughan at $531,000, however, the average price of land for a single-family home is $482,527.
The average construction costs are estimated at $495,000, with municipal fees around $168,375.
On top of that, there are the federal and provincial taxes, which come to $139,823, and finally, the land transfer tax which is around $25,000.
According to BILD’s calculations, the average total cost would come to just over $1.3 million on a home that would have to be sold at $531,000 to receive rebates.
Spoke said that now is not the time for any government directive that will disincentivize Ontario developers from constructing new builds.
“We need to build much more new housing to increase the stock of second-hand, third-hand, fourth-hand, and so on, housing—that is, older stock that is relatively more affordable,” said Spoke.
“Any measure that leads to there being less new housing as opposed to more is contrary to the goal of affordability.”