It's never a good political look to be seen as helping out, or worse, bailing out developers. Developers are about as popular as cyclists who ride through red lights.
Last week, the feds and the BC government botched this housing announcement when they offered minimal details and said that they would step in to buy vacant condos and turn them into affordable housing. According to CMHC, there are around 4,376 completed condominiums sitting vacant in Metro Vancouver.
The reaction to the announcement was immediate: This is the government overtaxing the housing industry into a crisis, and then turning around and giving it a bailout.
Since then, BC Premier David Eby has acknowledged that maybe they should have worked out more of the details before going public. He also clarified that this is about buying "distressed condos" below replacement cost. No developer will, in theory at least, profit from this program.
My knee-jerk reaction is that the private sector should be left to sort itself out unless you believe the answer is "yes" to one or both of the following questions: (1) Is government intervention necessary to prevent systemic risk and contagion in the market, and/or (2) Should our governments be in the business of owning affordable housing?
I'll leave it to you all to form your own opinions.
Cover photo by Albert Stoynov on Unsplash
This week, the band got together to announce a development charge reduction program here in Toronto. Basically the way it works is that the City is receiving "up to $1.5 billion for eligible housing-enabling infrastructure projects" and this, in turn, will allow the city to reduce its reliance on DCs and lower them by 40-60% (depending on the housing type) between 2026 and 2029.
40% reduction:
Studio and one-bedroom apartments
Multi-unit homes
60% reduction:
Single and semi-detached homes
Apartments and multi-unit homes with two or more bedrooms
Dwelling rooms
The provincial and federal framework requires cities to maintain the lower rates for at least three years. So if everything passes this year, it will expire in 2029. My assumption is that you'll need to have submitted a Site Plan Control application within this time period to lock-in these rates, but as always, you're going to want to consult with your planner and planning lawyer.
While this is certainly positive for housing, it is not a long-term, sustainable solution. The federal and provincial governments had to step in because the infrastructure funding model clearly isn't working for cities, and they're having to overtax new housing as a result. Let's not stop here.
Cover photo by Patrick Tomasso on Unsplash
As we all try to figure out what the future of the condominium market looks like in Toronto, it might be helpful to consider the forms it has taken over the years. When our nascent condominium market started to emerge in the 1990s, it solved a clear problem: it was an affordable solution for first-time buyers. It was a way to buy a place, build equity, and then trade up to a single-family house.
Because of this use case, it was also true that pre-construction condominiums typically sold at a discount relative to resales. This was because buyers wanted to be compensated for the time they had to wait to move in and the risk of buying something off a plan.
As the market grew and evolved (and the cost of constructing new housing rose), this pricing dynamic flipped, and pre-construction condominiums started to be priced at a premium relative to resales. The narrative, then, was that new condos were newer and nicer relative to older stock.
But more importantly, it was also because the buyer profile shifted more toward investors, and therefore, the problem to be solved also changed. Investors, as we spoke about here, started to view the timeline to occupancy as a feature rather than a bug. It meant more time for the unit to appreciate and more time for rents to grow.
This market largely disappeared in 2022, and so now the industry has returned to focusing on end-users. But Toronto is a different, more urban city than it was in the 1990s. Somewhere around 95% of the new housing built in the city is now multi-unit housing. The Baby Boomer generation is also starting to age out of staircases and low-rise houses.
Today, at this very moment, the pre-construction market is trying to address a new problem: large, luxury suites for wealthy buyers. It's the most fertile segment of the market. But how deep is this buyer pool? And what does it tell us about the next condominium cycle? The only thing we know with any certainty right now is that we're seeing a return to end-users.