# Toronto announces nothing plan to create more rental homes

By [Brandon Donnelly](https://brandondonnelly.com) · 2024-10-31

affordable-housing, city-of-toronto, development, development-charge-waiver, housing, investing, landlord, landlords, multi-family-development, multi-family-housing, property-tax-reduction, real-estate, rental-housing, toronto, unlocking-rental-housing

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Yesterday, the City of Toronto [announced](https://x.com/MayorOliviaChow/status/1851692019040637340) that it would be "unlocking" 7,000 new rental homes -- including 1,400 _deeply_ affordable homes -- by doing two key things:

*   Waiving development charges on rentals
    
*   Providing a 15% reduction on property taxes
    

And by their estimates, the value of these benefits would be roughly $58k per new rental home:

![](https://storage.googleapis.com/papyrus_images/f9eb2cee9df33fb53156c438ec8c2ff6.png)

Great news, right?

But wait, there's a catch. If you [read the details](https://secure.toronto.ca/council/agenda-item.do?item=2024.EX18.2), you'll see that in order for a project to be approved under this program, there is also a requirement to deliver at least 20% of the homes as affordable rentals.

So let's look at what this could mean.

Here is a chart comparing a market rental suite at $3,000 per month to a more affordable one at $1,500 per month:

**Market**

**Affordable**

**Variance**

Face Rent

$3,000 

$1,500 

($1,500)

Suite Size

$600 

600 

0 

PSF Rent

$5.00 

$2.50 

($3)

Annual PSF Rent

$60 

$30 

($30)

NOI Margin

70%

70%

$0 

Annual Net Rent

$42 

$21 

($21)

Cap Rate

4.50%

4.50%

$0 

PSF Value

$933 

$467 

($467)

Per Unit Impact

($280,000)

20% of Units

($56,000)

Both are assumed to be 600 square feet. In the case of the market suite, the per square foot (PSF) value is estimated at $933 psf, and the affordable suite is estimated at $467 psf. This represents a halving of the value (which makes sense because I halved the rents).

On a per unit basis (again, we're assuming 600 sf), this is a loss in value of about $280k. But since only 20% of the units would need to be "affordable", I multiplied this number by 0.2. The result is a per unit loss of approximately $56k.

What this means is that we're basically doing a whole bunch of stuff to get right back to the same place. Like, hey, we're not building enough rental housing and we're certainly not building enough _affordable_ housing -- because the development margins are so dangerously thin -- so here's a credit of $58k per unit. But at the same time, here's a bill for $56k per unit.

What's the point, besides making it _sound_ like we're doing something to create more housing? This program will do absolutely nothing to spur the creation of new rental housing.

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*Originally published on [Brandon Donnelly](https://brandondonnelly.com/toronto-announces-nothing-plan-to-create-more-rental-homes)*