Housing Policy is an Economic Development Challenge

by Jan De Silva

In the last quarter century, Toronto joined the ranks of the world’s global cities. Local policymakers must now confront the economic challenges that come with urban success. Some problems are routine: regional promotion, competitive tax policies, and the need to fix goods movement bottlenecks. But our most urgent economic development issue is a socioeconomic problem: a shortage of affordable, attainable housing, especially near employment zones and transit routes.

The boldest step voters can take in 2018 to boost our long-term competitiveness is to vote for candidates who have the will to fix this problem. We need more housing financed, approved, and built in the right places. And we need it fast.

In 2017, the Toronto Region Board of Trade surveyed the region’s young professionals on housing. Forty-two percent of respondents were ready to leave the region because of housing challenges. Sixty-eight percent did not plan to buy a home in the Toronto region, with a strong majority citing cost as the barrier. As the millennial generation settles into family life, buyers are forced to look at smaller cities or exurban options to find enough space at an affordable price. This is a talent retention risk.

Meanwhile, we also face a recruitment risk. CEOs from major international firms constantly cite housing costs as a key barrier to future growth in the region. One 2017 index of affordability measured median home prices divided by median pre-tax gross household income. On that scale, with a ratio of 7.9, Toronto’s affordability ranked worse than that of New York City, Boston, Tokyo, or Dublin and not far behind London, San Francisco, and Los Angeles. While Toronto celebrates new technology investments from firms like Samsung, Sidewalk Labs, Amazon, and General Motors, we urgently need more homes to house the professionals they seek to hire.

This problem is partly a byproduct of market success. Our city-region is attractive because it is a social, cultural, and economic oasis in an increasingly insecure urban world. But it is also a problem of market suppression. Lot by lot, ward by ward, Toronto City Council’s legal and policy approach is more likely to prevent or limit the production of new housing than to encourage it.

Toronto’s leaders have spent decades talking about developing housing over and around transit stations, as many other cities have, but bureaucratic barriers maintain the status quo. Approvals for multi-family developments take twice as long as they did a few years ago, adding to the carrying costs of assembling land for large new developments.

Our system of development charges, taxes, and fees makes builders pay the same for developments in areas with underused infrastructure as it does in areas of high density, so growth concentrates in areas where subway stations and water pipes are already at capacity. New transit lines meant to support housing and job dispersal are decades or more away at current construction and approval speeds. Meanwhile, most City of Toronto neighbourhoods are stagnating or even losing population.

We must take radical action to increase housing supply. We need to reform rent control rules and tax models to attack barriers to new purpose-built rental construction. We need to treat the hiring of more planners to expedite approvals as an investment, not a cost. We need as-of-right development permits on and near transit corridors. Governments are making more public land available for housing, but we need to expedite approvals for those developments as well.

Most of all, we need to end the de facto ban on new housing in Toronto’s so-called “Yellow Belt” (areas zoned R1 for single detached housing only, shown in yellow on official plan maps). We need to legalize laneway homes, duplexes, townhouses, and small walk-up apartments in every R1-zoned neighbourhood in Toronto and beyond. We must remove the barriers to entry that penalize smaller developers. We need legal changes to open the market for alternative housing development models, ranging from co-ops to purpose-built rental condo towers. These steps are critical, not just because small developments can be built more quickly. Smaller-scale developments are also more likely to fill the gaps in the supply of family-friendly housing.

The call to build more homes across the urban landscape is known as the “Yes in My Backyard” (YIMBY) movement. In the San Francisco/Bay Area and Seattle, in New York City and Vancouver, millennials are organizing lobby groups to push back against “Not in My Backyard” (NIMBY) policies. In June 2018, San Franciscans elected London Breed as their new Mayor. She owes much of her victory to the active support of YIMBY organizations and volunteers.

Since the housing shortage poses a serious threat to Toronto’s talent-dependent competitiveness, it’s time for economic and business leaders to join this fight as well. Without enough affordable, attainable housing for knowledge workers, service workers, and their families, we will choke off Toronto’s potential for sustained urban growth and development. If too many new homes are sited too far from urban job centres and transit lines, we will make existing traffic congestion worse. If we can learn from the experience of more urbanized cities to solve this problem, Toronto can meet its full potential as a leading 21st-century city-region.

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