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A friend of mine sent me a text on Thursday:

“Awesome blogs this week dude!”

I wrote him back and said, “Well, only a couple of comments on Wednesday’s blog, so maybe it’s not all that enthralling?”

He wrote back:

“What else is there to say?:

Good point, I suppose.  And if I’m trying to take that as a compliment, he means that I’ve already said it all.  But it’s more likely that he means these three posts are more informational in nature and there’s not much debate to be had.

I understand that these three blogs are not amusing, entertaining, or offering any behind-the-scenes action in the red-hot real estate market, but my hope is that anybody who has an interest in real estate, the future of our city, or both, is going to read the fifty-five recommendations from the Ontario Housing Task Force and understand what is attempting to be done about our “housing crisis.”

This past week only furthered this notion of a “housing crisis.”

A client of mine had his east-side property on the market in late-2020 for $799,900 without a sniff of an offer, albeit with another agent.  This past week, I sold his condo for $955,000.

I listed and sold a condo in November for $520,000.  This past week, I listed and sold the identical model and floor plan, on the same floor, for $615,000.

Those prices don’t make sense and yet this is happening all over the city and all throughout the GTA.

For the last decade, we’ve heard that the Government wants to “address” the housing market.  “Help” the housing market.  Sometimes it’s “cool the housing market” and other times it’s “address affordability.”  Another way of saying that is “help buyers with affordability,” but at the same time, that’s not really what they’re doing.

When the Federal Government increases CMHC insurance premiums, that’s not “helping buyers with affordability.”  That’s a measure aimed to decrease affordability, which the government hopes takes some buyers out of the market, in an attempt to balance the market.

Think of the logic that the federal government has used thus far to “address” the housing market.  Break it down into steps and it goes something like this:

1. Identify that real estate is expensive.
2. Attempt to make real estate less expensive.
3. Determine action on the demand-side is necessary.
4. Look to remove demand from the market.
5. Increase CMHC premiums to decrease affordability, thus removing demand from the market.

This is not “helping with affordability,” but this is the type of measure we’ve seen each and every time the government talks about “addressing” the housing market for the last decade.

It’s been all about the demand-side thus far.

Increase minimum down payments.

Decrease maximum amortization periods.

Increase CMHC premiums.

Increase mortgage qualification standards.

Implement interest-rate “stress test.”

All of these measures are going to result in less affordability, meaning less demand, but the government has always sold this to us as some sort of “fix” for the market.

I’ll be honest and tell you now that every real estate agent in Toronto with a platform, whether social media, the newspapers, or a TV spot, is talking about how “we need to increase supply and stop focusing on demand-side measures that don’t work,” I’m a bit perturbed since I’ve been saying this for ten years and most of these agents never had this thought until two months ago.  However, I rarely, if ever, let emotions cloud judgment or direct actions, so I’m going to take all of this as good news, since I may finally get what I’ve been wishing for: a government that pays attention to the deficit in supply/demand, and who wants to act on the former.

So let’s look at the remaining sixteen recommendations by the Ontario Housing Task Force in their report…

40. Call on the Federal Government to implement an Urban, Rural and Northern Indigenous Housing Strategy.

This is beyond my area of expertise, so let me speak from the heart and as a Canadian rather than a Toronto real estate agent.

Over 25% of the population of Canada lives in the Golden Horseshoe, and I would estimate that when you add in the Greater Vancouver area, greater Montreal area, Calgary, Ottawa, and Edmonton, that’s probably 70% of the country.  Anybody wants to do the math on this, be my guest!

I recognize that large urban centres get most of the attention from government as they are home to the most voters, as well as the largest economic output.  But I do think that the government has a responsibility to provide infrastructure to small cities and towns as well as access to and from these cities and towns, and I’m probably not going out on a limb when I say that our Indigenous population is the group most affected by waning support.

41. Funding for pilot projects that create innovative pathways to homeownership, for Black, Indigenous, and marginalized people and first-generation homeowners.

I’m not going to shy away from this point because it deals with a sensitive subject, even though to even discuss a sensitive subject is often deemed insensitive.

The problem with what’s written above is the word “innovative.”

Because what creates homeownership?

Money.

So to be “innovative” means, at some level, to provide money, otherwise, this recommendation is just grandstanding.

My fear when I read something like what’s written above is that we are going to put the goal of home ownership ahead of the means to buy that home.

Whether an individual is Black, White, Asian, Indian, Christian, Jewish, Muslim, old, young, male, female, or other, that person needs to be able to afford home ownership, in order to become a home owner.

I don’t want to see the government attempt to increase home ownership rates among marginalized people by encouraging those who are not qualified to purchase homes, or clearing a path for them to do so that isn’t based on affordability.  I would see this as a political move and one that backfires when these individuals can’t make their mortgage payments, thereby making them worse off in the long run.

At the same time, I think equality of opportunity should be examined.  History will show discrimination in lending practices, especially decades ago when prospective borrowers would walk into their local bank to apply for a mortgage, and the lender could judge them based on appearance.  So I would like to think, naively or otherwise, that if two individuals both make $60,000 per year, both have $50,000 in savings, both have an 810 credit score, and both have been in their jobs for 36 months, that these individuals would qualify for identical mortgage amounts.

42. Provide provincial and federal loan guarantees for purpose-built rental, affordable rental and affordable ownership projects.

This should be at the forefront of all the recommendations made in this report.

The way I see it, there are two ways in which we can enact immediate change to the housing supply:

1. Cut red tape, allow faster approvals for development, and relax zoning.
2. Encourage purpose-built rentals.

Very, very few purpose-built rental units come to market and that’s in part because of the return on investment that a developer can make while building condos rather than apartment buildings.  So if the government provided a financial incentive for developers, investors, and/or REIT’s to build rentals instead, then it might help balance that absurd difference between the number of condos built versus the number of apartments.

The point does mention, however, “affordable rentals,” which is another story.

This has to be a partnership between the private sector and public sector, and the report provides little in the way of help here.

This is one of those “recommendations” that merely whets the appetite, but doesn’t provide a meal.  I’d love to hear more about actual ideas.

43. Enable municipalities, subject to adverse external economic events, to withdraw infrastructure allocations from any permitted projects where construction has not been initiated within three years of build permits being issued.

From the report:

“Municipal leaders shared their frustrations with situations where new housing projects are approved and water, sewage, and other infrastructure capacity is allocated to the project, only to have the developer land bank the project and put off building.”

You can see where this is going, right?

One of the recurring themes in this report is holding stakeholders accountable.  If there’s a partnership between the developer, who builds housing, and the government, who provides infrastructure, then this has to remain a faithful marriage or it won’t work.  If the government delivers and the developer doesn’t, then there has to be consequences for that developer.

44. Work with municipalities to develop and implement a municipal services corporation utility model for water and wastewater under which the municipal corporation would borrow and amortize costs among customers instead of using development charges.

I’m not sure how I love the idea of yet another municipal corporation being formed in order to address a problem.

Again, one of the recurring themes in this report has been there’s way too much red tape and involvement of various levels of government, so suffice it to say, adding another level of government makes me weary.

Not only that, the report notes:

“Development charges are still not enough to fully cover the costs of building new infrastructure and retrofitting existing infrastructure in neighbourhoods that are intensifying.”

So I have to wonder how not using development charges is going to help address an issue created by insufficient development charges in the first place.  Am I crazy here?

45. Improve funding for colleges, trade schools, and apprenticeships; encourage and incentivize municipalities, unions and employers to provide more on-the-job training.

There’s a section in the report titled, “Create The Labour Force To Meet The Housing Supply Need,” and I think it’s brilliant.

However, I really can’t give you my two cents on these recommendations without sounding like an old man.

“Kids today,” I lament, as I shake my fist at a cloud.

They don’t want to work!  They want to be “influencers” on social media and get paid 10 cents every time somebody uses their coupon code to buy a pair of pants.

Show me a 17-year-old in Toronto right now who’s telling his teacher, “I want to learn a skilled trade.”  I’m willing to be they’re very few and far between.

When I was growing up, a friend of mine who I knew little about asked me to go over to his house in Bennington Heights one day.  It was the biggest house I had ever seen, and I asked him, “What does your dad to for a living.”

Was he a doctor?  Lawyer?  A banker?

Nope.

My friend replied, “He’s an electrician.”

Now maybe this skilled trade led to the opening of a business, one which absolutely flourished and grew into something massive.

But my friend’s dad didn’t go to law school.  He made his fortune off what is typically referred to as a “blue-collar job.”

For years, I’ve been asking aloud, “Who’s going to build all these condos and houses down the road when all the existing workers retire or die?”

Who’s going into bricklaying these days?  What 21-year-old wants to work in plumbing?

Tell me I’m wrong here, but I don’t think the next generation has any interest in skilled trades, and if we don’t replace the aging workforce, we’re not going to be able to build anything down the line.

These points that the Task Force are including in their report are extremely forward-thinking, and I applaud them for this.

46. Undertake multi-stakeholder education program to promote skilled trades.

I think we covered this above.

47. Recommend that the federal and provincial government prioritize skilled trades and adjust the immigration points system to strongly favour needed trades and expedite immigration status for these workers, and encourage the federal government to increase from 9,000 to 20,000 the number of immigrants admitted through Ontario’s program.

I see a can of worms here.

If we’re going to accept immigrants because they fulfill one role, versus another, then where does this take us?  And what doors does it open?

I see the theory behind this but I’m always good at seeing the downside or unintended consequences.

What do we need more of: doctors or bricklayers?

But if we don’t have the hospitals or funding to necessitate more doctors, then the point is moot, right?

We went from training more skilled trade workers in Recommendation #45 to immigrating them in Recommendation #47.

How about combining the two?  A program that trains immigrants in the skilled trades?

48. The Ontario government should establish a large “Ontario Housing Delivery Fund” and encourage the federal government to match funding. This fund should reward:

a) Annual housing growth that meets or exceeds provincial targets

b) Reductions in total approval times for new housing

c) The speedy removal of exclusionary zoning practices

Did I read that correctly?

The province wants to “encourage” the federal government to give them money?

This is where the report looks like wishful thinking, at times.  There are so many bright ideas in here, but a lot of them are pie-in-the-sky.  If a “recommendation” by a task force, hired by the province, is for the province to ask for money from the federal government, then it’s not a very good one.

The idea of rewarding points (a), (b), and (c) above have merit, no doubt.  But this feels a little like a child asking his mother, “If I eat all my dinner, can I have dessert?”

All joking aside, the Task Force isn’t wrong.

From the report:

“Ontario should also receive its fair share of federal funding, but today faces a shortfall of almost $500 MIllion, despite two-thirds of the Canadian housing shortage being in Ontario.  We call on the federal government to address this funding gap.”

I’ve always maintained that the federal government has done enough for the Golden Horseshoe, where 25% of the country’s population lives.  So whether I think Recommendation #48 is silly or not, I agree that Ontario needs more funding.

49. Reductions in funding to municipalities that fail to meet provincial housing growth and approval timeline targets.

Yet another punitive recommendation, which shows the backbone of whoever is on this task force!

50. Fund the adoption of consistent municipal e-permitting systems and encourage the federal government to match funding. Fund the development of common data architecture standards across municipalities and provincial agencies and require municipalities to provide their zoning bylaws with open data standards. Set an implementation goal of 2025 and make funding conditional on established targets.

Again, we’re “encouraging the federal government to match funding.”

The Task Force is making it clear that while the provincial government is taking action, the federal government is not.

“Make funding conditional on established targets.”

Again with the punitive measures!

“If you don’t eat your meat, you can’t have any pudding!  How can you have any pudding if you don’t eat your meat?”

51. Require municipalities and the provincial government to use the Ministry of Finance population projections as the basis for housing need analysis and related land use requirements.

Require one level of government to rely on another level of government.  Hmmm.

I would much rather defer this to the private sector, where I’m sure there’s a far more capable and accurate “projection” to be had, but I digress…

52. Resume reporting on housing data and require consistent municipal reporting, enforcing compliance as a requirement for accessing programs under the Ontario Housing Delivery Fund.

“If you don’t wear your seatbelt, you don’t get any ice cream.”

You can picture this cause-and-effect piece of parenting in practical use, right?

Whether this is your parenting style or not, I’m just making a point.

A seatbelt is a good thing.  It’s there to help us.

So if you have to bribe somebody to do, or continue to do something that is good for them, then is this really the way to go about solving the problem?

“Reporting on housing data” is something that the government should already be doing.  I’m not sure if/when/where it stopped, but if the Task Force is calling this out as one of their fifty-five recommendations, then obviously the data ceased to be freely available.  But to suggest that data reporting must be done “as a requirement for accessing programs under the Ontario Housing Delivery Fund” is not the way to go about.  I’m sure this will make it more effective, like the child who does what he or she is told in order to get a treat, but what does this say about the child’s behaviour in the first place – or in this case, the lack of data tracking?

I seem to be drawing on a lot of parent/children analogies here, but isn’t it sort of warranted?

53. Report each year at the municipal and provincial level on any gap between demand and supply by housing type and location, and make underlying data freely available to the public.

Make that data freely available to the public, um, yeah!  Why wouldn’t they?

I’m not sure I understand the “gap between supply and demand by housing type and location,” since demand can often be driven by desire.  This is a “wants versus needs” conversation, so if the public “demands” more detached, 4-bedroom houses, but they aren’t available for prices that that same public can pay, then where does that leave us?

We need more houses, but on what land to we build them?  And with the cost of land, infrastructure, and construction, is it realistic to assume that the lower-middle-class can afford them?

A lot has been said about the “middle class” or the “missing middle,” and how we’re building all sorts of 1-bedroom condos, possibly faster than they’re needed by end-users, but we’re not building for families and/or the middle-class.  I think we can all agree on that, but my question is this: if you took a plot of land off the 404 in Gormley, Almira, or Behesda, carved out 30 x 120 foot lots, serviced the land, and built 4-bed, 4-bath houses, what’s the all-in cost?  Is it $500,000?  Is it $800,000?  What’s the cost of the land, plus development charges, plus financing, plus materials and labour, plus HST, plus overhead for the developer (staffing, office, marketing, etc), plus anything else we can think of?

The demand for “location” is going to differ based on price.  Nobody sets out to live in sub-division; they move there because the more attractive areas are unaffordable.

I suppose, in the end, if we simply said, “Build more houses, anywhere you can,” then eventually the increased supply would bring price stability.  That is, if investors don’t just buy up every new-build in the GTA…

54. Empower the Deputy Minister of Municipal Affairs and Housing to lead an all-of-government committee, including key provincial ministries and agencies, that meets weekly to ensure our remaining recommendations and any other productive ideas are implemented.

This is fluff.

It starts with “empower.”

I had a feeling the last few recommendations would be fluffy.

55. Commit to evaluate these recommendations for the next three years with public reporting on progress.

Not exactly ending the mix-tape with your #2 song, is it?

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Wow, that was fun!

The report was super dry at times, and I know that I’m overly-cynical but I can’t help it.

I got into real estate in 2003 and since then, I haven’t seen any level of government act in anything but a reactive manner.  There’s zero proactivity in government and nothing is ever addressed until it’s a “crisis.”  So while this report is ambitious and has some fantastic ideas, I cringe when I see that one level of government is making a “recommendation” that requires action from another level of government.

I also am extremely mistrusting of different levels of government working together.  It’s a fantasy.  And I’m sorry for my attitude, but I just don’t see them as anything but “frenemies.”

What this report did accomplish was bringing to light the fact that we desperately need a plan, not to mention, it probably got the attention of the federal government too.  And while most of the meaningful change with respect to housing supply has to come from the municipal level, then the provincial, level, it’s the federal government who has the most money, and it’s desperately needed here.

It’s a long weekend!  Who’s in the office on Monday?  Raise your hand!

I’ll be doing Tuesday/Thursday posts next week and, come to think of it, I’m currently without a topic.

Any ideas?

The post Housing Affordability Task Force Report: My Two Cents (Pt3) appeared first on Toronto Realty Blog.