TorontoRealtyBlog

Is Olivia Chow a mad genius?

Was this her plan all along?

She can’t be this naive right?  This must be part of a well-orchestrated, thoroughly thought-out plan, conceived by a group of strategic and conniving individuals?

Not sure what I’m talking about?  Don’t pay attention to the news?  Do pay attention to the news, but only read the headlines, and thus remain confused?

I’ll explain.  But first, let me provide you with an analogy.

Let’s say that you’re standing in front of your child’s school, talking to another parent, who we’ll call Rob.

And now, let’s say that an ice cream truck pulls up and the kids immediately get excited!

You turn to the kids and you yell, “Who wants ice cream?”

The kids all shout, “Me!  Me!  I do!”

Then you ask again, “You all want ice cream?”

And the kids say, “Yes!  Please!  We do!  YAAAAAAY!”

So you turn to them and say, “Great news, kids!  You all get ice cream,” and the kids celebrate with glee!

You then announce, “Go get whatever you want, kids, because Rob here has agreed to buy you all ice cream!”

Oh, burn!

What the hell is Rob going to do now?  He can’t let those kids down, can he?  He’d be a villain, even though you are the one that said he’d foot the bill!

This is what I believe the plan was last week when Olivia Chow announced her groundbreaking $36 Billion housing plan, and yet I wonder how many people will actually come to realize the house of cards upon which this idea sits.

So, what’s the media coverage been like?

Headlines are a funny thing!

Like this one, for example:

Toronto “unveils” their plan.

Huh.

Take this headline at face value, and you wouldn’t expect that you’re basically asking some other child’s dad to buy all the kids ice cream.

Toronto, in case you have a short memory, is broke.  Like, completely and utterly effed.

I mean, weren’t we just talking about the city’s projected $46.5 Billion budget shortfall over the next decade?

Oh, wait, that was August.  Ancient history!

A staff report showed that not only is there an estimated $46.5 Billion shortfall expected over the coming ten years, but that $7.5 Billion will originate from a deficit.

They call this “annual operating expenditures in excess of operating sources of funding.”

Right.

Another way of wording this is, “spending more money than you have.”

And $9.5 Billion is the cost of increased debt and the repayment of new debt issues.

Uh-huh.

So you’re paying loan shark rates, are you?

The staff report noted, first and foremost, that “property taxes are both the City’s largest and most predictable revenue source, as well as being the revenue tool most directly in the City’s control.”

The report then noted: “Increasing Toronto’s property tax rates to levels comparable to other municipalities in the Greater Toronto and Hamilton Area (GTHA) – approximately a 10-12% increase over and above the rate of inflation – would provide an additional $500 million per year, as outlined in Section 3 of this Report.”

But Mayor Olivia Chow didn’t want to upset all property owners with a large property tax increase, so instead, she only upset some property owners…

“Toronto Council Approves New Measures To Deal With Grim Financial Situation.”

The new measure is….

…drum roll, please….

…an increase in land transfer tax for properties above $3,000,000!

But nobody cares.  I mean, 99% of Toronto doesn’t care.

A flat-out, 7.5% tax on a $20,000,000 house isn’t “unfair” if it doesn’t affect 99.9999% of the population.

At the risk of straying too far off topic, let’s just say that this $46.5 Billion deficit expected over the next ten years doesn’t really shout, “Let’s announce a $36 Billion plan for public housing.”

It’s why, when I first saw the headline above, I said aloud, “This can’t be right.”

It just can’t be.

How in the world could a city with a $46.Billion hole announce another $36 Billion in spending?

Well, if you get somebody else to buy the ice cream, then it follows – you’re not the one paying for it…

The City of Toronto has tried valiantly to get money from the other levels of Government, and continues to do so.

“Toronto Mayor Olivia Chow Heading To Ottaw To Plea For Financial Aid”

That article is from September 19th.

And suddenly, I’m getting deja-vu.

Didn’t Olivia Chow already ask for money?  Like, earlier in the year?

Yeah.

And how did that go?

Well, sorta like this:

“Freeland Rejects Toronto Mayor Chow’s Ask For Financial Help From Federal Government”

Freeland said:

“The ability of the federal government to spend is not infinite — and the emergency support we provided during the pandemic led directly to the excellent fiscal position that the province of Ontario currently enjoys.”

So basically, you asked your wealthy uncle for money, and he told you to just ask your mom.

Right.

Well, if at first you don’t succeed, try, try again!

And that is exactly what Mayor Chow did last week with her $36 Billion housing announcement.

This is either brilliant or insane.  Time will tell which is true.

But for now, let’s look at the entire announcement, and not just the headline, which can be viewed in full on the City of Toronto’s website.

Here’s the good news: the City of Toronto has five “housing ready sites” located at 405 Sherbourne St.,150 Queens Wharf Rd.,1113-1117 Dundas St. W., 11 Brock Ave. and 25 Bellevue Ave, which will be used as part of this plan.

Here’s more good news: the City of Toronto has forty-seven other city-owned “housing ready sites” for which they want to potentially include in developments down the line.

Here’s the bad news:

It seems as though this $36 Billion “plan” relies entirely on the assumption that the Province of Ontario and the Federal Government are going to foot the bill.

Oh, snap.

Mayor Chow is a dawg.

Downright, O.G. gangster.

She announced a massive housing plan at a cost of THIRTY-SIX BILLION DOLLARS and intends to use very little, if any, of the city’s money.

Here’s how the project will primarily be funded:

1) From the Government of Canada: $500 – $800 Million per year in grant funding to Toronto, over seven years.  That’s $3.5 – $5.6 Billion.

2) From the Government of Ontario: $500 – $800 Million per year in grant funding to Toronto, over seven years.  That’s $3.5 – $5.6 Billion.

3) From the Government of Canada: $6.5 – $8 Billion in low-cost financing or repayable loans, over seven years.

4) From the Government of Ontario: $6.5 – $8 Billion in low-cost financing or repayable loans, over seven years.

5) From the Government of Ontario: waive PST on all purpose-built housing rental projects

And that’s just the big-ticket stuff!

But the amazing part about this “housing plan” is that Mayor Chow isn’t just detailing how she expects the government to provide $30 Billion’ish in funding, but rather all the other provisions that were included but not really mentioned in media reports.

Here are a few notable points:

-Establishing a requirement that as part of any future federal land sales, at least 30% of the gross floor area be allocated for affordable housing for 99 years.

-Providing loan guarantees for non-profit and public led purpose-built affordable and market rental projects

-Introducing an anti-flipping tax on residential properties sold within the first 12 months of ownership.

-Amending the National Housing Strategy programs and establish lending criteria tailored to the unique risk profile and requirements of municipal governments and non-profits.

That last one is interesting.

“The unique risk profile of municipal governments.”

That’s really vague and it sounds cheeky.

Is this suggesting that a city, which is completely broke, has a “unique” risk profile in the sense that it needs to be risky?  Or take huge swings?

Is this the City of Toronto asking the federal government to grant loans that they know will never be repaid?  Oh, there are so many things to read into here!

How about this one:

Amending the Income Tax Act to require landlords to disclose in their tax filings the rent they receive pre-and post-renovation and to pay the taxing authority a proportional surtax if the increase in rent is excessive.

I can’t believe what I’m reading.

Who is going to determine what is “excessive?”  And what kind of door does this open?

So we’re now going to hire people to comb through tax returns, and analyze rent rolls, to see if we can go after landlords who just completed renovations?  Why?  Because God forbid, they might have done a good job on a renovation and significantly increased the value of their properties?

Did I mention that I want to know how to define “excessive?”  I did, okay.  Good.  We can move on.

How about this one:

Developing policies to curb excessive profits in investment properties while protecting small independent landlords.

Again, who is going to decide what “excessive profits” are?

And if the government “curbed” excessive profits, wouldn’t that disincentivize developers from developing?

Also, if the government wanted to “project small independent landlords,” we’d be in another time, on another planet, and not reading stuff like this:

“GTA Condo Owner Says He’s Struggling To Make Ends Meet As Tenant Won’t Pay $20K In Rent”

Wow, the more I read, the more I question.

This is buried pretty far down, but it’s not exactly a footnote:

Re-introducing rent control to cover units occupied after November 15, 2018.

Wow!

This “report” is supposed to be about asking two other levels of government to foot the bill for housing, and yet we have some incredibly far-reaching items further down on the agenda.

Rent control is a massive powder-keg in our city, and the fact that it doesn’t apply to units occupied after November 15th, 2018, is a well-known and impactful fact.  Undoing that legislation would have huge implications.

Noble cause here, but wow I can’t imagine:

Identifying tenants in need of housing support services through the eviction process and provide these services for every household that is evicted through the Landlord and Tenant Board, with a goal of timely re-housing.

I don’t know what “housing support services” are, but if the City of Toronto is asking the Government of Ontario to “re-house” every single person who is evicted, then this too will have massive implications on the housing market, the role of government, and of course – the cost!

But the point above is followed by this one:

Providing and funding emergency temporary accommodation and related supports for households evicted through the Landlord and Tenant Board, at no cost to municipalities, until long-term housing can be provided for those households.

Wow!

“At no cost to municipalities.”

The City is asking the Province to foot the bill for this too.

How is this not like a 7-year-old’s Christmas list for housing in a city that bankrupted itself through mismanagement, over-spending, lack of foresight, and lack of planning?

There’s more.  There’s so, so much more.

But I want to focus on the $36 Billion housing plan, which I’ll have to remember to BOLD throughout today’s blog, just for emphasis.

Guess how many units of housing this $36 Billion plan will produce?

65,000.

That’s it.

While we need 1,500,000 new units of housing in Ontario over the next ten years, the $36 Billion plan that Olivia Chow is proposing, which would be almost entirely financed by the other two levels of government, would only provide 65,000 new units of housing.

And near the bottom of the report, we find this:

Construction cost per unit (excluding land cost) – Estimated at $575K – $600K per unit, average.

I don’t even want to know how the lottery balls are going to drop to see who gets a new $600,000 condo, paid for by the governments of Ontario and Canada, via the City of Toronto.

Am I the only one who read all this and laughed?

Look, I’m not the only armchair quarterback in the city.

I love the Globe & Mail, but this headline is ridiculous:

“A Simple Fix To Help Solve Toronto’s $46.5 Billion Budget Problem”

You can’t, in good conscience use the words “simple fix” in the same sentence as “$46.5 Billion budget problem.”

It’s an oxymoron.  It’s no bueno.

And yet here I am, tearing down Mayor Chow’s massive housing plan, without providing any “solution” of my own.

But the solution isn’t my job.

I suppose neither is the analysis of the housing plan itself, but I can’t sit by and watch the farce that has become politics in this country without shining a light on the underbelly.  And I honestly don’t know whether to congratulate Mayor Chow for a brilliant way to shame the provincial and federal governments into paying for this program, or whether to demonize her as a clueless, hopeless, naive idealist who is in over her head.

Honestly.  I don’t know which one it is.

That’s what fascinates me about this story the most, as I said at the onset.  The plan is just so crazy that there must be more to it.  The city can’t be this naive and wishful.  They must be trying to bait the other two levels of government here.

Just imagine if it worked?

The post Monday Morning Quarterback: Olivia Chow’s $0 Housing Plan appeared first on Toronto Realty Blog.