Toronto’s affordable housing program set to break ground after years of delays

According to a new report, the first three of 21 projects could start construction this summer despite new risks posed by rising interest rates.

According to a new report, Toronto could break ground on three developments from its Housing Now affordable rental program by next summer, despite the shifting tides of the development market, including rising interest rates.

Following the competition, the three sites – 50 Wilson Heights Blvd, 140 Merton St, and the intersection of Bloor and Kipling – are expected to inject 3,024 rental units into the market, with 1,510 of those units set to be offered at rates lower than the city’s average market rent.

But as the city agency that handles its real estate portfolio, CreateTO, forecasts that construction will begin by the second quarter of 2023, timelines are still up in the air for the other eight sites announced in the first phase of what officials have dubbed Toronto’s “signature” affordable housing program.

Housing Now was approved by the council in January 2019, but has been plagued by delays as the number of projects in its pipeline has grown to 21. Meanwhile, rents in Toronto have reached all-time highs, with a waitlist for deeply affordable housing totaling more than 81,000 households as of September. When a new, moderately priced rental building downtown recently opened applications for 100 available homes, 1,202 bids were received.

Rising interest rates and a “rapid escalation” in construction costs are also risks for the Housing Now projects, according to CreateTO CEO Vic Gupta. Gupta wrote in a report for CreateTO’s meeting Friday that the additional costs threaten to “significantly impact” the agency’s ability to move forward with the initiative as planned, prompting staff to move “expeditiously.”

The city has stated that it expects to allocate approximately $1.3 billion in the land, staff resources, and financial incentives such as relief from development charges and building permits across all three phases of Housing Now, with the incentives totaling approximately $433.95 million. The resulting mixed-use developments rely on both development partners and federal funds.

Ana Bailo, a former city councilor who served on the CreateTO Board the last term, said that given how the market has shifted, staff has been taking a “second look” at projects in earlier stages of development. “How do we ensure that projects continue to be viable?”

“You can look at a number of things, such as more money from the government, more incentives, more density, and adding more market units to have more money to pay for affordable housing.”

Gupta’s report breaks down the issues by the property, ranging from obtaining “acceptable” financing from the Canada Mortgage and Housing Corporation to coordinating drainage over a TTC corridor.

Officials have previously given several reasons for the effort’s delay, ranging from disruptions caused by the COVID-19 pandemic to the completion of transit lines.

According to the new report, construction at Wilson Heights and Merton St. is expected to begin by the end of 2020, with Bloor and Kipling following by the end of 2021. While the city had previously stated that construction at Merton would begin in November 2023, Gupta’s report predicted that all three sites would begin in the second quarter of this year.

Construction on the other eight sites announced as part of the first round of Housing Now was initially scheduled to begin between late 2020 and late 2022. There is no current forecast date. In 2019, the city stated that it hoped to complete the first round between 2022 and 2024.

One issue with the first round of sites, according to Bailo, was announcing the addresses while due diligence was still in progress.

Almost immediately, she said, it became clear to officials that more preliminary research could assist in mitigating the types of challenges that have arisen. “That is something we identified as something we want to do better and more as the program develops,” Bailo said.

According to Magda Barrera of the Advocacy Centre for Tenants Ontario, speed is critical because renters are facing asking prices that reached $2,474 for a one-bedroom in September, according to the report.

“It’s disappointing to see the delays because these were really big developments,” Barrera said, noting that data shows the most available units are at the low end of Toronto’s rental market. She shared CMHC data from October 2021, which showed that the citywide vacancy rate of 4.9 percent had dropped to 1.9 percent for units priced between $1,000 and $1,249.

“At this point, any new low-cost rental is welcome… It will not solve the crisis, but any new rental affordable units we can obtain will make a significant contribution.”

She sees great potential in the Housing Now program, praising its ability to eliminate the high cost of land from the development equation by utilizing the city’s own properties.

“I sincerely hope it can get back on track — and provide us with the affordable rentals we require.”

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