Ontario proposes sweeping changes to address housing affordability crisis

Key Takeaways:

• The changes are expected to make it easier, faster and cheaper to build housing.
• Officials also want to encourage more rental and affordable housing construction.
• Ontario is also looking to crack down on unethical builders, land speculators, empty homes and foreign buyers.

The Whole Story:

Ontario is looking to turbocharge home construction with new legislation.

This month the province unveiled legislation that, if passed, would support Ontario’s newest Housing Supply Action Plan, More Homes Built Faster. 

Officials explained that the plan is part of a long-term strategy to increase housing supply and address housing affordability.

“For too many Ontarians, including young people, newcomers, and seniors, finding the right home is still too challenging. This is not just a big-city crisis: the housing supply shortage affects all Ontarians, including rural, urban and suburban, north and south, young and old,” said Steve Clark, minister of municipal affairs and housing. “Our Housing Supply Action Plan is creating a strong foundation on which 1.5 million homes can be built over the next 10 years. Our government is following through on our commitment to Ontarians by cutting delays and red tape to get more homes built faster.”

Addressing the missing middle

Ontario is proposing changes to the Planning Act to create a new provincewide standard threshold for what’s allowed to be built by strengthening the additional residential unit framework. If passed, up to three residential units would be permitted “as of right” on most land zoned for one home in residential areas without needing a municipal by-law amendment. Depending on the property in question, these three units could all be within the existing residential structure or could take the form of a residence with an in-law or basement suite and a laneway or garden home. Officials noted that these new units must be compliant with the building code and municipal bylaws. These units would also be exempt from development charges and parkland dedication fees.

Building more homes near transit

Proposed changes to the Planning Act would help move towards “as-of-right” zoning to meet planned minimum density targets near major transit stations, reducing approval timelines and getting work started faster. Once the key development policies for major transit stations are approved, municipalities would be required to update their zoning by-laws within one year to meet minimum density targets.

Supporting affordable and rental housing

The province is proposing regulatory changes to provide certainty regarding inclusionary zoning rules, with a maximum 25-year affordability period, a five per cent cap on the number of inclusionary zoning units, and a standardized approach to determining the price or rent of an affordable unit under an inclusionary zoning program.

Officials also want to help streamline the construction and revitalization of aging rental housing stock. As it stands, under the Municipal Act and City of Toronto Act, municipalities may enact bylaws to prohibit and regulate the demolition or conversion of multi-unit residential rental properties of six units or more. These by-laws vary among municipalities and can include requirements that may limit access to housing or pose as barriers to creating housing supply. Ontario plans to begin consultations on potential regulations to enable greater standardization of these municipal by-laws, while ensuring that renter protections and landlord accountabilities remain in place.

Building attainable, affordable and non-profit housing

Officials stated that government charges and fees significantly impact the cost of housing – adding up to nearly $200,000 to the overall cost of building a home. Changes to the Planning Act, the Development Charges Act and the Conservation Authorities Act would freeze, reduce and exempt fees to spur the supply of new home construction. This includes ensuring affordable, and inclusionary zoning units, select attainable housing units, as well as non-profit housing developments, are exempt from municipal development charges, parkland dedication levies, and community benefits charges. Rental construction would also have reduced development charges and conservation authority fees for development permits and proposals would be temporarily frozen. Ontario is also undertaking a review of all other fees levied by provincial ministries, boards, agencies and commissions to determine what impact they may have on the cost of housing with the intent of further reducing, if not eliminating these fees altogether.

Streamlining processes

Proposed changes to the Planning Act would remove site plan control requirements for most projects with fewer than 10 residential units with some limited exceptions. Officials expect this to reduce the number of required approvals for small housing projects, speeding things up for all housing proposals, while building permits and robust building and fire code requirements would continue to protect public safety. Proposed streamlining changes also include focusing responsibility for land use policies and approvals in certain lower-tier municipalities to eliminate the time and costs associated with planning processes by upper-tier municipalities. The province explained that this would give the local community more influence over decisions that impact them directly, clarifying responsibilities and improving the efficiency of government services for citizens.

Improving the Ontario land tribunal 

Proposed legislative changes to the Ontario Land Tribunal Act are expected to speed up proceedings, resolve cases more efficiently and streamline processes. This includes allowing for regulations to prioritize cases that meet certain criteria , as well as to establish service standards. Proposed changes would also clarify the Tribunal’s powers to dismiss appeals due to unreasonable party delay or party failure to comply with a Tribunal order, as well as clarify the Tribunal’s powers to order an unsuccessful party to pay the successful party’s costs. Ontario would also invest $2.5 million in other resources to support faster dispute resolution and to help reduce the overall caseload at the Tribunal.

Creating an attainable housing program

Ontario plans to create a new program to support home ownership. The new program will leverage provincial authorities, surplus or underutilized lands, and commercial innovation and partnerships to rapidly build attainable homes in mixed-income communities that are accessible to all and will help families to build portable equity.

Protecting homebuyers

Ontario intends to double maximum fines for unethical builders and vendors of new homes who unfairly cancel projects or terminate purchase agreements. These proposed changes under the New Home Construction Licensing Act, would, if passed, increase existing maximum financial penalties from $25,000 to $50,000 per infraction, with no limit to additional monetary benefit penalties, and be retroactively imposed for contraventions that occurred on or after April 14, 2022. These changes would also enable the Home Construction Regulatory Authority to use funds from these penalties to provide money back to affected consumers, making Ontario the first jurisdiction in Canada to provide such funds to consumers. If passed, the amendments would come into force in early 2023.

Combatting land speculation

In January, during the Ontario-Municipal Housing Summit, Ontario’s mayors expressed concerns that lands planned for residential development are sitting empty because home builders are taking too long to complete their planning applications, delaying the creation of new homes. Ontario plans to work with industry partners to investigate the issue of land speculation and determine whether potential regulatory changes under the New Home Construction Licensing Act are needed.

Improving heritage and growth planning

Proposed changes to the Ontario Heritage Act would renew and update Ontario’s heritage policies and strengthen the criteria for heritage designation and update guidelines. Officials believe this would promote sustainable development that conserves and commemorates key places with heritage significance and provide municipalities with the clarity and flexibility needed to move forward with priority projects, including housing. Ontario will be consulting on how it manages natural heritage, including improving the management of wetlands, while supporting sustainable growth and development. Ontario will be seeking input on integrating A Place to Grow: Growth Plan for the Greater Golden Horseshoe and the Provincial Policy Statement into a single, provincewide planning policy document. This review will also include consultation on how to address overlapping planning policies that could negatively impact precision in mapping and municipal planning.

Reducing taxes on affordable rental housing

The province is asking the federal government to partner with them on potential GST/HST incentives, including rebates, exemptions and deferrals, to support new ownership and rental housing development. 

Changing property tax for affordable and rental housing

Currently, property tax assessments for affordable rental housing are established using the same basis as regular market rental properties. Ontario plans to explore potential refinements to the assessment methodology used to assess affordable rental housing so that it better reflects the reduced rents that are received by these housing providers.

In addition, Ontario will consult with municipalities on potential approaches to reduce the current property tax burden on multi-residential apartment buildings in the province.

Addressing vacant homes

This winter, the province plans to conduct consultation on a policy framework setting out the key elements of local vacant home taxes. Officials noted that currently only a handful of municipalities have the authority to charge this tax on unoccupied residential units to incentivize owners to sell or rent them out. A provincial-municipal working group will be established to consult on this framework, and to facilitate sharing information and best practices.

Strengthening the Non-Resident Speculation Tax

At 25 per provincewide, Ontario noted that it now has the highest and most comprehensive Non-Resident Speculation Tax (NRST) in the country. This initiative is meant to further discourage foreign speculation in Ontario’s housing market.