Bubbles, Programs and Policies

Today, the Globe and Mail’s Report on Business (ROB), to their credit, has a major spread on the Ontario Government’s effort to cool the housing bubble in the Toronto region. (Globe and Mail, ROB, April 22, 2017) Their conclusion is that this is a political fix that will do very little to reduce the price of housing.

It is Barrie McKenna, the ROB feature writer, who says that the government’s response was political, but that is not the point. The rising prices of homes are making it virtually impossible for new buyers to purchase housing, and that is a serious political issue. Governments should respond to this crisis. The real question is, will the new government policy work?

A new building within Regent Park, an old public housing project.

For that we have to turn to another ROB reporter, Janet McFarland, who spent her time over the last couple of days talking to realtors who have first hand knowledge about buyers and sellers. Their opinions are consistent. The policy will have a marginal impact at best and maybe no impact at all.

The 15% foreign buyer’s tax is the major policy change designed to take some of the air out of the housing bubble. Realtors selling to foreign buyers told McFarland that the new tax will make very little difference. These buyers are wealthy people trying to get their money into a safe haven such as Canada. The Canadian dollar is low, this country is stable politically, and is seen as an ideal place for a secure investment. One real estate agent told her that the exemptions to the tax will mean that only about 20% of foreign buyers will have to pay the tax and it will not be a disincentive at all for them.

The conclusion of those with first hand knowledge of the industry is that it will not work. There may be some psychological benefit, but that will be marginal and short term. The only thing that might work is some form of tax on speculators who buy property and flip it for a profit. A tax like that would apply to everyone and would be very hard to administer. Governments are reluctant to use such a blunt instrument to deal with such a complicated problem.

We are left, then, with what economists call “market forces” to dampen the housing bubble. McFarland quotes agents who say the high prices are attracting more listings. That increase of supply could help to dampen prices, but as long as demand remains high the tendency will be for house prices to drift upwards.

I am not surprised by any of this. To put the crisis baldly, middle and low income families and individuals have been priced out of the market, and there is very little the government can do about it. I am coming to the conclusion that this is not a housing bubble; the market has established a new price plateau, and it is likely that prices will continue to rise.

If the Ontario Government policy is not going to work, then what should we do? I believe we need a new government led program that will provide decent housing for middle and low income families because they are the ones suffering from the high cost of housing.

This does not mean that the government should build public housing, and create ghettos for the poor, like they did in the past. There is another model of co-op and non-profit housing. In this program, government provides start-up funding to agencies like the Co-operative Housing Federation of Toronto, churches, unions, community associations, ethnic groups and so on. They then raise a mortgage using a government guarantee, build the housing and manage it over the life of the building.

These types of projects are low risk for the government. It is a form of investment where the pubic recoups its money as the mortgage is paid off. These projects provide good housing and strong communities for hundreds of thousands of people. At the same time a comprehensive housing program such as this will tend to dampen the housing market and stabilize prices. That will benefit first time buyers who want to own their own house or condo.

If we don’t provide a comprehensive housing program that helps middle and low income people get decent housing that meets their needs, we will pay a terrible price. Living standards will deteriorate for a large number of people in our cities and that will bring any number of serious social problems and costs.

Providing good affordable housing is political. It is a legitimate role for government to provide good housing because it is an essential for a decent life. Let’s stop band-aids and get on with a program that will benefit all Canadians.

Will the Wynne Housing Initiative Work?

Finally, the provincial government has acted to cool the overheated housing market in the Toronto region from Niagara to Peterborough and as far north as Lake Simcoe. But will it work?

These are the three important elements of Kathleen Wynne’s plan.

  • A 15% tax on foreign house buyers,
  • Rent control on all rental units capped at a 2.5% increase a year, and
  • A five year $125 million plan to encourage construction of new housing.

We can build sustainable, well designed, affordable housing.

There are some smaller but important elements of the plan that could have an impact on the market. These include providing additional powers to municipalities to tax vacant properties, tax fairness for rental properties, and reviewing real estate industry practices.

Recently Mayor John Tory pointed out that realtors are “aggravating the market mayhem” by tactics like bidding wars, and agents who represent both buyers and sellers. (Toronto Star, April 20, 2017) It is essential that these problems be addressed, but you can be sure that the vested interests in the real estate industry will fight reforms like these.

There are other changes to the development industry that are in the works. In October 2016, the government announced that they would reform the Ontario Municipal Board. OMB appeals have added to the costs and unpredictability of the planning system. We still do not know what the government plans to do with the OMB, but it will be necessary if they are serious about improving the speed of the approvals process and reducing costs.

Taken as a whole, this package of reforms and new programs will have an impact on the housing sector across the Toronto centered region. I confess it is much broader than I predicted. But is it enough? Will it cool the housing market so that prices become more affordable, and encourage new construction of affordable housing? The signs are mixed and only time will tell the story.

The biggest concern of late is the spike in the price of houses and condos. Clearly this is driven by speculation. This is difficult to control and the government has done about the only politically acceptable thing they can do by putting a 15% tax on foreign house buyers. (As I pointed out before, this is easy for Queen’s Park. Foreigners cannot vote in Ontario.)

Last year the B.C. government put a 15% tax on foreign buyers and the average price dropped by about one-fifth. But it appears that Vancouver house prices this spring have bounced back up to near pre-tax levels. Foreign buyers have not had the same impact on prices in the Toronto area. It is likely that the tax will have some effect, but I predict it will not make much of a difference on skyrocketing prices here.

The real criticism that has emerged of the Ontario initiative is around rent control. There have been news accounts of major rent increases in Toronto of 30%. (Globe and Mail, January 27, 2017) A 2.5% rent increase cap will help renters. In my view that is good. It will help keep some rental units affordable.

Others believe the rent cap will discourage developers from building new rental accommodation and in the long run that will increase the problem because there are fewer affordable units available. There have been a number of recent announcements of new construction of rental buildings in Toronto in recent months. Will this provision lead to a halt of construction? We don’t know.

But the problems are even broader than controlling speculation and rents. We have a planning system in Ontario that is helping to push up prices. I call it, “let’s make a deal planning.” (See my book, The New Urban Agenda) Everything is up to negotiation between the developer and the municipality and deals are struck using Section 37 of the Ontario Planning Act. If the developers don’t get their way they appeal to the OMB. There are armies of lawyers in Ontario that do nothing but help developers steer through the system. All this leads to unpredictability and drives up costs.

In virtually every other jurisdiction in North America planning regimes provide predictability. Official plans are drawn up, and zoning is put in place. The developers are forced to follow those rules. No appeals are allowed. That helps to make an orderly system. But not in Ontario. Reform of the OMB will help but what we need is a new planning act.

But there is even a deeper crisis than this. We are not building the type of housing we need at a price that people can afford. The overheated market has led to more housing being built, and more is in the pipeline, but it is expensive. Many people are spending over 50% of their incomes just to put a roof over their heads. The reasons include the things we have been talking about: speculators drive up prices, the OMB, lawyers, the price of land, and developers and real estate agents taking excessive profits. But it is also because we do not have a rational government housing policy. Let’s look at the basics.

By the time a developer buys the land, gets plans drawn up, goes through the approvals process, buys the materials, builds the building, and pays for things like marketing and real estate agents, the unit costs are unaffordable to any but the affluent. Incidentally this is not an apology for the developers. I have spent my time in the trenches fighting them in the past. It is the reality of the development system in Ontario and across North America.

We can solve this problem by increasing the incomes of middle and working class Canadians. I would be in favour of that, but that will not happen easily. The only alternative is to bring down the costs of the housing so that it is affordable.

Affordable housing programs have been a fact of life in Canada, Europe, and even in the United States since the Second World War. The housing crisis in Canada between 1945 and 1950 was much worse than it is today, and it was solved by massive public subsidies. Billions and billions of dollars were spent on subsidized mortgages through CMHC, sewers, water, roads, expressways, and so on.

At that time there was a recognition by government that the free market system could not provide good housing for people at affordable prices, and the government needed to subsidize the market. Those subsidies went to people of all incomes and in all regions of the country. It had a huge effect on Canada and played an important part in raising the living standards that many of us continue to enjoy today.

Perhaps the most enlightened housing program in the developed world happened in Canada with the co-op and non-profit program developed in the ‘70s and early ‘80s. That program put together mixed income, affordable housing for individuals and families, and developed a system of co-operative management that encouraged community. Hundreds of thousands of people still live in those buildings.

The rise of right wing ideologies and governments led to the cancellation of affordable housing programs in Canada. It was the Chretien Liberal government in Ottawa that cancelled the federal housing program in the early 1990s, and the Mike Harris Conservative government ended the program in Ontario in 1995. Today, Canada is the only developed country in the world that does not have an affordable housing program.

As part of the recent Ontario government plans, Kathleen Wynne announced a five year $125 million program to encourage construction of new housing. That is $25 million a year; not enough to built one small multi-unit housing complex.

It is distressing. In 1945 Canadians had just fought a World War, government debt was much higher per-capita than today, and yet they created a housing program that transformed this country and improved the lives of millions of people. What we lack is not only a comprehensive housing policy; we lack the political will to make it happen.

Let’s stop the politics. Let’s build environmentally sustainable housing for families and individuals, and create strong, stable neighbourhoods. The benefits will be enormous.

Hard talk about the housing bubble

The big news in Toronto and the rest of the GTA is the housing bubble and what to do about it. Like many others, I am not optimistic. Understanding the details of the problem shows why.

Houses like these in the GTA now cost well over $1 million

The average price for a detached house in the GTA in February 2017 was $!.21 million, 32.5% more than a year earlier. For all types of residential housing the average price was $875,983, up nearly 28% from the year earlier. (Toronto Star, March 3, 2017)

There is little doubt that this is a price bubble, driven by speculation, and the cost is being paid by first time home buyers. If you own a home in the GTA you can sell into this hot market, pay no capital gains tax if it is your principle residence, and buy a new one. But the high cost to buy a house is almost an impossible barrier for all those not in the market. That means young people just starting out.

Let’s say you want to purchase a home for one million dollars. First you will need 20% down. That is $200,000. Closing costs will range between $15,000 and $40,000. You will still have to raise a mortgage of $800,000. Then there are taxes, heating, repairs and all the rest.  It is estimated that you will need a combined yearly household income of at least $190,000 just to qualify for the mortgage, and even then, paying the monthly costs of owning a house will be a real burden.

Check out this website on the affordability of housing. “Can I afford a million dollar home?” https://www.ratehub.ca/blog/can-i-afford-a-million-dollar-home/ It shows how difficult it will be for people to get into the housing market. Yes, some individuals and couples have yearly incomes in the $200,000 range. Others have access to family money, but on average the price of housing is making home ownership an impossibility for most.

There are strong hints that the provincial government will act to try and deflate the housing bubble as early as next week with the provincial budget. It is likely that it will be a tax on foreign buyers. They can’t vote so they are an easy target. In Vancouver a 15% tax was put on all foreign buyers and that did depress prices by nearly one-fifth. http://www.huffingtonpost.ca/2017/02/15/vancouver-average-house-price-january-2017_n_14775268.html

Similar moves in Ontario will help deflate the bubble, but my guess is that it will not have as dramatic an effect as in Vancouver. The GTA does not have the same proportion of foreign buyers bidding up the price of houses. Ontario needs to do more to reign in the rising prices, but they are reluctant to act too aggressively. The fear is it could lead to a rapid downward spiral that depresses prices across the province. And don’t forget that there are millions of middle class and upper class homeowners in Ontario who have benefited enormously from the price inflation. They will not be happy to see their net worth dramatically decrease.

My prediction is that the Wynne government will tinker a little, but it will do very little to reduce the cost of housing. This is a strategy of dampening demand. If we are ever to going to deal with the problem of housing, it is essential to work on the supply side by providing more affordable housing, especially affordable housing for families.

And that is why I am not very optimistic about controlling the cost of housing. We lack the political will to solve the problem. Our governments, both federal and provincial, are not willing to develop a comprehensive housing policy that controls speculation and provides good homes for people of all incomes. We are a very wealthy country but we are failing those with middle and low incomes who cannot get into the housing market.

 

Spiraling Housing Costs and Affordable Housing

Pressure is being applied – yet again – on the provincial government to increase the land supply in the GTA to decrease the costs of housing. This time the report is coming from Benjamin Tal, an economist with CIBC.

Urban sprawl in the GTA.

Urban sprawl in the GTA.

This demand matches the developer’s dream of building houses on fertile farmers’ fields and across the Oakridges Moraine. Yes, it would produce a few extra houses for people in the top income groups, but it would do nothing to meet the demand for good housing at a reasonable cost, and it would not stop the spiraling costs of housing in Toronto.

What is more, if the Ontario government were to allow developers to build single family houses on greenfields, it would increase the existing problems of traffic gridlock, and unsustainable suburban sprawl. The price of housing would continue to spiral upwards, because demand could never be satisfied this way, and demand is what is driving up the cost of housing.

Benjamin Tal believes the problem is the cost of land, but there is lots of land available for development in our cities at a reasonable cost. Land in the downtown core of Toronto is expensive, but just outside the downtown along the avenues like Eglinton, and Lawrence there are scores of good sites. A little further out, in Scarborough and North York the land is even less expensive.

These sites are not appropriate for low density single family houses, but they are ideal for mid-rise apartment buildings of eight to twelve stories. Complexes like this can have large units, which can provide excellent housing for families, and if the buildings are located along streets with good transit, residents can live without a car. That makes living even more affordable.

So if the problem is not the availability of land at a reasonable price, what is the problem? Some blame the developers. I used to do that. But if you look closely at the problem you will soon discover that with the cost of land, material, labour, and all of the other items it takes to build condos, especially large units suitable for families, the costs make the units unaffordable for middle and low income families.

Housing costs have been a problem in Canada at least since the end of the Second World War. In the past, governments built public housing like Regent Park and Toronto Community Housing. This proved to be a disaster with rising social problems in many of these developments. Public housing was killed in the late ‘60s in Canada.

Then the federal government changed its policies and provided funds for co-operative and non-profit housing. This is mixed income housing, and this program delivered the best affordable housing program this country has ever seen. Some see it as the most successful housing program in the developed world. Short sighted federal Conservative and Liberal governments withdrew money from the program in the 1980s, and finally killed it in the early 1990s.

Canada today is the only developed country that does not have an affordable housing program. Our housing policy is driven by the “trickle down theory.” The belief is that, if new housing is built, like the condos downtown for high income people, it will free up other housing at lower cost, for low and middle income families. Only this does not work in Toronto. Demand is too strong, and it continues to drive up prices.

Benjamin Tal is right on one thing. The only way to bring down housing prices is by increasing the supply, but his solution will only create more unsustainable suburban sprawl. The way to increase supply is by building multi-unit, affordable housing, with some government financial assistance. We need another program like the one that created the co-op and non-profit housing of the past.

The Trudeau Liberals have to deliver on their promise of a government led affordable housing program. If not, the price of housing is going to continue to climb in our cities, and hundreds of thousands of people in Toronto, the GTA, and the rest of the country are going to suffer.

The budget must deliver affordable housing

On this, the eve of the first Justin Trudeau Liberal Canadian budget, those of us interested in urban issues are hoping there will be serious money for cities.

A design for mixed income housing

A design for mixed income housing

The dream of city politicians and staff is for money to fix up or replace badly deteriorated infrastructure – roads, bridges, sewer pipes and so on. I have a different priority and it is affordable housing.

I don’t mean to say that infrastructure is not important, but the housing crisis that we face is

Innovative affordable housing design

Innovative affordable housing design

approaching emergency level and forcing many into poverty. What we need is a comprehensive program that provides new mixed income housing in our large cities.

Good housing at affordable cost should be seen as a fundamental right for Canadians. It will do more to raise living standards than any other measure.

And don’t let politicians convince you that we can’t afford it. That is nonsense. As I have shown in my book, The New Urban Agenda, a good affordable housing program will be largely self-supporting. It will take some seed money from government, but after that the projects can be paid for and maintained out of rents and condo purchases. In the long run these projects will return far more money to public finances than were ever spent on them.

Think of it this way. The International Monetary Fund[1] reports that Canadians subsidies for fossil fuel amount to $34 billion a year. Global energy subsidies are almost $2 trillion a year. In return the oil and gas industry are the chief contributors to greenhouse gas emissions, the single largest cause of climate change that is threatening our planet. Does that make sense?

Surely it is time that we build an affordable housing program that will benefit all Canadians. That’s what I will be looking for in the Trudeau budget.

[1] http://www.globalresearch.ca/imf-pegs-canadas-fossil-fuel-subsidies-at-34-billion/5485558

 

 

Sustainable Cities and Passive Housing

I have been spending time, recently, trying to find out more about how we can create sustainable cities.

Transit, of course, is an essential. Not just moving people out of their cars and into public transit, but we will have to create a transit system that is completely non-polluting, low cost to build, and meets the transportation needs of people living in large urban centers. That is a very tall order.

An Onion Flats Passive Housing project

An Onion Flats Passive Housing project

The other major challenge is creating sustainable buildings. About half of the greenhouse gas emitted in cities is produced from buildings. The rest comes from transportation and industry. If we are ever to reduce the threat of climate change we will have to eliminate the emissions from all of our buildings. Again, a very tall order, but an impressive start has already been made.

German architects and contractors are building what is called passive housing that produces no, or almost no, emissions from heating or cooling. Today there are well over 60,000 such structures in Europe, mostly in Germany and Scandinavia. In North America a few passive houses have been built on the west coast around Portland, Oregon and a handful in British Columbia.

There are three characteristics of a passive house: well insulated walls and ceilings, triple pane windows and doors, and a system to circulate fresh air. A house built to passive building standards needs virtually no heat because as air is brought in from the outside a heat exchanger draws the heat out of the stale air before it is exhausted to the outside.

The secret is in the building materials and how they are assembled. The outside walls are at least 8 inches thick and filled with foam and other insulating material. They also have to be weight bearing. The insulating material in the roof is even thicker than the walls. In northern climates the house is oriented towards the south to capture the heat from the sun. Typically roofs have solar panels and flat roofs have gardens that provide even more insulation.

Most of the passive buildings in North America are houses, but now multi-unit buildings are being constructed. A company in Philadelphia called Onion Flats has constructed large complexes to passive housing standards. They use modular, factory built, techniques to keep costs down and then assemble the units on site.

An Onion Flats multi-unit housing project in Philadelphia

An Onion Flats multi-unit housing project in Philadelphia

Onion Flats has built attractive affordable housing in this way. In one case they were able to build a complex of 132 units of between 1,000 and 1,200 square feet, for an average of $242,000 U.S. a unit. That is a remarkable achievement.

The project is environmentally sustainable, low cost, affordable, and very low maintenance costs. This demonstrates how we can create a sustainable, affordable city, if only we use technology that has been developed and proven to be effective.

There are still problems to be solved before we create a truly sustainable city, but this is a good beginning.

For details on passive housing explore the Internet. These are sites to begin.

General overview: https://en.wikipedia.org/wiki/Passive_houseOnion Flats, Philadelphia: http://www.onionflats.com/Images of European passive housing: https://images.search.yahoo.com/search/images;_ylt=A0LEVy.le5JWmLcAJ8tXNyoA;_ylu=X3oDMTByMjB0aG5zBGNvbG8DYmYxBHBvcwMxBHZ0aWQDBHNlYwNzYw–?p=Passivehouse+In+Europe&fr=mcafee

Mobilizing for a better community: Hamilton’s North End

I was in Hamilton last Friday evening, October 9th. A group of North Enders, led by Rob Fiedler, the chair of the North End Community Association, took me on a tour of their neighbourhood, we had dinner at the home of Shawn and Sheri, along with others. Then I led a talk and answered questions with about 30 people in the new Evergreen Centre at 294 James Street North.

Hamilton's Waterfront in the North End

Hamilton’s Waterfront in the North End

Things are beginning to happen in Hamilton and the action is built around the idea of community participation. The city, along with the Hamilton Community Foundation, have invited Evergreen, (the successful group that took the lead in renovating the Brick Works in Toronto), to collaborate the Hamilton City Building Action Campaign. But that is another story.

Let’s begin with the tour that I was given by the North End community activists. This is what I learned.

There are vast chunks of land in the North End, and the area the city calls the “West Harbour,” that can be redeveloped. Most of it is old industrial property that has sat unused for decades. There are also empty lots and vacant pieces of property.

James Street North in Hamilton's North End

James Street North in Hamilton’s North End

Much of this land is close to the harbour, the Waterfront, yacht clubs, and within walking distance to the new GO station on James Street North that will be opened within weeks. Metrolinx will be providing commuter train service along the Lakeshore route every hour through the day.

In the last couple of years there has been increasing demand for housing in the North End, and the broader area north of King Street in the central core of the city. Clearly speculators see this as a “hot” neighbourhood that is about to develop.

Local residents are naturally concerned about this. They fear that it will bring gentrification, drive up prices, increase property taxes, and possibly displace low income individuals and families. This process has been going on for decades in North American cities and their fears are well grounded.

The North End group brought me in to talk about these issues because I had written The New Urban Agenda. I know Hamilton well. I once worked an organizer there and have written three other books about the city.

These are some of the things that I told the group about the issues and problems faced by the North End residents.

  • Intensification will be good for the neighbourhood. More people will strengthen the shops, bring better services, provide children for the schools, and generally bring life to the community.
  • The fear of gentrification is real. It will drive up prices of houses, and property taxes, but it will be very difficult to stop. We live in a market economy. In time new, affluent residents will integrate into the community and make a contribution in their own way.
  • The major objectives of community groups should be to provide mixed income housing for middle and low income individuals and families and to look for ways to improve the quality of life of the neighbourhood
  • New opportunities for mixed income housing will soon develop. (This meeting was held 10 days before the October 19th federal election.) Both the Liberals and NDP are promising money for affordable housing. We don’t know the details of the program that will finally emerge, but this will be the opportunity for communities like the North End to get mixed income housing.
  • Without spirited advocacy it is likely that new affordable housing will go somewhere else. The community should demand mixed income housing for middle and lower income individuals and families.
  • Community participation will be an essential ingredient in this process. The community has to be vigilant, examine the new plans in detail, criticize and yet still be open to change. It will be a long process that will be frustrating at times, but it is a very important part of the process if a new, revitalized neighbourhood, that values the quality of life, is to emerge.

There are other things that I could have added. To improve communities we have to focus on the public domain. These are the streets, sidewalks, parks, trees and all of those other things that exist in the “spaces between the buildings.” To create a great community we have to learn how to calm the traffic and give our neighbourhoods a human scale.

Neighbourhood associations should demand that the city encourage grass-roots participation by hosting a charrette, where community members meet with experts like planners and architects, who can assist the community in visualizing and understanding the way that they think the neighbourhood can change and develop.

 

The political stars are aligned. Progressive politicians want to stop urban sprawl. Intensification of existing neighbourhoods is now seen as the best investment for new housing. Billions of dollars are being spent on transit in Ontario, and new development is being encouraged along transit lines to build a transportation system that is transit based.

All this means that communities like Hamilton’s North End are in the sweet spot to get new mixed income development, but participation and involvement of local residents is the key to make all of this happen.

A mobilized, engaged community, with clear objectives, is the key to developing affordable, vital, interesting communities with a high quality of life.

Hamilton and the New North End #2

Change is coming to Hamilton’s North End, but the question remains whether it will lead to a high income or a mixed income neighbourhood.

The city is supporting development. Studies have been done showing where new housing can be built. There are plans to improve transit and the street network. Developers have acquired land and are preparing to build, but a controversy is stirring. The fear of some is that this will lead to an influx of high income people, and in time those with low incomes in the neighbourhood could be squeezed out.

This is happening in big cities across North America. In Toronto and Vancouver many families with low incomes have been forced out of the old city. Now poverty is located in the suburbs, and the downtowns are becoming places of high income. Still, it can be argued, there are advantages. Gentrification leads to the restoration of old neighbourhoods. It brings increased densities that helps the shops, brings life to the streets, and makes transit more viable.

In reality people living in Canadian cities have no choice as to what type of development we get. The market determines everything, especially real estate. There are no programs for new affordable housing, so it is either housing for the affluent, or no new development at all.

A mixed income housing complex

A mixed income housing complex

But if the redevelopment of Hamilton’s North End stops at providing housing for the affluent, it will be a lost opportunity. Local residents must insist that we get good housing that serves the needs of all of the people, not just a small elite. This is what is happening in other cities in Canada and the United States. Hamilton is well positioned to do this type of housing, and the North End is the perfect place to begin.

Mixed income housing

What must be provided is not affordable housing, just for those with low incomes, but mixed income housing. It is not just the poor who are having a hard time finding good housing they can afford, but people with middle incomes as well. We need mixed income for people of all ages, incomes, and ethnicities.

The downtown and the North End also needs more density—more people living in the area. If our neighbourhoods are built, or rather rebuilt, with higher densities, shops and other amenities will soon come. That will strengthen the whole community and make the city more economically viable. It is this combination of higher densities and mixed income housing that makes for healthy communities. Let me explain how it can be done.

If we take the area from King Street north to the water, between Bay Street and Wellington, there is plenty of vacant land. The empty parking lots alone could house thousands of people. Much of that land is in public ownership or can be acquired at a reasonable cost. We can build medium density housing of between 8 and 10 stories on much of that vacant land.

If the cost of the land is excluded, excellent mid-rise housing can be built for about $150 a square foot. That means that a 1,000 square foot unit can be built for $150,000 and a 1,500 square foot unit can be built for $225,000. Units that size are large enough for almost all families.

Interest rates are low today and the monthly payments on a 1,000 square foot unit would be under $800, and a 1,500 unit would be under $1,200 a month. (For more details on this see my blog posting “How we can create new affordable housing.”)

The cost of the land is one of the reasons housing costs are high. If the city, or some other public agency, provides the land at cost, or amortized the costs over a long period, say 100 years, at low interest, it would make these units affordable. Another possibility is the public agency leases the land for a low monthly fee. That would allow the agency to control the resale costs of the condos and keep the building affordable.

New units could be sold as condos, rented as apartments at affordable rates, organized as co-ops or non-profit housing, or held by a housing agency and provided at rent-geared-to-income rates for those with low incomes. The result would be excellent mixed income housing.

These types of developments are called Public-Private-Partnerships (PPP). A public agency provides the land and manages the project. A developer builds, rents or sells the units. They also manage stores and other amenities built into the building. The amount of money provided by the public agency is not large because the developer would raise the money pay for construction. The public costs will be regained over time. The redeveloped property will have increased value, and the property taxes the buildings generate will significantly increase the tax revenue of the municipality.

New buildings in the redeveloped Regent Park

New buildings in the redeveloped Regent Park

These types of PPP projects are becoming common. This method was used for the successful St. Lawrence Neighbourhood in Toronto during the 1970s. It is the model for the redevelopment of Waterfront Toronto and Regent Park. Toronto has accepted a plan to redevelop virtually all of the large public housing projects in the city in this way, and the Toronto Housing Authority is the agency that is managing the redevelopment for the city. Hamilton Housing Authority could play a similar role.

This is the way to provide mixed income development. At the same time the buildings can be constructed to be environmentally sustainable, built with interesting materials, good design, and useful amenities. All that will help to keep housing costs low. Developments such as this will improve the housing stock in the city and provide the densities needed to make viable, vibrant communities. It will depend on activist government, and some public money, but the rewards will be enormous.

Mixed income housing and increased densities will lead to strengthened communities. There will be more people in the shops, wider sidewalks, bike lanes, and traffic calming measures. Interconnected parks and recreational facilities can be designed to lead down to Hamilton’s refurbished Waterfront. All this will help to create a community with a healthy environment and village like atmosphere that everyone can enjoy.

We can sit back and let the developers build the city that they want and take the profits. The politicians will be reluctant to act. It is citizens that must take control of the development process by insisting that government agencies provide the mixed income housing so badly needed. We will all benefit from the results with sustainable housing, strengthened communities, and a more economically viable city. The people of Hamilton can make this happen.

How we can create new affordable housing

One last note on affordable housing before moving on to look at the political parties and other issues in this federal election.

Energy efficient, affordable housing in Denver

Energy efficient, affordable housing in Denver

In Toronto, the rest of the GTA, and other large cities in Canada a vital issue in this coming election is the lack of affordable housing. The affluent, and many older people, have good housing but for those with low incomes, large families, new Canadians, and especially young people trying to get established, the cost of housing has become an impossible burden. No wonder the young and poor do not get out and vote. Politics does nothing for them.

But affordable housing is possible. This is how it can be done.

The federal government can set up an arms-length agency, or agencies on a regional basis, with the power to borrow money. The mandate of these agencies would be to purchase land with good access to rapid transit in the large cities.

There is plenty of land such as this in the GTHA. Eglinton east of Leslie, the Highway 7 corridor in York Region, Hurontario Street in Peel, and downtown Hamilton: these sites are all good prospects. The same is the case in other cities.

Mid-rise apartment buildings of between eight and twelve stories can be built on this land. They can be organized as condos, co-ops, non-profits, or rental. The key is that these projects must be organized as mixed income, not housing for the poor.

Units large enough for families and singles can be built for $150 a square foot. A one-thousand square foot unit can be built for $150,000[*]. This is the math of the costs of a condo of this size, but keep in mind that these same costs would apply to co-ops, or rental units.

A 25 year mortgage for $150,000 at 5% would cost $872.41 a month. Toronto property taxes on a condo worth that amount would be $1,084.51 a year, or $90.38 a month. (2014 tax rate). The cost of the land would have to be added. If the land was leased for say 99 years at the interest rate that the federal agency paid, it would add another $50.00 a month. Let’s assume the cost of the land plus condo fees was $100.00 a month. This is the calculation for the monthly costs of a 1,000 square foot unit.

  • Mortgage cost………….…$872.41
  • Property taxes……………$  90.38
  • Land + condo fees……….$100.00
  • Total monthly cost………$1062.79

That is affordable housing!

The monthly costs of units would vary according to size, property taxes, and the cost of land, but the calculation demonstrates that affordable housing can be built without government subsidies. It must be emphasized that it will not happen unless a government agency provides some minimal financial help, and organizes other things like the design of the buildings, and contracting developers and builders.

Between 25% and 30% of the units should be rent-geared-to-income. That will provide a mix of middle and low income residents in the buildings. The provincial government pays the RGI costs. That is a real subsidy but it will be manageable because the cost of the units is low.

One final point: every building and every unit must be energy efficient with good windows and doors and ample insulation. Geothermal heating and cooling is now possible and over time these added costs can be paid for with energy savings. District heating and cooling is another possibility for lowering costs. A design that includes solar panels will also keep long term energy costs low.

Affordability should be the aim and the way to do that is to use good building materials and innovative technology.

Buildings like this must not be the dull, cookie-cutter structures of the past. New design and construction methods allow for individuality and aesthetically pleasing buildings.

Excellent, affordable housing that is not a financial burden on governments is possible. What is needed is a little political help to organize projects, and leadership to make it happen.

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[*] I have taken this number from Dan Barnabic, “The Real Estate Election?” Report on Business, The Globe and Mail, August 29, 2015

Federal parties on affordable housing

The federal election is now in high gear, and it is fair to ask, what are the political parties promising to do to solve the problems of cities? This posting is the first in a series looking at the promises of the federal parties. We begin with perhaps the most urgent urban problem of all: the crisis of affordable housing.

It is important to recognize that affordable housing is not a municipal issue. Municipalities do not have the tax base to provide a program like this. Only the federal and provincial governments, with their access to income, corporate, and value added taxes and value added taxes have the financial ability to implement an affordable housing program.

That is why we should target the federal parties during this election and demand they tell us what they intend to do to meet the affordable housing crisis.

Policies benefit homeowners, not those in need:

After the Second World War the Canadian federal government established housing policies, but virtually all of those policies benefited home owners, not renters. These programs are why urban sprawl has become such a serious problem in our cities.

Urban sprawl in the GTA. Government housing programs encouraged sprawl

Urban sprawl in the GTA. Government housing programs encouraged sprawl

CMHC was established in 1946 to provide low interest rates to developers and guarantee mortgages. Financial regulations were changed to permit the entire value of the house to be used as equity when calculating mortgages. This stimulated housing construction and suburban growth. Soon Canada had among the highest home ownership rates in the world.

Municipal governments zoned and serviced land that permitted suburbs and cheap housing. Since the 1970s a steady stream of home purchase assistance programs were created to encourage ownership.

The most generous benefit provided to homeowners is in taxes. Rental properties pay property taxes at about twice the rate of homeowners in Ontario. Perhaps the biggest benefit is that homeowners pay no capital gains when they sell their principal residence. This benefit amounts to about $6 billion a year.

Government policy for renters

While there is government support for homeowners, there has been only modest support for those who rent housing, and renters, on average, have lower incomes and a much lower level of assets than owners.

Regent Park in Toronto, the first of the major Canadian public housing projects, was approved in 1947 and built largely with municipal money. Other municipal and provincial projects followed. In 1963 the federal government provided subsidies for low-income households and since then some 200,000 public housing homes were built.

By the 1970s there was major criticism of public housing because the concentrations of poor people were causing social problems. In 1973 the federal government created legislation and financial support for housing co-ops and non-profit profit housing sponsored by groups like churches. This program was cut by the Mulroney Conservative government in the 1980s and finally the federal Liberals cancelled the program in 1993.

Woodsworth Co-op in St. Lawrence Neighbourhood, Toronto

Woodsworth Co-op in St. Lawrence Neighbourhood, Toronto

Today about 2,000 housing co-ops continue to exist, providing housing for about 250,000 Canadians. Between 25% and 30% of the people living in those buildings receive rent-geared-to-income (RGI) subsidies. Others pay market rent. This created mixed income housing that is much praised by planners and those concerned with social policy.

Since 1993 the federal government has not had an affordable housing program. Money for new co-ops and non-profits is not available. Canada now is the only developed country without an affordable housing strategy.

Some federal money is spent on aboriginal housing and the homeless. The government also fulfills some housing commitments made by previous governments but that is all. The policy of the present federal government is to stop all federal affordable housing grants and support after present commitments terminate.

Affordable housing is an urban issue

Almost 70% of the people in Canada own their own homes, but the proportion of home ownership in cities is much lower, and it is lower in large cities than in smaller cities.

In Toronto 51% of households are owners, in Vancouver 51.5%, and in Montreal only 38% own their own home. Smaller cities have a higher percentage of ownership but still not as high as the Canadian average. Hamilton, for example, has 65.2% owners. However, in the GTA outside the City of Toronto almost 80% of residents are owners.

People living in rental accommodation in larger cities, particularly Toronto and Vancouver, suffer from very high rents, and these rents are escalating faster than the cost of living. Many spend in excess of 50% of their income on rent. Incomes have stagnated while the cost of living, particularly rents, are rising. This is causing real hardships for hundreds of thousands of people.

Added to this, a large number of the older rental apartment buildings have deteriorated. Elevators break down. Windows and doors are inefficient raising energy costs; transit service to apartment buildings in the suburbs is inadequate.

Clearly the lack of affordable housing in cities is a serious urban crisis, and it is getting worse. Governments, particularly the federal government, have the financial ability to create innovative affordable housing solutions, but since 1995 Canada has had no national affordable housing program.

A key question in this election then is, what are the political parties promising to do to meet the affordable housing crisis?

Political commitments on affordable housing

The Conservatives say that they will continue with their existing programs, and that means no affordable housing program at all.

On August 15, 2015 the “Conservative Plan for Affordable Home Ownership” was released, but like the policies of the past, it is a program to help homeowners, not the over 30 percent of Canadians who are renters. In the Conservative plan they say they “believe in helping Canadian families purchase their first home,” and promise a tax credit of $5,000 for first time home buyers.

The Conservative policy is to help those who can afford to buy a home and in large cities homeowners are more affluent than the average. It has nothing for renters. Help the affluent, ignore those in need, is the Conservative promise.

The NDP calls for “a National Housing Strategy and long term government investments in social and affordable housing in Canada.” (NDP news release 22 November 2013) The party introduced a bill in the House in 2012 condemning the Conservatives for the lack of action on affordable housing, saying that if elected they would consult widely on housing and meet the needs of aboriginals and the homeless.

Tom Mulcair, the New Democratic leader, has gone out of his way to support housing co-operatives. On June 26, 2015 he promised to renew operating agreements to maintain the current funding for housing co-ops and social housing.

What the NDP has not done is state clearly what type of affordable housing program they will introduce if elected. Will the party favour co-ops and non-profits? Do they advocate mixed income housing? Will there be a program to renovate deteriorating privately owned rental buildings? We just do not know.

The Liberals are in favour of an affordable housing program and call for a National Housing Commission on housing. Much of the Liberal effort is used to attack the Conservatives for their lack of an affordable housing program, but they have put little effort into outlining what type of program they would legislate.

In the election Justin Trudeau, the Liberal Leader, has said that they will provide $550 million over two years for affordable housing and a tax credit worth $400 million for green renovations. The Liberals also add that they will pay 50% of the cost of energy audits.

So that’s it

The lack of affordable housing is most serious problem facing low income renters in the big cities, and all we get from the political parties vying for our vote is vague promises. It is up to those of us concerned about affordable housing to demand answers and details.