As the pandemic surges on, and affordable rental housing continues to be a pressing need in the GTA, some housing experts believe a solution has been sitting in plain sight all along: infill development. Simply put, it means adding new units to existing rental sites where there is room and opportunity for growth.
Currently, the Federation of Rental-Housing Providers of Ontario (FRPO) estimates there are some 950 rental sites with the potential to add 176,000 new units throughout Toronto and the wider region.
“A lot of the sites are concentrated outside of the downtown core in relatively affordable markets,” says Tony Irwin, president of FRPO. “The other thing that’s important is that over 35 per cent of the potential units are within 800 metres of a current or future transit station.”
According to a recent Urbanation report looking at supply gap and opportunities for development, Toronto and the Greater Hamilton Area (GTHA) will be facing shortages of up to 200,000 rental units within a decade unless solutions are implemented in the near-term to change this long-term reality. Even with COVID-19 tipping the market temporarily in favour of tenants, data indicates we’ll see “a return to base projections” by 2022.
Could infill development be the answer?
The pros certainly seem to outweigh the cons — particularly given 60,000 of the potential new units would be situated close to rapid transit. Furthermore, the Ontario government has committed to building healthy, connected, transit-oriented neighbourhoods as a way to “reduce traffic congestion, reduce emissions and build integrated, accessible communities,” while also supporting COVID-19 recovery.
“If we could unlock development on these transit-oriented, rental infill sites, overnight we’d have an incredible impact on our city’s housing affordability crisis,” says Toronto City Councillor, Brad Bradford. “To be clear, we know that supply alone does not fix affordability. We also need the right kinds of supply in the right places — like ‘missing middle’ housing, which is more livable and more practical for families.”
According to Bradford, Toronto has been making some positive strides in this arena. The City is poised to implement inclusionary zoning policies that would require a percentage of units built around transit hubs to be affordable; additionally the Open Door program already incentivizes and fast-tracks affordable rental development. It is also working towards modernizing and improving the development process overall.
Diana Petramala, Senior economist at Ryerson University’s Centre for Urban Policy and Land Development, is also in favour of infill development, although her projections are a little less dire in terms of future shortages.
“There is a lot less building in Ontario to meet Millennial demand than when Boomers were entering the labour and housing market,” she says. “I do agree that there’s a lot of potential for infill construction in the Toronto CMA, even the greater Golden Horseshoe, and it goes beyond the downtown areas that are already built. There’s a lot of capacity to build along transit lines. I think that it’s enough potential, for my own estimates, to absorb all the population growth that is expected out to 2051.”
That said, Petramala cautions against building too much too fast — especially high-density and condos like we saw in the late-1980s, that led to the 1990 housing market crash. Instead, she advises mid-rise developments and ground-related housing, including semis, townhouses and stacked towns, calling this approach “safer and healthier” for markets and communities alike.
“You get all kinds of financial risks associated with building too many condos and not enough ground-related housing,” she warns. “On the condo side, how sustainable are those investments? And then on the ground-related side, are people taking on too much debt to buy these units?”
Tall and affordable vs. short, luxury buildings
Ground-related housing, including missing middle, mid-rise, and medium density, are the “gold standard” of developments, but these aren’t easy, as Toronto-based real estate developer Brandon Donnelly notes in a recent blog post: “Along the main streets and outside of the downtowns of many North American cities — which is where mid-rise buildings typically live — the land parcels are often smaller and the pieces of land needed to put together a viable project might be owned by half a dozen or so different people. Getting them all on-side to sell can be a feat in itself.”
Meanwhile, builders want taller buildings that make financial sense, while communities often want the heights to come down. To recoup costs for a mid-rise project, builders charge luxury prices, thus the expense of a mid-rise build is passed down to the consumer.
Ontario’s rental housing providers are constricted by these realities. According to Irwin, FRPO members want to build a variety of units, not just luxury ones. A project may be approved by the city, but only if 12 storeys, for example, are removed from the building’s height. “The economics simply don’t support that,” he says. “I recognize that you have to be responsive to different points of view [of the community], but there has to be a way to make projects realistic and approve projects that are economically feasible.”
Purpose-built rentals offer more stability than condos bought by investors and rented out: condo landlords can sell the unit or decide to use it themselves, sending the renter bouncing into the market again.
“Over the last two or three decades, very little purpose-built rental housing has been built in the Toronto area,” notes Irwin. “There’s nothing wrong with condominiums, but we need a mixture of different housing types. And we need an environment that definitely encourages and supports purpose-built rentals.”
Councillor Bradford acknowledges these “land economics” and financial challenges, noting that the federal government has started offering low-interest capital for rentals via its National Housing Strategy. “There are HST reforms that move the dial on rental viability,” he says. “That’s something that would need to come from the province.”
But no matter how the pieces come together, everyone agrees: the region needs more supply. “Over half of Toronto’s households are renters,” Bradford says. “The rental market is a key component of housing affordability and without new supply, our housing system gets stuck.”
Nina Dragicevic is a freelance journalist who writes for Rentals.ca and other local and national publications.