Who’s doing it best: Building rental housing in Toronto and Vancouver
Published on November 15, 2017
With persistently low vacancy rates and few new purpose-built rental units being built, many Canadian cities are feeling the pressure to boost their supply of rental housing. Compounding this rental crunch, the cost of housing throughout major cities in Canada has steadily increased – but incomes have not, making rental housing even more critical. With affordability concerns front of mind for politicians, policy makers and residents alike, building and maintaining a stable supply of rental housing is more important than ever. With most funding support coming from senior levels of government, what can cities do themselves?
Vancouver's Rental 100 program
Over the past few years both Vancouver and Toronto have introduced programs to boost their supplies of rental housing. In 2012, Vancouver introduced the Rental 100 program after a successful pilot program called “STIR” or Short Term Incentives for Rental. To make rental development more cost-competitive with condos, the Rental 100 program offers incentives to developments that contain 100 per cent rental units secured for a minimum of 60 years. While incentives include waiving development charges and quick application processing, perhaps most interesting is that the program permits rental developments to build denser than zoning allows by building smaller units (320 square-feet!) and provide less parking. Essentially, instead of requiring rents to meet a standard, the program seeks to achieve affordability through “tenure, location, modesty in unit size, level of finishing and design, and over time as the buildings age.”
Toronto's Open Door program
In Toronto, the Open Door program also tries to enable affordable rental development, but by offering a suite of fee exemptions, property tax relief and capital grants. However, acceptance to the program is contingent on developments providing 20 per cent of units at or below average market rents for 25 years. For the portion of the development that is affordable, development charges, building permit fees, some educational development charges, parkland dedication fees and residential property taxes are exempt. Capital funding is also available to projects, particularly ones that offer additional affordable units beyond the requirements or provide more than a 25-year term of affordability.
How many units?
Since the Vancouver program’s fee exemptions cover all units, and not just the 20 per cent affordable ones as in the Toronto case, more significant soft cost savings are possible. Likewise, allowing developers in Vancouver to have smaller units and denser buildings than otherwise permitted makes the development more comparable to condo development that would not be able to take advantage of those relaxations. As a result, Vancouver’s Rental 100 can activate rental development without senior level government funding. During the 2-and-a-half year pilot, the program yielded over 1,600 new rental units. In comparison, 1,668 affordable rental units have been created in the first year of Toronto’s Open Door program in 2016 and 2017.
While both programs are trying to increase the supply of affordable housing, they go about it in different ways and have different outcomes. The Open Door program targets medium-term affordable housing while the Rental 100 program targets long-term rental housing. Vancouver’s Rental 100 program guarantees units remain rental for longer, whereas Toronto’s Open Door program guarantees some units are rented at or below market rates. Toronto’s program ensures rents stay at or below market rates while the Vancouver program relies on the market and the ageing of the building to create affordability.
A recently released report by Evergreen and the Ryerson City Building Institute looked at the rental market in the Toronto Area. It looked at who rents, the lack of purpose built rental development and how to improve the area’s housing system. See the report for more policies that can increase the supply of rental housing including these types of municipal incentive programs, federal/provincial tax changes and updated zoning.
We are celebrating National Housing Week from November 20-24, calling all Canadians to make their voices heard and commit to building a healthy housing ecosystem. Find out more about what events are happening in Toronto or join the conversation online with #HousingWeek2017.
This article has been corrected to show the correct number of units built by the Toronto Open Door program.