By Richard Joy, Executive Director, ULI Toronto
No Toronto real-estate story has dominated 2017 more than the sudden spike of housing prices and its social consequences. While the dream of becoming a homeowner of anything larger than a shoe box has long escaped those with their sights on downtown neighbourhoods, the nightmare of being priced out of our region’s suburbs is also setting in.
This concern was at the foundation of a recent housing conference that the Urban Land Institute (ULI) Toronto helped organize with the Canadian Urban Institute and the City of Mississauga, titled Making Room for the Middle.
Any discussion about housing affordability can quickly splinter into the vast complexity of policy options, economic models, and the myriad of social needs that must be addressed. There are no silver bullets. Prudently, the conference explored just a few pieces of the equation, mostly oriented toward the demographic of middle income residents seeking to leave the rental market.
On the financing side, the conference examined two nascent concepts in Ontario. Inclusionary Zoning (I.Z.), a key new tool that is being put into the municipal tool box by the Province, proposes that an affordability percentage of units of all new development projects. And Shared Appreciation Mortgages (SAMs), a relatively unused concept offering affordable second mortgages to new home buyers. Separately, these tools likely have limited utility.
A recent ULI report on Inclusionary Zoning in the United States observed that where this policy tool has worked has almost entirely been in the context or purpose built rental buildings, not condominium projects. And where they have proven viable, offsetting incentives ranging from extra-zoning, development charge waivers, or government funding, have always been part of the economic equation. None of these circumstances are on tap in Ontario, where I.Z. is intended to work in an ownership (condo) model without any public financial incentives.
The Shared Appreciation Mortgage model allows a purchaser of a home to share a mortgage (essentially a second mortgage) with a non-profit company, like Trillium Housing or Options for Homes, thereby lowering the monthly cost of carrying a loan. Equity is accrued as the value of the property increases and the mortgage paid down. While several thousand SAM housing units have been developed in Ontario, these projects generally enjoy few public incentive advantages, if any, to that of a for-profit developer and must compete in an ever more competitive market. Not surprisingly, there are comparatively few such ownership opportunities available in Ontario.
What if these two concepts were to be brought together? Could the SAM housing affordability tool be the economic incentive that I.Z. needs to be viable? And could the expanded opportunity of I.Z. units be the inventory of opportunity that the SAM model needs to expand? It’s an idea, of many, that needs to be examined. And it’s an idea that might also attract greater government support, by providing real and tangible advantages to development projects that pursue such hybrid homeownership affordability models.
The pursuit of affordable home ownership may not be the most efficient use of public resources to deliver housing affordability. International experience demonstrates that public policies oriented around rental accommodation offer the greater scale of opportunity. But not unlike universal health care, Canada’s (and Toronto’s) high homeownership rate — whereby two-thirds of our population owns their residence — is a decided socio-economic advantage. It is almost certainly the foundation of financial security for most Canadians.
Skyrocketing housing prices and the knowledge that Millennials are opting out of home ownership at rates well below 40 per cent is a growing urban crisis that cannot be ignored. And while we may have lost the opportunity to address this segment of affordable housing in the central core of our region, it may not be too late to find solutions in our suburbs. So it is encouraging that Mississauga, a city with a legacy of offering affordable homeownership, is creativity looking at how to keep it this way.
Reprinted with permission from Building Magazine