Faster Approvals, Higher Density: Will Recent Policy Changes Deliver More Homes?
The ever-widening imbalance between Canadian housing supply and demand has the potential to evolve into a generational issue. The affordability of private housing has eroded, putting homeownership out of the reach of many potential buyers. Meanwhile, the availability of rental properties continues to lag Canadians’ need for comparatively affordable and popular housing options. For too long, barriers have contributed to the too-slow pace of residential construction. These include onerous zoning practices, lengthy permitting times, high construction costs, and layers of costly regulations.
To put the issue in context, the Canada Mortgage and Housing Corporation (CMHC) projects that Canada must build an additional 3.5 million new homes by 2030 to achieve housing affordability, or four million under a high-population-growth scenario. A CIBC economist places that figure closer to five million, factoring in non-permanent immigration. Whichever estimate one adheres to, the story is clear: Canada’s current pace of construction cannot keep up with surging demand. Nationally, housing starts fell to just over 220,000 units in 2023, far below the record highs set in 2021.
Housing policy changes a welcome start
Against this backdrop, the pace of change must be increased exponentially to deliver meaningful impact. This is particularly true in Toronto and Vancouver, cities notorious for development charges, red tape, and the longest approval delays in Canada. In the Toronto area, delays can add up to $50,000 to the price of a condo. Moreover, government charges and fees have come to represent more than 31% of the total cost of building a home in major cities, according to the Canadian Centre for Economic Analysis.
Fortunately, there are signs that the industry may be headed in a positive direction. Governments at all levels have committed to reducing regulatory barriers that have historically stymied the creation of sorely needed supply. These new measures are a welcome start, but they will not have the impact needed to solve the housing crisis. Faced with a problem of this magnitude, stakeholders must set their sights even higher.
Taking Aim at Exclusionary Zoning
Record population growth and urban land scarcity underscore the importance of a high-density approach to efficiently house Canadians. However, exclusionary zoning practices have historically barred new apartments and condos in many residential neighbourhoods, favouring detached homes instead. Recent shifts in urban zoning reform could be early signs of a wider-scale moderation of this barrier in key markets.
‘Gentle’ density approach is taking root
A significant catalyst for this shift is the $4-billion federal Housing Accelerator Fund. Launched in March 2023, the program provides funds to cities to expedite the creation of more than 750,000 new homes. Of more than 500 applications received, 179 resulted in signed agreements with the federal government. Applicants were asked to commit to ambitious reforms, with the voiced expectation that ending exclusionary zoning would be among them. In turn, numerous cities have signalled a willingness to permit multiplexes and other “missing middle” housing as–of-right (without conditions) in residential areas.
Ultimately, provinces are constitutionally responsible for housing and have implemented policies to accelerate the creation of denser housing forms. For example, Ontario has permitted up to three residential units per lot since 2022. In April, Ontario passed its new housing plan, the Cutting Red Tape to Build More Homes Act. The act reduces development delays, removes mandatory parking minimums near transit, and eases the delivery of standardized housing. This expands on Ontario’s March announcement of $1.8 billion in funding toward municipal infrastructure projects that support homebuilding. In late 2023, British Columbia’s new housing legislation overrode municipal zoning to enable more small-scale multi-unit housing across the province. It also required local governments to take steps to reduce regulatory delays and review bylaws.
What could the future of inclusionary zoning look like?
While efforts thus far have focused on incorporating “gentle” density (multiplex, secondary suite, townhome) within existing residential neighbourhoods, it remains to be seen whether these policies will bring meaningful supply online. Granted, some permitted low-rise builds can effectively quadruple the housing available on a single lot. However, it is difficult to see detached-dominant neighbourhoods reconfiguring existing homes or creating new multiplexes in substantial numbers.
As inclusionary zoning policy becomes normalized, however, we may see municipalities extending discussions to transitional, mid-rise-inclusive zones. These can be located at the periphery of low-density residential areas and along commercial corridors, such as those initially explored in Hamilton and Winnipeg. Transitional mid-rise projects can efficiently support density aims while better aligning to the scale private developers are seeking to complete.
More extensive measures, such as promoting as-of-right density on transit corridors and other locations, might be a logical next step. Taken together, such approaches could serve to temper discussions around controversial urban boundary expansions, which may yet be required to help solve the housing crisis. Incorporating higher-density build forms, such as mid-rise condos, into the traditional suburban blueprint can offer a compromise solution at a time when action is critical.
Encouraging Transit-Oriented Development
Desirable high-density development has often pooled around transit hubs in major cities, providing value for investors and convenience to residents. However, even there, housing plans have historically clashed with restrictive zoning and, more often, arbitrary minimum parking standards for vehicles that may be neither desired nor necessary. In Toronto, a single parking spot can cost between $48,000 and $160,000 to build, inflating end-user costs and rendering some residential projects financially unviable. In response, we are seeing encouraging density policy changes and parking reform in transit-oriented priority areas.
Reversing arbitrary parking minimums
For example, British Columbia’s zoning reform (Bill 47) that took hold this year legalized up to 20 storeys along transit corridors. Further, it allows for 12 storeys within 400 metres of a route and eight storeys within 800 metres. Notably, the same provincial reform also bars municipalities from imposing off-street parking requirements beyond accessible parking in transit areas. Outside its transit-oriented districts, Vancouver eliminated parking minimums in the walkable West End and Broadway neighbourhoods. This improves the outlook in Vancouver, where development has favoured high-rises and detached residences with few options in between. Compelled by provincial law, Toronto established minimum density standards for development near transit stations.
Like its catalyst effect on inclusionary zoning, the Housing Accelerator Fund has similarly encouraged some jurisdictions to densify along transit. Ontario cities such as Hamilton, London, and Vaughan have discussed plans to better accommodate building near transit. Brampton announced as-of-right zoning for fourplexes and four-storey developments within 800 metres of transit, which encompasses most of the city.
Purpose-built rentals an ideal fit for transit corridors
Investors may recall the introduction of last year’s federal and provincial tax incentives for the construction of purpose-built rentals. It is likely that apartments will figure predominantly into a new wave of transit-oriented housing. In many cases this is by design, with renter preferences increasingly skewing toward well-serviced, amenity-rich urban areas. For residents, these benefits can often offset the typically higher rent prices commanded by units along transit routes.
For truly transformative results, municipalities must consider extending as-of-right densification to major roadways in addition to transit corridors. Furthermore, “stepped” density plans like Vancouver’s are less prescriptive, acknowledging that towering high-rises aren’t the only solution. Instead, such plans allow density to take the size and shape most beneficial to the community.
Exploring More Innovative Approaches to Housing
Beyond funding and adding density, expediting the creation of housing has been a focus of several new initiatives and proposals:
Pre-approved home designs:
The federal government plans to update its catalogue of standardized home blueprints originally designed to accelerate housing production between the 1940s through the 1970s. Developed by the CMHC, the updated catalogue is expected to first focus on low-rise builds and potentially explore higher-density construction, such as mid-rise projects. The approach could reduce approval times for financing and municipal permitting by up to a year, according to experts cited by the government.
Like the CMHC effort, British Columbia is exploring its own library of accessible home designs. Under the Standardized Housing Design Project, builders can expect to gain access to 10 modular designs for laneway homes, duplexes, and triplexes. Both catalogues should launch in 2024.
While it is encouraging to see governments take aim at systemic barriers to housing creation, they must carefully consider how these approaches can be executed from a development standpoint. For developers, practical constraints include the scarcity of buildable lots, and building requirements can differ from region to region. Furthermore, extending the strategy to mid- and high-rise applications is complicated by their numerous site-specific engineering and design considerations. To genuinely create housing relief, the goal of ongoing consultations must be an actionable government policy that reflects industry realities.
Unlocking government lands:
In most major metros, land available for infill development remains scarce and expensive. Some cities, including Hamilton and Burlington in Ontario, have stated they will explore partnerships for the development of public lands. Calgary’s new Housing Land Fund, introduced in March, serves to reduce barriers for the usage of surplus municipal lands for development opportunities.
Office-to-residential conversions:
Converting office space to residential homes sidesteps net-new construction and repurposes underutilized buildings. Canada’s government announced its aim to redevelop surplus federal offices into more than 2,800 affordable homes in Calgary, Edmonton, St. John’s, and Ottawa. Some building owners and investors faced with high vacancy rates are also increasingly looking to this approach. Not without its challenges, repurposing can include costly layout, plumbing, and HVAC changes.
While stakeholders can and should pull all levers available, the scalability of niche approaches must be fully considered. A patchwork of initiatives may collectively see some results, but necessarily highlights the need for larger-scale development.
Private Investment Will Play a Major Role in Relieving the Housing Crisis
On the heels of these many initiatives, the federal government unveiled in April a total $21-billion investment designed to further accelerate housing density. It includes a $15-billion top-up of the Apartment Construction Loan Program, as well as $6 billion to help provinces build the infrastructure needed to support new housing.
Cities and provinces hoping to tap into this funding must commit to many of the approaches outlined above. That includes cutting development approval times to 12 to 18 months, eliminating parking minimums near high-frequency transit lines, and as-of-right construction for pre-approved designs. This push is the most encouraging yet, but public policy is only one part of the equation.
Tellingly, Prime Minister Justin Trudeau’s announcements echoed the CMHC, which has long recognized the private sector’s important role in addressing the country’s housing shortfall. It has maintained that well-run, accountable firms have access to the capital and expertise necessary to achieve homebuilding at scale. To get there, more must be done to dismantle onerous regulatory frameworks that inhibit development and construction. Unlocking private productivity can help build housing faster, improve project viability, and reduce unnecessary costs that otherwise get passed to Canadians. With public and private stakeholders working together, only then might we be closer to relieving the housing crisis.