Michael Lewis
Toronto has approved a plan to defer development charges on 3,000 condominium units stuck in the project pipeline due to inflated costs, provided that 5 to 10 per cent of the units meet the city’s definition of affordable housing.
City staff are to review residential development applications to identify multi-unit condo projects that have already submitted site plans and where zoning approvals and private land acquisitions are in place.
The city will then defer payments from developers totalling about $60,000 per unit, according to Toronto CFO Stephen Conforti, who said the review will prioritize projects that include a higher percentage of affordable housing.
The deferred development charges (DCs) will be due, without interest, at June 2024 rates, either four years from the deferral grant date or upon project completion, whichever occurs first. The deferral will cost taxpayers more than $28 million in foregone investment revenue, Conforti said.
Members of city council approved the plan by a 22 to 2 vote at their regular meeting late last week, despite the objections of Ward 2 Etobicoke Centre Coun. Stephen Holyday who said the deferrals amount to a ratepayers’ subsidy of developers at a time when the condominium market is awash in vacant units.
While housing starts have tumbled, Toronto is seeing a record number of condo completions, with 31,000 new units expected to come on stream this year to significantly increase available inventory, says real estate agency Urbanation. It says the city’s condo market started 2024 with approximately 6,300 active listings, with the amount nearly doubling to 12,000 by year-end.
At the same time, city staff estimate that there are at least 14,000 condo units stalled in the development pipeline due to spikes in interest rates, construction material and labour costs, along with economic uncertainty caused by U.S. tariffs on Canadian goods. Based on the city’s financial capacity, the report said up to 3,000 condominium units can be unlocked by delaying some costs for developers at the initial stages of a project.
A staff report to city council said the deferral will subtract more than $180 million in charges over 3,000 units to free builders’ cash flow and allow projects to proceed within the next two years. Staff are to report in the second quarter on implementation progress.
The city also hopes that the municipal move “will be complemented by efforts by the provincial and federal governments to advance housing supply,” noting that council has asked Ontario’s Progressive Conservative government to amend the Development Charges Act to give municipalities more flexibility to adjust or remove annual development charge indexing provisions without an amendment to the development charge by-law.
Toronto is also seeking rebates from senior levels of government in cases where it waives development charges, which pay for essential municipal infrastructure services including transit, sewers and roads.
Mayor Olivia Chow noted that the city’s decision in November to approve a package of financial incentives for rental builders, contingent on 20 per cent of the new units being rented at discounted rates, was subsequently accompanied by a federal government commitment to allocate $2.25 billion through its Apartment Construction Loan Program.
The aim of Toronto’s deferral plan is to spur condo construction to help fill a gap in the city’s supply of affordable housing. The plan follows a 46 per cent year-over-year drop in Toronto condo starts in 2024, according to national housing agency the CMHC. Data from the Crown agency, meanwhile, shows that more than 40 per cent of condominium units in Toronto serve as rental properties.
Ward 19 Beaches—East York Coun. Brad Bradford, whose motion to “indefinitely defer” DCs on three-bedroom purpose-built apartments until November 2026 was defeated, said falling interest rates mean the city’s current surplus of 20,000 condo units will eventually be absorbed.
The problem, he said, is that there are no starts on the horizon. “We are setting ourselves up for a housing supply cliff just a couple of years down the road.”
Bradford echoed a written submission to the city from industry group Building Industry and Land Development calling for more ambitious cuts in construction taxes and fees, citing the example of adjacent municipalities such as Vaughan that have dramatically reduced DCs after a sharp runup beginning in 2018.
Mayor Chow said that even though a record number of condo building completions are anticipated there is still a need to build more housing faster to meet rising demand for affordable rental accommodation, which the city defines as housing where rent does not exceed 30 per cent of before-tax monthly household income.
“We know all these applications. Everything has been done but the math just doesn’t work so condos need support. We wish we could do more. We are hoping that the feds and the province will provide us with rebates on DCs, then we could do more. Just cutting red tape alone won’t do it.”
