May 31, 2017
The only thing increasing faster than GTA home prices is the complexity of the market.
So far 2017 has been characterized by an insatiable focus on the shocking rate of home-price increases, and rampant speculation about government efforts to address affordability concerns.
Now we are waiting to see how the market will respond to the Fair Housing Plan, announced this past April by the Ontario government. The plan introduces 16 measures to tackle affordability issues, including the expansion of rent controls.
While most of these measures are aimed at the existing resale and rental housing market, other very important and lesser-known changes are already underway that will significantly impact the new-home market.
Remember, every home that exists in the resale or rental market today was at one point a new home, created through the development process of its day.
So what happens in the new-home market today has a direct impact on the supply of homes tomorrow. And lack of supply is one of the most critical challenges shaping current GTA housing market conditions.
The new government measures, to be implemented in the latter part of this year, will touch almost every aspect of the development industry, with the potential to be highly destabilizing.
Tweaks to the Growth Plan for the Greater Golden Horseshoe and the Greenbelt Plan will increase the rate of intensification by demanding more high-density and less low-density development across our heavily populated region.
Yet changes coming to the Ontario Municipal Board will shut down a key approval channel that has helped to ensure the creation of much of the GTA’s high-density housing supplies over the past decade. Furthermore, developers, institutions and private investors contemplating investments in the development of new rental housing are hitting the pause button amid news of new rent control legislation.
Inclusionary zoning policies, which will require new housing development to subsidize the creation of affordable housing, will further impact project economics, with the costs borne in large part by new-home buyers. Paradoxically, efforts to solve the affordable housing problem could end up creating housing affordability issues. Some projects could be cancelled altogether.
Changes to the Tarion warranty program will alter the regulatory structure for new-home builders. The introduction of Bill 106, the Protecting Condominium Owners Act, will spawn the creation of two new Tarion-like organizations later this year: the Condominium Management Regulatory Authority of Ontario and the Condominium Authority of Ontario.
The growing complexity of the GTA’s housing market will impact developers and homebuyers in much the same way: with rising risks, longer timelines, higher costs and likely fewer players.
As Darwin put it: “It is not the strongest of the species that survives, nor the most intelligent that survives. It is the one that is most adaptable to change.”
George Carras is the president of RealStrategies Inc. and the founder of RealNet Canada Inc. (now part of Altus Group). His column appears in New in Homes & Condos once a month. For more information, visit www.realstrategies.ca .