Lee Quaile

Broker of Record

The past 24 hours have brought a pair of significant developments in our province – both of which will change how millions of Ontarians interact with our housing market.  The roller coaster ride that’s characterized the past two years has been slowing for a few months now, with rising interest rates and general uncertainty working to put the brakes on the unprecedented price hikes of late 2020 and 2021.  And just this morning the Bank of Canada has announced yet another increase of half a per cent in our benchmark rate, which now stands at 3.75% – the highest it’s been since 2008, prior to the ‘Great Recession’.

The increase of 50 basis points announced today comes in below what many economists had been anticipating, with most predictions being 75 points… and some even higher than that.  This is now being seen by many observers as cause for a glimmer of hope that the Bank of Canada could be approaching the end of its campaign to control inflation by increasing interest rates.  But today’s rate hike will only add to the already significant financial stress being carried by the many homeowners whose monthly mortgage payments have been surging higher month by month this year.

In fact, when examining the numbers with a colleague of mine at Chestnut Park West earlier this week, we calculated that the average monthly mortgage payment on a property valued today at $700,000 works out to be nearly identical to that which would have been paid on a property worth $1,000,000 in February, when the market was at its height (assuming a down payment of 20%).  Dropping prices might seem like a blessing to buyers in today’s market; but thanks to interest rates, real estate is no more affordable now for the vast majority of buyers than it was at the peak of the market.  This is in full recognition that very few of us are fortunate enough to have the means to purchase a property outright.

The problem of housing affordability being faced in Ontario (and across many other parts of Canada) has not escaped the notice of policy makers at all levels of government.  Although we can argue over the extent of the efficacy of the various programs, proposals and policies that have been introduced over the past year to combat the rising cost of housing, ensuring that residents can afford to have a place to call home has been a key political battleground in every election since 2021 (federally in September 2021, provincially in June 2022, and municipally, just earlier this week).

Ontario Premier Doug Ford was re-elected this past spring, partially based on a pledge to construct 1.5 million new homes in our province by 2032.  Ford’s plan relies on working with municipalities to relax zoning restrictions, providing incentives to developers to focus on family-friendly units (particularly in the rental sphere), lessening development charges, cutting the red tape that hinders redevelopment on the local level, and by putting more power into the hands of mayors to overrule their councils on matters where the development of new housing faces neighbourhood opposition.

Yesterday, the Premier took a significant step towards fulfilling his election promises, with his government announcing legislation which would ease restrictions on density in urban areas, reduce development charges, and introduce more widespread rent-to-own initiatives.  The Canadian Press synthesized the announcement in a piece published yesterday:

“The legislation would allow up to three residential units — such as basement apartments and garden houses — on one lot without needing bylaw amendments. Those new units would also be exempt from development charges.

The province also proposes to freeze, reduce and exempt fees associated with new home construction in order to spur building. Affordable housing, non-profit housing and inclusionary zoning units — meaning affordable housing in new developments — as well as some “attainable” units would be exempt from various charges.  Rental builders would also see development charges reduced, with larger discounts on family-sized units….

…The new housing plan also includes introducing more housing density near transit stations, and using surplus government lands, modular homes and rent-to-own programs.”

Waterloo Region has recently been at the forefront of such measures, with policies to encourage greater density and a focus on accessibility to public transport for those lured to live near the Downtown-Uptown core by heavy investment in infrastructure and incentives to developers.  I expect such a focus to only strengthen because of the provincial government’s latest announcement, which should also work to eventually ease the supply problem evident in today’s market.  While such solutions won’t have an immediate impact on affordability, it’s good to see that concrete action is being taken to ensure that our housing market is one that works for everyone and will not remain in crisis mode indefinitely.

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