Proposed Ontario Bill 66 Gets Squashed

In last week’s blog, we outlined proposed Ontario Bill 66, which had a provision in it which would have given municipalities the power to approve commercial and industrial development in protected green spaces. This would have opened the Greenbelt to potential industrial and commercial development – if local municipalities were to approve, and with subsequent Ministerial approval.

Ontario Green Belt
However, after a wide swathe of negative media coverage, strong opposition to the bill from municipal governments across the province, and angst from important stakeholders, the Ontario government changed its mind. After the Ontario Federation of Agriculture (a group friendly to the governing PC party) voiced its nervousness to the Bill and its ‘unworkability’, it was becoming increasingly clear that opposition went across ideological lines. 
Late last week, the Ontario Government stated it would pull the key Schedule 10 provision of Bill 66 (the bylaw giving municipalities power to bypass the Greenbelt Act) from the law. With this move, the government effectively defanged the bill of its most contentious component and showed a novel capacity to change its mind. The announcement came from Housing and Municipal Affairs Minister Steve Clark, one of the government’s most experienced figures.
With these changes, residents of Ontario can have peace of mind that their protected green spaces will not be chopped up. The government will now likely unveil new measures to spur development and increase the housing supply in the province. Tembo will keep its eye on the provincial government very focused, as many structural changes and policy announcements will be unveiled in the coming months given the concocting of a provincial budget in April. 

What Does Ontario’s Proposed Bill 66 Mean For Its Residents?

In early December of last year, the Ford Government introduced a proposed law titled the Restoring Ontario’s Competitiveness Act. The bill is a comprehensive piece of legislation that alters several existing laws and introduces new ones – referred to as an omnibus bill.

 

Bill 66 is receiving increased attention lately given some of its controversial provisions.

Open For Business Zoning

The Bill introduces a new type of zoning, called OFB ZBL (Open for Business Zoning By-laws). This new zoning type is designed to not have to conform to legal standards set out in a number of major provincial environmental and planning laws, such as the Greenbelt Act, the Great Lakes Protection Act, and the Lake Simcoe Protection Act. The provincial government argues that this provision will provide municipalities with the capacity to quickly approve major industrial and commercial projects to create jobs and tax revenue. 

Critics Fear Environmental Impact And Out Of Control Development If Bill 66 Is Passed

Critics, on the other hand, say that the proposed by-law provisions would create the potential for massive environmental degradation and the transformation of protected green spaces into industrial and commercial areas. Water, soil, and air contamination could increase, and municipalities could embark upon aggressively competitive squabbles with each other to attract revenue generating projects.
Some City bureaucrats around the province claim that Bill 66 will upend traditional provincial planning arrangements and lead to out of control development. Tembo is keeping a close eye on the provincial government’s stated move to spur development and construction. Bill 66 has the capacity to alter land values by introducing industrial projects to areas that are designation for safer development. This could have drastic consequences. 

On Unemployment

Unemployment hasn’t been this low in over 40 years, having now hit 5.8% nationally. Ontario and BC lead Canada, with 5.4% and 5% unemployment respectively.

On Unemployment Cover
In hard hit Alberta, suffering from a collapse in oil prices, unemployment is at 6.7%. Unemployment is highest in Newfoundland at 15.4% and Prince Edward Island at 9.5%. The availability of jobs across the country is helping governments collect more tax revenue, is fuelling strong consumer consumption, and supporting sustained economic growth. Strong real estate demand is being fed by the robust labour market. In addition the strong jobs numbers are good news for the large number of new Canadians moving into the country.
But there is more to the low unemployment figures, many of the gains were made on the back of large numbers of part-time jobs even as full time job figures declined. Another important note is the increase in full time public sector jobs, reaching a very high 49,600. Average wage growth is improving above inflation but is cooling from previous strong trends. With inflation going up, the end result is more mixed. The figures are good for real estate and underpin the reality that the Canadian economy is in good shape. Times have not been this good in many decades, and consumers should use present stability to feather their nests and prepare for rainy days.

Ontario Election Predictions And Real Estate Implications

Housing Is One Of The Biggest Issues In The Upcoming Ontario Elections 

With the middle class increasingly squeezed out of the housing market, government intervention will be increasingly called for and more and more political capital will be tied up in ‘resolving’ real estate issues. Whichever party wins Ontario’s 2018 election and forms government will grapple with growing discontent and increasing expectations from an electorate focused on housing issues. On the one hand, there are equity affluent baby boomers content with the status quo, and millennials and generation Xers struggling with low supply, high costs, and stringent demands desiring systemic change. Here’s Tembo’s analysis on how party’s would handle real estate if they win.

PC Candidate Doug Ford

PC Candiate, Doug Ford

PC: A PC government under Doug Ford would likely focus on supply side reforms, incentivizing and encouraging developers to build more housing. Permitting and regulatory processes would likely be streamlined, more land would be freed up for development, and financial incentives and corporate welfare to housing builders would not be out of the question. Funding for affordable housing is not expressly cited as a priority for the PCs and never has been. The PCs philosophically believe that affordable housing is not a prudent use of resources and that the market can solve the supply and price problems.

NDP Candidate Andrea horwath

NDP Candidate, Andrea Horwath

NDP: The NDP have released a platform which heavily focuses on investing in affordable housing. Close collaboration with Justin Trudeau’s Liberals on meeting a national affordable housing plan’s targets would likely be sought out. The NDP would also take a greater hand in mandating certain types of development, increasing tenant rights, and spurring densification. This would have certain short-term benefits but would also irk developers who would likely hold back on investment and see profits decreased. The last NDP government under Bob Rae built affordable housing spaces across the province, in rural and urban communities.

Liberals Candidate, Kathleen Wynn

Liberals Candidate, Kathleen Wynn

Liberals: A centrist approach would continue, with the government occasionally increasing involvement significantly and intervening (foreign buyers tax), with nods to the private sector and developers in balance. As the Liberal party and NDP are largely competing for the same pool of voters, the long term implications of a re-elected Liberal government would see an approach to real estate that would lean to more government intervention over the long term.

What Is The Greenbelt And How Does It Affect You

Ontario PC Party Leader Doug Ford was recently caught in the headlines in Ontario’s heated election campaign after a video was released showing him discussing Ontario’s Greenbelt. Ford said that he wanted to open up large tracts of the Greenbelt to additional housing development to increase the supply of homes and reduce their sky-high prices. Ford mentioned discussing the plan with developers and that he would still keep the Greenbelt largely intact. The video sparked a heated debate and saw Ford take heavy criticism which prompted him to eventually retract his position and clarify that the Greenbelt would remain as is.

 

What Is The Ontario Greenbelt And Why Is It’s Significance?

The Greenbelt is an area of over 7,000 square kilometers of protected land that is essentially closed off from development and construction that surrounds the GTA. It is 11 times the size of the City of Toronto and contains woodland, agricultural space, important wetlands, and open green space. The Greenbelt was established by the present Ontario Liberal government in 2005, fulfilling a 2003 election campaign commitment. The Greenbelt was created to protect vulnerable and ecologically important spaces and to set a clear limit on the extent of urban and suburban sprawl and construction. Large construction companies and developers and their lobbyists accept the Greenbelt and it is generally seen as a popular, positive, and strategically important legislative accomplishment.

Ontario Greenbelt photo

Is Protecting The Greenbelt The Reason For High Price Of Homes In The Greater Toronto Area?

The Greenbelt, in limiting construction and development, is sometimes blamed by groups and certain politicians as a factor in the high price of real estate. Tembo Financial is eager to dispel these minority concerns and to provide more objective background information:

  • The legislation which created the Greenbelt was pragmatic. It set aside large tracts of land adjacent to the Greenbelt and closer to urban and suburban areas for construction.
  • Experts have stressed that very small amounts of land that was set aside for development has actually been used. The Greenbelt does not need to modified or changed.
  • Most developers accept these facts and do not want to antagonize environmental groups or voters by encroaching on protected spaces. Doug Ford’s proposal had little broad public support.
  • Only 4% of Canadian land is arable (can be farmed). While we are the second largest country in the world, some of the best quality farmland in the country is in southern Ontario and protected by the Greenbelt.

Ontario Election 2018 – What’s in it for real estate?

Ontario Election 2018 – What’s in it for real estate?

In this blog post, Tembo Financial Inc. will analyze the election platform for the Progressive Conservative Party (PCs) and will outline what the official opposition is proposing to do for real estate professionals, prospective homebuyers, and homeowners if it were to replace Premier Kathleen Wynne’s Liberals as the province’s governing party.

 

infrastructure icon

1.    Local Infrastructure Fund

This is being touted to create jobs and build infrastructure in small communities.

park infrastructure fund

2.    Investment in Parks and Green Infrastructure

Investing some money to make certain green spaces across the province more user friendly.

apprenticeship icon

3.    Increased access to apprenticeships, doubling the loans for tools program

This will stimulate people learning an apprenticeship, and could be beneficial to the real estate and construction industries hungry for skilled apprentices.

transit funding icon

4.    Transit

The PCs are making a big push to invest $5 billion over 4 years on top of existing funding into new subways, particularly a downtown relief line which Tembo discussed previously. They will also upload the administrative and maintenance costs of Toronto’s subway system from the TTC while allowing the TTC to keep all the fairs. In return, they want the city to build more LRTs – especially a connection from the soon to be completed Eglinton-Crosstown to UofT’s Scarborough campus. These initiatives will spur development, improve property values, and stimulate construction.

sell air rights to developer icon

5.    Selling transit station air rights to developers

Self-explanatory, the PCs want to develop long along and by transit stations to create more housing stock.

Land Reform icon

6.    Reforming the Planning Act

To reduce permit delays, cut red tape, and to stimulate more housing construction and development by sending a clear signal to municipalities.

Selling Property Portfolio icon

7.    Reviewing the province’s property portfolio

In other words, see what the province owns or has rights to and look to sell chunks of it to developers so they can build. Think underused or vacant parking lots, undeveloped land, wills, etc.

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8.    Reforming planning processes

This will encourage municipalities to update their planning and zoning processes and to update them routinely so as to send regular signals to developers about what and how to build, the goal is to ultimately increase supply in the long term.

Review Tenancy Act

9.    Reforming planning processes

This will encourage municipalities to update their planning and zoning processes and to update them routinely so as to send regular signals to developers about what and how to build, the goal is to ultimately increase supply in the long term.

 

Overall the PCs are promising to make big new investments in transit and to increase housing supply. The full platform with all of its proposals is available here: https://www.ontariopc.ca/peoples_guarantee

 


Disclaimer:

Tembo Financial Inc. is non-partisan and looks forward to analyzing the party platforms of the Ontario Liberal party and government and of the third party NDP. Let’s hope that the 2018 election sees issues of housing supply, affordability, and infrastructure discussed thoroughly and qualitatively.

Now Creative Group November 14, 2017 No Comments

The Market Rebound Begins

In a promising sign that the traditionally positive seasonal effects of Fall on the real estate market are once again kicking in, October sales of homes in Toronto rose over 12% from September figures. The increase will be well received by realtors and prospective sellers, as it shows that the market is showing renewed resilience and that demand and buying potential remains firm. Growth in October is usually expected by teal estate professionals in a usual year, but the 12% increase is slightly stronger than usual metrics.

Prices for average homes also increase slightly, hitting roughly $780,000.00. Prices have been increasing for very conservative but the October increase shows an acceleration from September numbers – again, this is a very promising sign. The increase in prices and sales shows that a market that had faced rapid and dramatic cooling from a long list of government and regulatory measures after peaking in May is once again begin the slow but steady process of warming up again.

While sales and prices are slowly returning to health, concerns about a continued large gap in the supply of homes versus still shy demand remain with close market watchers and realtors. The gap may be bad for those wanting to sell, but benefits buyers, who at the height of the market in May were hard pressed to get a bid in a prospective home, let alone a fair shot of sealing the deal with a buy. The large amount of supply continues to place downward pressure on sales and price growth.

Condo market surge continues

As a previous Tembo blog has outlined, the condominium market in Toronto remains very strong and shows strong price and demand growth. Although many pockets of the GTA have lukewarm and slow condo markets, the overall market, and particularly activity in the core continues to surge. Average October prices increased over 20% in October. The average price of a condo in Toronto now exceeds $520,000.00

As Tembo has repeatedly stated, the fundamental underlying pillars of the GTA real estate market remain firm and strong, and in the long term, the market will continue to be resilient and will continue to offer opportunities for buyers and sellers.

Now Creative Group October 6, 2017 No Comments

Stress Tests May Squeeze Homebuyers

Home buyers could lose a quarter of their home buying power if federal officials get their way in establishing guidelines to prevent people from borrowing too much. Federal officials are proposing stress testing uninsured mortgages. Uninsured mortgages are ones with a 20% minimum down payment. The government is wary about the financial sustainability and serviceability of these mortgages if interest rates rise.
If stress testing becomes a norm, it will reduce the ability of Canadians to borrow money and take on mortgage debt, and will place enormous pressures on an already pressured market to respond. Developers will see their pool of potential customers decreased, and demands for cheaper housing, which is already high, will continue to increase.
The federal agency responsible for stress tests in the financial system is the Office of the Superintendent of Financial Institutions (OSFI), located in Toronto with offices around the country. OSFI’s mandate is to ensure that risk and contagion in the financial system is a low as possible. One particular area of concern has been the long-term reality of low-interest rates and their impact on mortgage insurance, banks, overall debt in the country, and the stability of the financial system.
While many recent changes to regulation, down payment standards for housing purchases, and interest rate increases have added stability and cooled what was an inflamed market, OSFI continues to work towards tougher and tighter standards in anticipation of future market risks. When recently questioned about the state of the housing market and the need for tougher measures, Federal Finance Minister Bill Morneau made the point that he felt enough had been done and that further action was not necessary for the time being.
With future interest rate rises on the horizon and the possibility of stress tests, it is clear that regulators are weary and vigilant about the potential risks to Canada’s housing market – a market that has become crucial to economic activity and the livelihoods of hundreds of thousands.

Now Creative Group September 5, 2017 No Comments

Why Toronto is Immune from a Real Estate Crash

The imposition of a foreign buyer tax, stricter and more comprehensive rules and regulations, higher interest rates, and higher taxes has upended the Toronto real estate market. What was once the most dynamic sellers’ market in the history of the region in February of this year has now shifted in a much more balanced way towards buyers. A market where sellers were seeing double digit price increases and massive demand has been extinguished and now prices and sales are faltering with huge influxes of inventory hitting the market.

The talk now is of where the market will be in the medium to long term. Will prices and demand remain steady, recover, or crash? This is the grand question on the minds of professionals, buyers, sellers, politicians, regulators, bankers, and everyone else interested and affected by real estate. The best way to predict and ascertain the future is to look back to the past. The last time the market experienced a genuine, painful, and widely feared crash was in 1989. At the time speculation was rife, price growth explosive, money reasonably cheap, and demand strong.

But what triggered the ultimate inflection? What was the spark which led to a near decade long depression with a 40% real drop in prices? Ultimately, two factors broke the back of Toronto real estate. The first was a rapid increase in interest rates unveiled by the Bank of Canada to stem the inflation from the cheap money of the 80s boom and the second was a subsequently massive and sudden spike in unemployment. These two forces unleashed the early 90s recession which particularly hurt Ontario and caused 11% unemployment.

For the Toronto real estate market to crash, rates and joblessness would have to soar. The Bank of Canada has little reason to spike interest rates, as inflation is very low, and the economy is stable. Canada’s banks are healthy and sound, prices for many key commodities still remain competitive, and there are several economic sectors which are growing, particularly real estate, high tech, robotics, and advanced services. Leaving out a spectacularly sudden and damaging event, likely offshore, stability remains foreseeable in the medium to long term and jittery observers have little to fear from a full on 1989 real estate crash occurring

Now Creative Group August 22, 2017 No Comments

Toronto’s Condo Market Crackles On

As Tembo previously reported in its newsletter and past blogs, the Toronto condo market is undergoing a massive upsurge in activity and dynamism. In the last 20 years, Toronto’s real estate sector has enjoyed tremendous growth in activity, prices, and supply, especially in the form of condos. The city’s previously impressive skyline is now on track to surpass many American megacities traditionally viewed as architecturally and structurally more imposing, such as Chicago’s. A huge number of the new skyscrapers and high rises built in the city are condo buildings.

New figures show astronomical price increases in many Toronto neighbourhoods, particularly in Scarborough, where some prices increased over 60% from a year ago. As the price of detached homes continues to steadily increase with demand remaining strong, many first-time buyers continue to turn to the condo market to begin their respective real estate journeys. Despite a vast slew of new factors impacting the market, condos continue to be available in strong numbers and are far more affordable than detached, semi-detached homes or townhomes.

The most dynamic price growth was seen in much of Scarborough, north-west Etobicoke, and along the downtown core and lakeshore areas of the city. While 20-40% price growth was common throughout the city, it is important to note that base prices a year ago for many condos in the city’s periphery were very low, partially explaining the explosive nature of the price increases. Prices increases were most modest in the city’s midtown area.

The supply of condos continues to increase and generally is meeting demand as approvals and new construction continues to improve market supply. Another important factor is that many millennials are now in a position to afford an entry into the real estate market, and are turning to condo purchases to start building equity. Investors, foreigners, and retired, affluent baby boomers are also buying condominium units.