Breaking Down Ontario’s New Housing Changes

Listen: StrategyCorp Principal Sabine Matheson and Vice President Aidan Grove-White discuss the changes on Intended Consequences

Executive Summary

With the stated aim of reducing the cost, time and red tape associated with constructing housing as well as building 1.5 million new homes by 2032, the Government of Ontario introduced an omnibus package called More Homes Built Faster Act, 2022.

These reforms fundamentally alter the province’s land use planning system and municipal governance frameworks. The Act aims to do this without developing the Greenbelt and has specific clauses exempting the Greenbelt Area from several provisions. It also does not alter the obligation of planning authorities at all levels to engage with Indigenous communities on planning matters that may impact their Aboriginal and Treaty rights.

Development proponents will see changes to all aspects of their projects, including on planning approvals, Conservation Authorities, development fees and charges, heritage designations, wetland protections, regulations protecting new home purchasers, major infrastructure provision, and even municipal governance.

Introduction

On October 25, Minister of Municipal Affairs and Housing the Hon. Steve Clark introduced The More Homes Built Faster Act. The proposed law marks the most significant changes to Ontario’s planning and development system in a generation and would initiate fundamental reforms to the structure and revenues of the municipal sector. In short, nearly every part of the development sector will be touched by these changes.

In the context of a housing crisis which has become a hot-button political issue, the Ford Government has set an ambitious goal of building 1.5 million homes in the next decade. This legislation is designed to clear the path for home builders to be able to achieve that target and build upon previous legislation in 2019 and 2022 for the same purpose.

This Act also follows up on the report produced by the Housing Affordability Task Force earlier this year, and includes many of their specific recommendations.

The Act is part of a three-part initiative which includes this Act, consultations around specific regulatory changes and a new Growth Plan and Provincial Policy Statement (PPS), and a further housing bill expected in Spring 2023. Consultations around a new or merged PPS and Growth Plan and many of the regulatory changes referenced in the announcement will open this week as well, with most open for a 60-day window, concluding by the end of the year.

Together, these changes will certainly make it easier to develop housing, but also kickstart a debate about various local authorities and how much say they should have in land development. While this package of measures does not impact the Greenbelt or alter planning authorities’ responsibilities to engage Indigenous communities, it will nonetheless garner significant controversy.

Unlocking Housing in Existing Urban Areas

Long sought after by developers and urbanists alike, “missing middle” housing will be encouraged in part through allowing three units “as of right” on residential lots without needing a by-law amendment. In addition, development charges, community benefit charges and parkland dedication fees would be waived on these additional units. The Act would also eliminate site plan approval requirement for smaller developments, defined as those with 10 or fewer units. The “as of right zoning” approach will also be applied on a far larger scale to developments near transit, though those specific details have not yet been announced.

Significant Changes to Development Approvals and Municipal Governance

To reduce time-consuming and often costly duplication of processes, the province proposes to reduce or eliminate the planning roles of at least seven upper-tier municipalities. The main legislative changes will take place in this Act but be timed to coincide with a future bill in 2023. Existing approval authority will be transferred to lower tier municipalities. The residual role in planning for upper tier government is not yet entirely clear.

The 29 largest municipalities in Ontario will be assigned housing targets adding up to 80 percent of the ‘1.5 million new homes’ goal based on their existing populations. For example, Toronto’s target will be 285,000. Those municipalities will have to develop plans for how they will meet their assigned targets, they will be required to track and report on their progress to these goals regularly.

The Act would also scope municipal authority to regulate architectural details and aesthetic aspects of landscape design aside from important functional matters like flood control. This would not override Ontario Heritage Act tools.

Conservation Authorities will see a further reduction in their ability to influence development. Their scope will be legislated to “comment only” on development issues outside of their core mandate of preventing flood and other natural hazards. Their fees will be frozen, and they will be required to identify lands they own that would be suitable for housing.

Raising the Bar on Heritage Designation Processes

The new rules for heritage designation would streamline processes at the municipal level and require that properties meet two criteria in the regulations to qualify, whereas currently they only need to meet one. They would also raise the threshold required to establish Heritage Conservation Districts, including the creation of a regulatory authority to manage this process and streamline amending or repealing existing heritage districts. Importantly, once a planning application has been submitted for a property, municipalities would be prohibited from making a heritage designation unless a property is already on the municipal register. It would also require that existing registers are reviewed to ensure non-heritage properties are removed from the list.

Reducing Municipal Fees and Charges on Housing

Development Charges (DCs) will be frozen retroactively to June 1, 2022, but allow for phased increases rather than sudden surges. Parkland requirements for higher density residential developments will also be reduced. Community Benefit Charges (CBCs) on infill properties will only be charged on net new units. While purpose-built rental units will be given a 15, 20, or 25 percent discount on DCs (based on one, two, or three bedrooms respectively), affordable and not-for-profit housing developments and inclusionary zoning units will be provided outright exemptions on DCs, CBCs and parkland dedication. It is not yet known how municipalities will address this shortfall in revenue and how it will affect their capital programs.

Inclusionary zoning itself will be capped at five percent per development and the length of maximum affordable tenure reduced to 25 years. Other fees that impact the cost of housing levied by other provincial ministries, boards, agencies, etc., will be frozen.

Infrastructure to Support New Housing

The Act will also enact the Supporting Growth and Housing in York and Durham Act, 2022 which aims to speed up the planning and construction of two wastewater projects identified as necessary to support growth in the identified regions. While exempting the projects from the Environmental Assessment Act, it would require a separate and mandatory consultation process for Indigenous communities and interested parties to consider the two projects’ potential impacts to the environment and on Aboriginal and Treaty rights.

Reforming the OLT to Stop Delays Before the Start

Third-party appeals regarding almost every planning matter are to be eliminated – those appeals filed already but without hearings scheduled will be removed from the Ontario Land Tribunal queue.

The Tribunal would also be empowered to dismiss cases where a party caused an unreasonable delay, or where a party failed to comply with an order. In an effort to further discourage vexatious or frivolous actions by opponents of a development, the Bill clarifies that the Tribunal can order an unsuccessful party to pay the costs of the successful party.

The Act would also provide the minister with the ability to establish timelines standards for certain OLT case resolution activities and criteria for prioritizing OLT cases. However, no penalties or consequences for missing those timelines are identified. Similar measures are also proposed to improve the service standards of the Landlord and Tenant Board.

Protecting Homebuyers from Private Actors

Private sector actors who play a role in harming affordability are also on notice: the government increased the “foreign speculation tax” from 20 to 25 percent, effective midnight the morning of October 25, 2022.

In response to several stories of homebuyers being compelled to pay additional fees under duress, or purchase contracts being torn up without notice, the government will increase regulations and administrative fines (up to $50,000), with those fines being used to compensate victims of these unethical practices.

The First Tranche of Building Code Changes

Immediate changes to the Ontario Building Code are proposed to harmonize requirements for mid-rise wood frame construction with the National Building Code. The government is also seeking suggestions for “quick win” Code changes that will reduce costs for missing middle development.

More to Come…

Though they are substantial, the changes released on October 25, 2022, may be eclipsed by the reforms yet to come. The Provincial Government has opened up consultation and sent a clear signal sent that the Provincial Policy Statement and A Place to Grow: The Growth Plan for the Greater Golden Horseshoe are set to be integrated into a single document designed to facilitate housing development. The deadline for submissions is currently set to December 30, 2022. The Government also signalled its interest in deepening its involvement on major and complex projects through expansion of the Office of the Provincial Land and Development Facilitator.

This summary is not an exhaustive list of all the reforms proposed today and many other initiatives have not been made public yet. While more details will emerge over the coming days, it’s very clear that the political intention here is to demonstrate the Government’s willingness to take bold action to tackle the housing crisis.

Every development proposal at virtually any stage of the approvals process today will be affected but what has been announced already and what is yet to come. Proponents will need to identify whether new opportunities are emerging that that would deliver more housing, faster, and at a lower cost, and they must act accordingly. But to be clear, these changes are just the beginning: yet more change is on the way over the next six months, and proponents will need to act strategically to optimize their positions in this rapidly changing regulatory environment.

Observations

The proposed legislation is a bold package with sweeping implications. 

The motive behind the package is clear: address our housing needs. And for that, at least, there is much to be admired.  The “get it done” attitude is also clear: this is “open season” on planning “red tape,” whatever the source may be.

But as with every bold initiative, there are risks.

Here are some thoughts on what will be needed to make this package the success that we need it to be:

More detail needed: There are a lot of details that have yet to be filled in. The government is well aware of this, this consultations under way, and promises of more legislation to come. If the “devil is in the details,” there are lots of devils to be worked out in the weeks ahead. To do this, the government will need to stay committed to its goals, but open to stakeholder ideas on how to implement them.

Planners (and others) to do the work: Currently, there is a general HR shortage in the industry. The shortage of planners is part of that. Planned changes in “who does what” cannot succeed without a full HR plan to ensure there are people to do the work, especially at MMAH and in municipal lower tiers.

Infrastructure to connect to: Growth needs infrastructure. Ontario and municipalities will need to sort out who will do what and who will pay what under the new structure.  With caps limiting the revenue of growth funding tools, and proposed changes to the regional and local role in growth planning, suffice it so say there are details to be worked out. It wont pay for itself, or plan itself.

Stakeholder collaboration: Even with these changes, land development will still be a complicated process, involving many stakeholders. Change management requires cultural change, not just “top down” changes in rules. To be successful, the process will need to manage the change in way that allows other system participants to get on board.

Political Will: As the province has pointed out, NIMBY opposition has reached a level of intensity that is almost unprecedented. Opposition can be expected to both the legislative changes today and the proposed changes we’re anticipating soon. This Government has shown that it is willing to fight for the goals it believes in, it will need to show the same level of commitment and intestinal fortitude it has shown on other hot files.

Luck: Interest rates are up and the economy is likely to enter a recession engineered to fight inflation. There is talk of a housing price crash like we haven’t seen in forty years. We just had an historic pandemic that made our homes feel smaller and showed the value of publicly accessible open spaces. A war a world away might lead to higher transportation costs and reinforce the benefits of living close to work and walking or taking transit. All to say, the greatest challenges and opportunities for implementing this agenda are probably not known yet. On top of all the other factors identified above, Premier Ford and Minister Clark will need to have a bit of luck on their side.