There has been tremendous growth in the residential construction industry, as well as myriad obstacles thrown at it by successive governments. Where are we now in the cycle of governmental red tape?
The condominium and low-rise residential industries exploded after the last major recession of 1990-1995 and have not really stopped until April 20, 2022, when interest rates skyrocketed in a very short time.
The massive growth in the housing industry, in particular the low-rise industry, the need for better use of resources, as well as the desire to protect the environment, resulted in successive Liberal governments from the early 2000s until 2018 enacting more real estate-related legislation in those 15 years than probably the 50 years before, far surpassing any other industry in Ontario. For some reason, residential construction was an easy way to show that the government was doing something both for the environment and for housing, without actually spending any money.
The first of the two major pieces of legislation that started the housing crisis was the Greenbelt legislation, which removed two million acres of potential development land from the equation. It was pre-dated by the Oak Ridges Moraine legislation in 2002/2003. This restricted municipalities from growing greenfield development to preserve nature and farm land.
The second most impactful set of legislation was passed in 2005/2006. The Places to Grow Act was designed to curb urban sprawl and force municipalities to intensify in built-up areas first before they went to areas for future development.
Intensification means higher density projects, either townhouses or, more likely, condominiums. In this regard, the Liberals were successful in significantly cutting land supply for single-family dwellings and forcing development upwards in towns that never had high or mid-rises. As a result, choices were more limited for individuals and low-rise was made substantially more expensive. The real growth in condominiums was in part accelerated by this legislation.
Unfortunately, over the next 12 years, the amount of regulation from environmental, conservation, building code, zoning approval, tenant-friendly legislation, etc. lengthened the time for development approvals substantially. Low-rise approvals for pure greenfield lands were now a minimum of 10 years and sometimes longer. High-rise would be anywhere from two to six years. Again, the results were constriction of supply and increase in prices.
The resistance of municipalities together with the ratepayer groups to higher density projects and, in particular, an obsession about height, lengthened the development process significantly, which only added to costs.
Progressively more developments needed to go through the appeal process available to the city, developers and ratepayers alike, known as the Ontario Municipal Board (OMB). This independent body was the final arbiter, particularly for developers who faced unreasonable opposition by the cities and ratepayers to well-planned developments, which were being delayed or stymied by either municipalities or ratepayer groups.
One of the last legacies of the Kathleen Wynne Liberal government was to enact legislation that severely restricted the ability of the OMB (whose name was changed to the Local Planning Appeal Tribunal (LPAT), such that municipalities were given much longer times to review development applications before a developer could appeal.
When appeals did occur, they were made substantially more arduous in terms of the materials that needed to be supplied and the reviews that were conducted. Finally, the ability of the LPAT to make a decision was limited, either to support the zoning decision by the City or reject it. They had no ability to approve the developer’s application or amend it as they did under the OMB rules.
If they rejected the City’s decision, it then had to go back to the City to review and revise the zoning. There would then be a second appeal if the developer was unhappy. Timelines in these situations were doubled or longer and delayed project approvals substantially and added more significant costs.
In 2018, the Conservatives came in with a platform that recognized that the only way to deal with both availability of housing and pricing was to increase supply and move the process of approvals faster. This meant undoing all of the obstacles that had been built-up over 13 years.
In December 2021, the Conservatives commissioned a Housing Affordability Task Force, represented by a cross-section of developers, professionals, consumers and government officials to determine recommendations for increasing supply and housing affordability.
The group published a report in February 2022 that featured 55 recommendations. In response, the government accelerated efforts to make housing easier to build and enacted a series of legislation.
Prior to that, the government took steps to reverse the impact of Liberal legacy on LPAT. Essentially, Conservatives passed legislation to rename the Tribunal the Ontario Land Tribunal, and gave back essentially all of the powers that the OMB previously had. It reduced the timelines for municipal approvals to limit delays and created the appropriate forum for hearings and appeals. It restored the ability of the OLT to approve a municipal decision, reject a municipal decision, approve zoning as proposed or amend it.
In a series of sweeping pieces of legislation starting in spring 2022 and then at the year-end of 2023, Bills 109, 23, 97 and 143 were passed that, once implemented, could have significant impact on eliminating red tape, moving projects forward more quickly, expanding the approval times for developments, and as well impacting significantly on the Ontario Land Tribunal (OLT). The breadth of the legislative changes proposed, which were passed in December 2022, are far too extensive to go into detail but they did include things like:
1. Penalties on municipalities for not meeting certain prescribed timelines for reviewing development proposals and providing responses which would result in reduction of fees payable by developers;
2. Caps on new or increased development charges imposed by municipalities over a five-year period;
3. Limitations on site plan control by municipalities which would speed up the process and limit the ability of municipalities to change designs;
4. Removal of requirements for public meetings on draft plans of subdivision, limitations on parkland dedication charges which were escalating, particularly in the 905 area;
5. Exemptions for developments of up to 10 residential units for site plan control as of right provisions to build 3 residential units on a lot;
6. Substantial exemptions of DCs for rental housing, non-profit housing, projects with inclusionary zoning units;
7. Limitations on who could appeal a zoning decision to the OLT and stricter rules on eliminating frivolous appeals; and
8. Hiring of new adjudicators for the OLT to deal with a backlog of appeals (over 38 hired).
The government also looked at eliminating dual tier municipal approvals. In Toronto, there is only one level of approvals but in many other regions such as Durham, York, Kitchener, Waterloo, etc., any development requires approvals from both the regional authority and their local municipal authority. Rules were proposed for eliminating the dual approvals. However, these have not been passed.
Steps were also taken to expand municipal boundaries in various municipalities, such as Hamilton, or to increase supply of development land. All this was positive and led towards a streamlined approval process, which allowed more development, faster and cheaper.
Unfortunately, the investigations and allegations of the government’s impropriety towards the Greenbelt legislation, which opened up about 7,000 acres in the fall of 2022, have set back all of these proposed and enacted measures.
The government has become very reticent of being viewed as running roughshod over municipalities and is relooking at many of the provisions that they passed or are considering, including the boundary expansions, elimination of the dual municipality authorities, the capping of the DCs and other measures. They have introduced Bill 162 to return much of the lands temporarily removed from urban boundary expansions. However, no decisions have been made regarding Ottawa and Hamilton.
In fact, the industry does not know where it stands at this time. Many of these measures were announced in late 2023. Dave Wilkes, President and CEO of BILD, stated in a press release last December that the government has “no coherent housing plan” based on the steps that it had taken. He further stated that “the decisions, coupled with the announcement to review its commitment to reduce taxes on new housing through proposed changes to development charges, have created unmanageable uncertainty for the housing industry.”
So where are we on streamlining government approvals and increasing supply and affordability? This is uncertain. However, hopefully, the government will now be focussed on its original goals of reducing red tape and increasing housing affordability in conjunction with consultations of municipalities, consumers and the development industry in order to achieve the housing affordability reports goals of 1.5M new homes by 2031, in order to satisfy the present and future housing needs of Ontario. It has two years to right the housing ship before the next provincial election.
Leor Margulies is a Partner at Robins Appleby LLP. As head of the Commercial Real Estate and Development Group, he leads a team that specializes in land and housing development representing both established and newer real estate developers and builders. Within the housing development practice, he leads the condominium group, assisting in the construction, marketing, and sales of a range of condominiums, from common elements condominium projects to multi-residential/commercial ones and mixed-use projects. He has been a leader in the construction lending and development fields for over 40 years and was recently awarded the 2021 Ontario Bar Association Award of Excellence in Real Estate. He is also an ardent supporter of the residential construction industry, sitting on the BILD Board and Executive since 1999. Email: lmargulies@robapp.com Website: https://www.robinsappleby.com
