Rental Affordability for Toronto
My name is Cory Deville. I’m running to become The Next Mayor of Toronto. Here are four ways I would make rent more affordable in Toronto:
Rental Affordability for Toronto
The city uses its real estate portfolio and lending power, not new taxes, to make rent reflect what people in that neighbourhood actually earn.
Problem Being Solved
Rent in Toronto is set by market value, not by local income. There is no municipal mechanism that ties rent to what residents in a given area actually make. Affordable housing targets chase a market price that has no relationship to local wages.
The Return on Investment (ROI) for the Working Class
Rent paired to Area Median Household Income (AMI) is the only version of affordable that holds up over time. Renters get a number they can plan around for a decade instead of a lease renewal they dread every year. Repurposing city buildings and building more low rise housing use city assets instead of new spending. The equity and debt mechanisms use city capital that is recouped over time.
How This Policy Solves the Problem: Four Approaches
Repurposing the buildings we own.
Audit the city's real estate portfolio (~$26B in valuation; ~8,400 buildings to identify underutilized or commercial use buildings that could convert to residential use. Rent would be equal to Area Median Income (AMI).
Toronto building more low-rise residential projects.
Prioritize buildings of 10 storeys or fewer. They are cheaper and faster to build. They place less demand on existing infrastructure such as sewage and grid capacity. They are more insulated from market cycles (ex., forecasted recession panic, technical recession, categorical recession, etc). This targets rental affordability now instead of affordability five years out once a tower is finished. Rent is set to Area Median Income (AMI). Bear in mind the “area” would be defined by the ward boundaries (ex., subject to revision if City Council or public census offer a better framework).
Equity Partnership between Toronto and local Toronto developers headquartered in Toronto.
The city supplies 5-20% of a project's capital needs. This displaces bank financing that would otherwise cost the developer 6-8% interest. In exchange, rent is set to AMI and capped for 10 years (ex., with the annual increase percentage known in advance and aligned to or better than the province's existing rent guideline). The city takes a proportional equity stake.
A 10% capital contribution returns roughly $0.10 on every dollar the development earns. Developers also receive continued deferral of development charges, streamlined permitting, and priority access to city land zoned for the project, conditional on residential use. Equity returns fund other working class programs such as subsidized TTC fares, youth employment, community programs, etc.
Debt Financing Partnership between Toronto and local Toronto developers headquartered in Toronto.
The entry point is the same, 5-25% of capital needs, but structured as a 0% interest loan instead of an equity stake. The city recoups through 10-15% of project revenue until the principal is repaid, then 2.5-10% of profit for approximately two years. The developer retains full equity. The same conditions apply: Area Median Income (AMI) rent, a 10-year rent cap known in advance, deferred development charges, and streamlined paperwork.
Financial Commitment: $1.9 Billion
The total commitment for this policy is $1.9 billion, or 10% of the city's $19 billion operational budget.
That breaks down as follows:
Repurposing the buildings we own and Toronto building more low-rise residential projects together account for 9 percent of the operational budget, or $1.71 billion.
Equity Partnership or Debt Financing Partnership between Toronto and local Toronto developers headquartered in Toronto accounts for 1 percent of the operational budget, or $190 million.
The $1.71 billion is weighted toward the two approaches with direct capital and construction costs. The $190 million reflects that the partnership approaches are structured to recoup capital and become self-funding over time, so a smaller initial commitment goes further.
Key Performance Indicators (KPI) and Timeline
Day 5: Toronto audits its real estate portfolio and identifies at least 5 buildings or assets that can be converted from current usage to residential application.
Day 10: Toronto selects 3 wards to pilot this policy. These wards will be selected based on a public census and city council deliberation.
Day 15: Toronto defines project scope for the low rise developments such that it could be actioned based on this report by a third party who did not have context. However, it should be noted that Toronto would be developing this project (ex., through CreateTO or another internally held agency; there could be an option for a local development company to do this if there was a stronger project management/economic argument to be made). Day 20: Toronto creates a criteria set for what a qualified Local Developer Profile would look like with regard to Equity or Debt Financing Partnership would look like.
Day 25: Toronto completes a census report to determine median household income per region (ex., using the ward boundaries as our point of reference, but this could be re-imagined pending public feedback)
Day 30: Project Management Proposal complete and certified by City Council. We have confirmed the median household income rent benchmark per ward; the first developer partnership term sheet is signed. The first low rise sites are selected.
Day 35: We hire 2 Foremen/women per location.
Day 40: We start hiring for non-technical and technical construction jobs from Toronto residents. The former should be prioritized, because the latter we will need fewer of (ex., they would act as team leads; and then manage the smaller teams of both non-technical and semi-technical positions)
Day 45: We continue hiring for non-technical, semi-technical and technical roles on a rolling basis.
Day 50: We start building.
Day 60: We finalize a list of qualified developers to participate in the equity or debt financing program (ex., in addition to having project scope for builds, timeline, capacity, go to market rental amounts, 10 year rental increase proposals, et al).
Day 90: The first units are under city landlord control at area median income (AMI) rent, or the first partnership capital is deployed. At this point we decide whether to duplicate the pilot in an adjacent ward or advance to Tier 2 Policy Status (ex., Tier 1 = 10% of the city wards, Tier 2 = 50% of city wards, Tier 3 = City Wide)
Day 100: Review. Revise. Reimplement for next quarter. This would be a completely transparent process and published on the toronto.ca website for the public to see in full.
FAQ
Question:
Isn't the city becoming a landlord just government overreach into private housing markets?
Answer:
No. I am responding to the private housing market disregarding the well being of the working class, and prioritizing profits over people. This needs to be corrected. A housing market only sustains itself long term when rent reflects what the local workforce can afford to pay.
A market that requires people to give up their dignity, their stability, or the roof over their head to turn a profit is not sustainable. It is an extraction model, and extraction models eventually collapse under their own pressure through vacancy, default, or societal backlash. The first and second of those items is usually when the Provincial or Federal government issues bail outs.
Pinning rent to income keeps the market solvent for landlords, and livable for tenants at the same time.
Question:
Who decides median household income, and can that number be trusted?
Answer:
Toronto determines it independently through its own municipal capability. The city runs a ward-by-ward census across all 25 wards via an online census. This can be completed within a week. The data stays in-house, on a fixed annual recalculation schedule, with the methodology published before the first pilot rent is set.
Question:
Why would a developer take below-market rent just to get cheaper capital?
Answer:
It allows them to avoid 6-8% in bank loan interest; they also get to continue deferring development charges, and get faster permitting.
Question:
Doesn't converting city buildings to affordable housing waste assets that could earn more at market rate?
Answer:
No. The pilot targets low utilization and low revenue buildings first, and then scales to higher performing assets when necessary. Ultimately, people over profits must be our governance model.
Question:
What happens if a developer partner fails or the project underperforms?
Answer:
We are spending 1% (ex., $190 Million) of the City Operational Budget (ex., ~$19B) on equity partnership and debt financing projects for median household income geared rental affordability. We would only release 10% (ex., $19 million) of the $190 million per quarter until pre-defined key performance indicators were achieved (ex., the KPIs would be defined in an expanded policy scope). If a developer fails or the project under performs the city could readily acquire the entire project; and default re-assignment at a below market rate would be woven within the contract.