Should Toronto “force” developers to build 3-bedroom condos?
by David Fleming

This has been rumoured now for quite some time: the City of Toronto has contemplated amending the Official Plan to essentially “force” condominium developers to construct 10% of units in buildings with 100+ units as 3-bedroom condos.

While this is meant to address a glaring problem—that of affordability, and lack of options for growing families, a lot of people, myself included, don’t believe that the results would be anything near what was intended.

Take a look at a 3-bedroom condo downtown, and you’ll see that it’s better suited for three International students, renting and making a landlord money, than an actual family of four…

In 2009, Toronto came out with a report: “Final Report – Official Plan Amendment To Encourage The Development of Units for Households with Children.” The idea was simple enough: Toronto needs more properties suitable for families, and developers aren’t building them, so the City of Toronto needs to step in.

Sure, that makes sense. In theory.

But the city seemed to forget, or willingly ignored, the free market that we live in today.

The city seemed to live in this fantasy where every family of four who wanted to live in a nice downtown Toronto condo could do so.

As I said, hindsight changes things. But I just don’t understand what they were thinking.

Let me first summarize the key points of the Staff Report, then we’ll discuss. Here is my own condensed summary of the Staff Report:

SUMMARY
At its meeting of June 4, 2009, the Planning and Growth Management Committee considered a draft Official Plan Amendment to encourage the development of dwelling units suitable for households with children. The Committee directed City Planning staff to circulate the staff report containing the amendment to stakeholders and other respondents for comments, and hold a community consultation meeting on the matter.

CURRENT PROPOSAL
The proposed amendment involves two changes to the Official Plan. The first is a general amendment to the Housing Policies, to include the term “dwelling units suitable for households with children” as part of a full range of housing.

The second, more specific amendment is to the Site and Area Specific Policies of the Official Plan. This would require that 10% of all dwelling units in larger developments (with 100 or more dwelling units) in the downtown area to be built with either three or more bedrooms, or offer the potential to be easily converted to contain three or more bedrooms.

ISSUE BACKGROUND
It is clear that few new housing opportunities are being developed for families with children. In recent years, fewer than 2% of dwelling units in high-rise condominiums have been constructed with three or more bedrooms. The downtown area, in particular, is seeing a lack of family oriented housing being produced.

SUMMARY OF ISSUES RAISED IN SUPPORT OF AMENDMENT

•	Vibrant communities require a variety of residents, including a mix of families, singles, and seniors.
•	Too few units and buildings are available for families downtown.
•	Seniors are becoming more isolated because their children are not able to stay downtown
•	Children are enriched by the city experience (multiculturalism, the waterfront, museums, art galleries, special events, festivals)

The proposal would encourage families with multiple children to consider high density apartment dwellings as a feasible option by providing more private spaces within each unit. This may lessen the desire of families to purchase homes in the suburbs, and therefore function as a sustainable alternative to urban living.

SUMMARY OF ISSUES RAISED IN OPPOSITION OF AMENDMENT
Concerns raised about the implementation of the policy, in particular how the policy will affect developers providing market rental housing.

•	The vast majority of market rental with three-bedrooms is rented by students, not families.
•	Affordability is the greatest barrier to most families wishing to purchase housing downtown.  Current downtown condominium construction and development costs dictate a sales price for such a unit of about $600,000.
•	Based on CMHC guidelines and assuming a conventional mortgage, household income would need to be a minimum of $120,000 per year.  This is out of the range that most families can afford.
•	The city will be forcing developers to build units that they will not be able to sell under normal market conditions. The units will be sold at a loss. This means that the remainder of the units in a project will need to sell at a greater price to make up the loss, or more projects will not go ahead.

So, what do you think?

The report is 18 pages in total, including the draft of the changes to the City of Toronto’s Official Plan.

As we all know by now, the proposed changes have been debated for years, but the Official Plan was never altered to the extent that was discussed.

We also all know by now, that a large majority of new 3-bedroom condos are either:
1) Penthouse units, priced well over $1,000,000
2) Miserable, awful, laughable layouts of 800 square foot, 3-bedroom units

So where, exactly, was the City of Toronto hoping they’d have an impact on “families living in the downtown core?”

300 Front Street West

One of the worst condos I have ever seen in my life is at 300 Front Street West — a 1-year-old building, that contains some of these 3-bedroom units that the City of Toronto was hoping for. I have scoured the Internet near and far to find a floor plan, but alas, I cannot.

The unit is 800 square feet, containing THREE bedrooms. If you’re wondering how you can squeeze three bedrooms into 800 square feet, along with two bathrooms, a kitchen/living/dining, halls, closets, etc., then you’re not alone.

I had to see this unit.  And in the end, I was not disappointed, because it was worse than I was expecting.

Words, and photos, cannot describe the unit, but I’ll try anyways.

The “living space” is non-existent. If you put a couch in this room, it would be touching your fridge. Believe it or not, that is the “living/dining/kitchen,” so have fun!

Do a 180-degree turn from where the photographer is standing in the photo above, and you see what’s below – an entrance to two very small bedrooms:

Basically this unit is a dorm room and nothing more.

It’s a great way for a landlord to charge three unsuspecting, international students about $1,200 per month, each, to get an obscene ROI on a condo that runs around $575,000.

But as for a “family” with two children living here, the idea is laughable.

other 3-bedroom options

Staying with this building as the theme, what other 3-bedroom options exist for families?

Oh, sweet!

So that family of four, who clearly can’t afford a house in Toronto, now that the price of a detached house in the central core is about $985,000, is going to buy a condo for $1,185,000? Or $1,440,000?

The whole idea of “developers building condos for families” is fantasy, and nothing more.

I don’t want to come off as the troll under the bridge that scares children as they walk by (I gave up that gig years ago….), but the City of Toronto’s best intentions ended with exactly that: intentions.

There was no way this was ever going to actually work as intended, unless the city started to subsidize these units, or force developers to build three-bedroom units at a certain square footage and price point.

Because even if a developer was forced to build a certain percentage of units as three-bedrooms, they might elect to make those the jaw-dropping penthouses that cost $2M, and would be sold to rich jet-setters, rather than Toronto families with $80K combined incomes.

Maybe the problem isn’t what is being developed (or not developed, as in three-bedrooms), but rather what’s going on around it.

During the “consultation” phase of that 2009 Staff Report, Howard Cohen, the president of Context Developments (think Radio City, Spire, Tip Top Lofts, Mozo, etc.) wrote a letter to the City of Toronto, which contained the following:

“On the cost side of the equation, the City should look at the charges it imposes (Land Transfer Tax, Parks Levy, Development Charges, Public Art Contribution, etc.) on all new sale housing, generally in the range of $25,000 per unit for larger units.  It should ask the province to get involved a well. For example, the new HST will add at least $16,000 to the price of larger units.”

I don’t disagree at all.

I know that’s coming from a condo developer who clearly has an agenda, but you can’t argue that the costs the City of Toronto imposes are massive.

In the end, most of these costs are charged back to the consumer, by the developer (one of the many, many reasons I don’t advocate the purchase of pre-construction condos), and it doesn’t exactly help with affordability!

Mr. Cohen goes on to say, “the goal of encouraging family housing is a challenging one, but it will not be realized by simply mandating its supply.”

Again, I can’t disagree.

I don’t think the solution is to mandate supply, since as we’ve seen many times before, developers will work around the rules, and the results as they were intended will never be achieved.

If “lack of three-bedroom condos” is the problem, then “affordability” goes hand-in-hand.

And while you can change the city’s Official Plan to mandate more three-bedroom condos, you can’t change the free market that results in the lack of affordability.

Unless, that is, the city wants to start buying three-bedroom condos for families.  But that’s a topic for another day…

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