Building on success

The Region of Peel has opted to continue to encourage the development of more affordable and middle-income housing units in the region by making permanent its affordable rental incentives program, originally launched in May 2021 as the region’s affordable housing incentives pilot program.

During its July 7 meeting, Region of Peel council approved the Peel Affordable Rental Incentives Program as an annual program, following a successful pilot that saw the region receive six applications in 2021 that resulted in three housing development projects receiving $7.48 million in funding for 130 affordable units in Brampton and Mississauga.

The 2021 round of funding helped support the development of affordable units at 40 Lagerfield Drive in Brampton, 4094 Tomken Road in Mississauga and 18-24, 28 Elizabeth Drive and 31-33 George Street North and 25-27 Nelson Street West in Brampton.

“The pilot program generated a lot of interest from both the private and non-profit development sectors and we were very pleased with the number of applications we received,” Region of Peel manager of development systems and services Naheeda Jamal told NRU.

“In 2021, the Region of Peel hosted a launch event as well as a Q&A session on the program application prior to pilot launch; both events were well-attended and positively received by interested applicants and residents. The events allowed us to have a better understanding of who was interested in applying to the program and raised overall awareness of the program’s implementation.”

Now approved as an annual program, the affordable rental incentives program serves as a capital grant program that is designed to support private and non-profit developers building affordable housing, with a focus on larger, family-sized units geared towards middle-income individuals or families.

In Peel, middle-income refers to individuals or families making a combined annual income of between $61,600 and $110,500.

The Region is anticipating a fall launch of the ongoing program and $2.5 million in total funding will be available this year to any private or non-profit developer seeking to build affordable rental housing in Peel, with a minimum of five affordable dwelling units.

“The Peel Affordable Rental Incentives Program is designed to be combined with other available sources of funding,” Jamal said.

“In addition, the Region is aiming to stack additional incentives with local municipalities in future rounds [of funding] to continue supporting the development sector to build affordable rental housing in Peel.”

In order for applicants to the program to be eligible, they must meet a set of requirements, including proposing a minimum of five affordable units.

The affordable units must be two and three-plus bedroom units, in accordance with the region’s greatest middle-income housing needs.

Units receiving the incentives must be maintained as affordable for a minimum of 25 years and the entire building must operate as rental for the duration of the agreement. Applicants must also have experience developing housing and managing rental housing or must retain the services of an organization with expertise in that field.

Ontario has been experiencing a significant housing crisis for all housing types, and affordable housing and rentals have been lagging behind other forms significantly with respect to the rate at which they’re being built.

Incentive programs like the one being implemented by the Region of Peel are important, as building rental properties doesn’t hold the same level of revenue certainty for developers as building market housing does.

“When you’re building a condo, you’re borrowing against the down payments of the condo purchasers, and there’s revenue certainty right when they start construction on a condo project; typically, 70 per cent of the units are sold or at least 70 per cent of the revenue has been established for that project,” Bullpen Research and Consulting president Ben Myers told NRU.

“On the rental side, your pro forma may look great at the start of construction, but as we just saw over the pandemic, rents are down 20 and even 25 per cent in some places. We’ve seen some unfathomable declines. There’s also huge government risk because a new government could come in and say that they want rent control on all new buildings, so to say you can only increase rent by 1.5 or two per cent while inflation is at six, seven or eight per cent, it’s just not a good investment for anyone to put their capital into a rental project when there’s so much uncertainty in the marketplace.”

Certainty, or at least some modicum of predictability, is what the Region of Peel hopes to see from the implementation of this program, as they look to work with developers to create more affordable housing.

“Now that the program is permanent, it creates more consistency and predictability for the development sector and provides the opportunity to strengthen the Region’s working relationship with the development industry,” said Jamal.

“It also allows us to undertake continuous program improvement and observe and respond to successes and challenges over time to ensure the program remains viable and effective. We will also be seeking an increase in capital funding for the program starting next year.”

Incentives to build rental units have the potential to go beyond just the financial side of things, though at the end of the day, developers are looking out for their bottom line, and that has historically been at the forefront of why rental units aren’t being built at the same rate as market housing.

“In land use planning, the Official Plan designations for high-density residential and then your zoning will put in place the regulations of the type of use you can build; multi-use high-density doesn’t legislate in terms of the tenure,” Toronto Metropolitan University Centre for Urban Research and Land Development director David Amborski told NRU.

“So, a site that’s zoned ‘high-density residential’ can either be used for condos or rental; if you look at the pro forma or the financial analysis of the two, the return on the pro forma for the condominium is higher. For years those sites have been used for condo development rather than rental development, so that’s kind of the history of why we’ve fallen behind, because the rental market had been so strong.”

Amborski explained that Vancouver adopted something of an incentive program based in land use rather than strictly financial terms in order to create more rental housing, although he doesn’t foresee that type of program taking hold in Ontario any time soon.

“The Planning Act doesn’t allow you to designate tenure, it only allows you to designate land use, which is the issue, and I don’t see a possibility of that changing in the short run,” Amborski said.

“There were some exceptions in Vancouver…where if you wanted to get a higher density development around a transit station, if you’re doing rental, you’d get a higher density where if you’re building owner-occupied you couldn’t. The idea was that if you wanted a re-zoning, they’d give you a re-zoning for higher density if you’re doing rental.”

While creating more affordable rental housing certainly requires a multi-faceted approach, the Region of Peel feels they are well positioned moving forward and that in making the program permanent, they have added a valuable tool to their arsenal for creating more affordable housing in Peel.

“We recognize that there is no singular way or ‘silver bullet’ to end the affordable housing crisis,” said Jamal.

“The Peel Affordable Rental Incentives Program is one tool that enables us to work with the experts in the development industry to assist us with building more affordable rental housing, creating livable, sustainable and complete communities.”

_{Posted with permission of the publisher of NRU Publishing Inc. Original article first appeared in Novae Res Urbis GTHA, Vol. 25, No. 31, Wednesday, August 10, 2022."}