The government of Ontario has introduced new legislation that aims to tackle housing affordability challenges in the province. The plan includes easing development regulations and overriding municipal zoning laws to enable builders to construct 1.5 million homes over the next ten years. Naturally, homebuyers and homeowners, as well as property and mortgage investors, are speculating about how the new legislation could impact local housing markets.
An Overview of the More Homes Built Faster Act
Tabled on Oct. 25, 2022, the More Homes Built Faster Act seeks to increase the number of ownership and rental housing types in Ontario by easing development burdens on homebuilders. Under the proposed legislation, builders can build up to three units on a single residential lot without requiring any bylaw amendments or municipal permissions. Municipalities would be prohibited from setting unit size restrictions on properties or requiring more than one parking spot per unit.
The legislation aims to support the development of “gentle density,” or the creation of multi-unit housing like triplexes or garden suites, to bridge the gap between single-family homes and high-rise apartments. Included in the legislation are provisions to increase the number of affordable housing and attainable housing programs. Under the proposed rules, Ontario would waive development charges, parkland dedication levies and community benefit fees.
Municipalities across the province are being assigned housing targets by the government and will be required to develop “pledges” to explain how those targets will be achieved. For example, the City of Toronto has been assigned a housing target of 285,000 new homes by 2031, Ottawa 161,000, Mississauga 120,000, and Brampton 113,000.
The More Homes Built Faster Act completed its Second Reading in the Ontario legislature on Oct. 31, 2022, and has been referred to the Standing Committee on Heritage, Infrastructure and Cultural Policy. The bill is expected to be passed given the Progressive Conservatives’ overwhelming majority in Ontario’s Legislative Assembly.
How Would the Bill Impact Ontario’s Housing Market?
The Ontario government says its new legislation will increase the supply of available homes and help drive down the cost of real estate and rent at a time when housing affordability continues to erode. However, the impact of the new legislation on home prices could take years to materialize. Some analysts expect housing construction to slow over the next 18 months due to a weakening economy and labour shortages that have long impacted homebuilders.
Additionally, even by the government’s own estimates, Ontario’s population is expected to grow by 2 million residents over the next ten years, with roughly 70% of that growth concentrated in the Greater Golden Horseshoe Region. The addition of 1.5 million homes over that period could slow the pace of price appreciation but may not be enough to restore affordability for the current generation of buyers.
On a longer-term horizon, however, the government’s plan aligns with research from the Canadian Mortgage and Housing Corporation (CMHC) on how many new homes would be needed to bring costs down to a manageable level. CMHC released a report in June showing that it would take 1.85 million additional homes to reach a level where less than 40% of the average household’s disposable income would pay for the average home.
Researchers say the government’s focus on tackling affordability challenges, including cracking down on speculation and vacant homes, will be a net positive in supporting a more balanced market in the long run. A more affordable housing market could increase mortgage activity as buyers feel more confident that they can afford a home. This means a potential expansion of private mortgage opportunities for investors.
Non-bank lending activity has increased markedly since the start of 2021. Even in the current climate of rising interest rates and a slowing economy, demand for private mortgages continues to grow. According to Statistics Canada, the total value of outstanding residential mortgages issued by non-bank lenders increased to $373.8 billion in the second quarter, up from $356.1 billion in the first quarter.
Private mortgages play an increasingly vital role in Ontario’s residential mortgage landscape. As such, they’ve become one of the fastest-growing assets within alternative investments. To learn more about how you can invest in the future of Ontario’s dynamic mortgage market, contact CMI today. Since its inception, CMI has successfully placed more than $1.6 billion in mortgages across the country with a strong presence in Ontario markets.
