Canada’s one stop platform and the #1 National voice to the rental housing industry

IN DESPERATE NEED OF MORE AFFORDABLE HOUSING MISSISSAUGA COUNCIL BACKS BOLD PLAN TO INCENTIVIZE DEVELOPERS

Posted in

IN DESPERATE NEED OF MORE AFFORDABLE HOUSING MISSISSAUGA COUNCIL BACKS BOLD PLAN TO INCENTIVIZE DEVELOPERS

How can sky-high rents across Mississauga be lowered?

Here is the dilemma: governments are not in the business of building rental units; and the companies that do are facing unprecedented cost barriers such as high interest and building material prices.

Along with mounting demand these rapidly increasing costs continue to push rental rates far out of reach for most residents in the city.

Mississauga City Council has developed a strategy to incentivize developers, helping lower their bottom-line cost, while prioritizing affordable rental units, which staff anticipate could bring up to 500 affordable housing units online within the next three years.

A report presented to the planning and development committeeTuesday highlighted the rise in housing costs which “has significantly outpaced income growth over the last fifteen years, placing significant pressure on the rental housing market. Between 2008 and 2023, average rents in Mississauga increased by 71% while average (Ontario) wages increased by 53%.”

It continued: “After a period of very little growth, there has been an increase in purpose-built rental construction in recent years. While this is a positive development, the prevailing market rents in new buildings are higher than many households can afford.”

This is nothing new.

A 2020 report from the Region of Peel found 80 percent of residents cannot afford to purchase a home or rent in Peel. According to a January Rental Market Report from the Canadian Mortgage and Housing Corporation, “Despite an increase in overall rental unit supply, demand outpaces supply for the second consecutive year. Canada is experiencing record-low vacancy rates (1.5%) and record-high average rent growth (8%) in 2023, creating competitive rental conditions across major markets.”

In Peel, rent prices remain among some of the highest in Canada, with Rentals.ca’s March report showing rent in Mississauga is the second highest in the province behind Toronto. The average one-bedroom apartment in Mississauga was $2,294, a 1.3 percent decrease month-over-month, but a 5.2 percent increase year-over-year. The average rent for a two-bedroom apartment was $2,722 — a 4.3 percent increase from the year before.

A motion to City Council in December pointed out that 27 percent of Mississauga residents are currently renters.

During the planning and development meeting Tuesday, City staff introduced their latest strategy, the Affordable Rental Housing Community Improvement Plan (CIP), aimed at incentivizing developers to prioritize affordable units by supporting them through grants and waived fees. Staff said the CIP — meant to increase the supply of affordable rental units in multi-unit rental buildings, substantially below-market rental units in multi-unit rental buildings and gentle density rental units in low-rise areas — is a tool to address some of the financial barriers to building affordable housing.

Based on $33 million of funding for the program it’s anticipated that between 300 to 500 new affordable rental units over three years could be achieved through the implementation of the CIP. City officials previously said the funding will help bring more than 3,000 new homes and important housing-related infrastructure to Mississauga over the next three years, with an anticipated 35,200 new units over the next decade. With the addition of these new units, the City expects to approve permits for more than 13,000 new homes by 2026. The previous estimates seem far out of reach with the City’s latest initiative only projecting to bring online a few hundred units.

“The objective of the CIP is to strike a balance between providing enough incentives per unit to ensure the units are delivered, while also ensuring the funding goes far enough to incentivize as many units as possible,” Tuesday’s staff report detailed. “The proposed grant programs are not expected to close the entire gap between affordable and market rents. For this reason, the CIP has been designed to enable (builders) to stack funding with other government programs.”

To expedite the allocation of funding and the construction of units, the program will be administered with what staff have called “a rolling application window” that allows developers to submit applications at any time. If the eligibility and criteria laid out under the programs are met, developers will receive funding on a first-come, first-served basis and grants will be paid out when building permits are issued. For constructed units that do not comply with the conditions of the grants, a payback will be required plus interest.

The proposed CIP includes a Multi-Residential Rental Incentive Program, geared towards higher-density rental projects, and a Gentle Density Incentive Program, focused on adding rental units to the city’s lower-density neighborhoods, that are eligible for incentives. The programs were presented Tuesday as “a high-level concept,” City planner Catherine Parsons explained. If approved, council members will receive updates to track the success of the plan, which allows developers to “stack” various incentives from different levels of government on top of each other for the same project.

“[W]hat we’re proposing today may not address the entire financial gap for developers,” Parsons told committee members. “So we’re hoping to enable stacking and we, to the greatest extent possible, have designed the program to have applicants to the program be able to stack funding from the City with other government programs such as the Region’s program or CMHC’s funding and financing programs.”

The idea is to lower costs for builders who can then pass on those savings to renters.

Housing is considered “affordable” when it costs no more than 30 percent of a household’s income including mortgage or rent payments and all other costs associated with housing expenses. A 2017 study found one in three households were spending more than 30 percent of their income on housing, and more than a quarter of middle-income households (those who earned between $58,000 and $108,000) and 70 percent of all low-income households were facing affordability challenges.

In an effort to address these challenges and demonstrate its commitment to the Province’s mandate to build 120,000 homes in Mississauga by 2031 the City approved Growing Mississauga: An Action Plan for New Housing in March 2023. The four-year plan aims “to increase the supply of housing, streamline development and building approvals while improving affordability.”

Tuesday’s staff report reveals one of the most critical findings in the City’s two housing strategies is that “in the City of Mississauga new affordable rental housing is unlikely to be developed without the financial incentives given the gap between market and affordable rents.”

“Based on industry input, and analysis provided by Parcel Economics, prevailing market rents in Mississauga far exceed affordable rent levels for even our moderate-income renter households.” Data provided to the committee showed a renter household would need a yearly gross income of approximately $100,000 to afford just a one-bedroom apartment. The report cautioned that “without intervention, it is unlikely that the market will deliver new units at affordable rates.”

Staff noted the CIP is not designed to compete with the delivery of low-income units that are built and operated by Peel Region, but is configured to increase the supply of rental units affordable to moderate-income renter households earning $54,000 to $96,000 in household income.

In July 2019, City Council directed staff to develop a city-wide CIP to provide financial incentives to private and non-profit corporations with the hope it would “stimulate” rental housing by encouraging the delivery of affordable rental housing units. The CIP, which was previously paused due to “budgetary uncertainty” caused by the pandemic and the various changes in recent years to provincial legislation, will be implemented as a grant program, supported through funding from the federal government, and will focus on the increased supply of affordable rent units, below-market rentals and gentle density rental units.

“The CIP is intended to balance the need to provide enough incentives per unit to ensure the units are delivered, while also ensuring the funding goes far enough to incentivize as many units as possible,” the report stated.

The City has proposed a total of $33 million, sourced from the federal government’s Housing Accelerator Fund and the City’s housing reserve funds, to support the grant program. Once the federal funding slotted for the CIP is exhausted, staff said the City can draw on its Affordable Housing Reserve Fund to continue to provide the grants. According to the staff report, the current breakdown of available funding for the program equates to roughly $24.8 million from the federal fund and $8.2 million from the City’s housing reserve. Staff noted the CIP grant will work alongside recent legislative changes from the Province, like Bill 23, and federal/provincial tax exemptions.

The CIP funding comes after Mississauga received $112.9 million from the federal government in December. The funding flowed following the City’s approval of four-plexes in neighbourhoods city-wide to help address the housing crisis — a move that triggered the federal funding — creating more density aligned with Ottawa’s criteria for housing support to municipalities. The funding incentive is one of the steps being taken by the federal government to overcome the housing crisis country-wide.

The federal money, provided by taxpayers, is meant to support eight initiatives under the City’s housing action plan, including: developing a range of incentives to boost the development of affordable rental housing; introducing process improvements and incentives to encourage more housing types such as four-plexes, triplexes, townhouses and semi-detached homes in low-rise neighbourhoods; streamlining approval processes to get development applications and building permits issued more quickly; investing in infrastructure to support new growth and development around transit stations; and investing in affordable housing, among others.

The fund, local MP and Minister of Small Business Rechie Valdez previously explained, will provide upfront revenue to ensure the timely building of new homes, as well as additional money once results are delivered. The remainder of the funding will “trickle forward annually over the next three years.” Staff explained on Tuesday that CIP applications will be received for three years to coincide with the federal funding timelines, or to the point where funding is exhausted. Staff will report back to council with a progress report mid-way through the program.

Under the Multi-Residential Rental Incentive Program, there are two streams laid out– affordable rental and below-market rental. Multi-residential projects need to include a minimum of five affordable units, and affordable units need to remain affordable for 25 years. The affordable rental stream is designed to offer incentives to applicants who provide rents at or below 100 percent Average Market Rent (AMR). That equates to current rates of no more than $1,625 for one-bedroom units, $1,855 for two-bedroom units, and $1,967 for three-bedroom units. According to the report, the current value gap between rents at these affordable levels and current market levels is approximately $120,000 to $220,000 per unit.

The incentives outlined under the first stream include a $100,000 discretionary capital grant, a building permit fee grant-in-lieu (of approximately $1,700), and planning application fee relief for non-profits only. Staff estimate the amount for the planning application fee relief incentive to be $50,000 to $100,000 (fee amount depends on the size of development and type of application required).

The second stream under the Multi-Residential Rental Incentive Program is the below-market rental, intended to provide incentives to applicants who provide rents between 100 percent AMR and 125 percent AMR (no more than $2,031 for one-bedroom units, $2,319 for two-bedroom units, and $2,459 for three-bedroom units). This stream would offer incentives focused on “the development of new rental units that are significantly below market, but do not qualify for as many statutory incentives” and would include grant-in-lieu of city development charges, community benefit charges and parkland dedication (estimated at $25,000 to $42,000), a $30,000 in discretionary capital grant, and building permit fee grant-in-lieu (of approximately $1,700). Staff estimate the combined grant value would be approximately $57,000 to $74,000 per unit.

The second incentive program under the CIP – the Gentle Density Incentive Program – would offer incentives to applicants who provide a new rental unit on their property for a minimum period of 25 years. While City Council approved four units “as-of-right” city-wide last year, staff explained that current legislation exempts the second and third unit on a lot from municipal fees, but not the fourth unit, “so the CIP would address that that gap in the legislation until it potentially catches up,” Parsons explained. The incentives under the gentle density program would include a grant-in-lieu of the City development charges and parkland dedication fees for the fourth unit on residential lots (up to $58,000); a grant-in-lieu of building permit fees for the second, third, and fourth unit (approximately $1,000 per unit); and a grant in lieu of parkland cash-in-lieu fees on additional dwelling units created through non-residential conversions (could be up to $26,000).

The committee approved the plan in principle, directing staff to bring forward the final Affordable Rental Housing Community Improvement Plan to be passed “as expeditiously as possible.”

 

Story by: The Pointer