Cities can benefit from Ontario’s housing reforms
In addition to improving affordability, cities can make the case for greater fiscal autonomy.
Last week, the Ontario government held a virtual summit on housing affordability along with the mayors and chairs of the biggest cities and regions in the province. The highlight of the summit was the province’s commitment to speed up development application processes, but the news was quickly overshadowed by rumours about one of Ontario’s more prolific advisory committees: the Housing Affordability Task Force.
The Task Force was established in December to “explore measures to address housing affordability, including increasing the supply of market housing, reducing red tape and accelerating timelines, and supporting economic recovery and job creation.” While this nine-member committee was not expected to submit their report to the government until the end of the month, a draft report was circulated to various ministries and journalists.
On Thursday, TVO’s John Michael McGrath discussed some of the recommendations from this report in an opinion piece. The Task Force is proposing some significant changes, such as allowing up to four units on residential lots in big and medium-sized cities, converting vacant commercial properties in to mixed use buildings without municipal approval, and exempting projects of 10 units or fewer from additional review processes. These changes were accompanied by recommendations to scrap more granular planning rules that impede housing construction such as lot size and shade restrictions, mandatory consultations on minor variances, and heritage-preservation requirements.
The announcement of these changes was widely celebrated by housing activists, including those whose recommendations made a big part of the Task Force’s focus. But there is a lot still up in the air: How will the final report differ from the draft being circulated? Will the Ontario government adopt (let alone respond to) the report? And if so, will it be legislated before the provincial election in June?
One other question stood out to me: What’s in it for cities to give up control over planning decisions? If the Task Force’s recommendations become law, municipalities will cede some of their authority on housing to the province — but that doesn’t mean they can’t get anything in return.
For starters, municipal governments can benefit from the perception of being agents of change in improving housing affordability. As Canada’s housing crisis becomes a more pressing ballot box issue (especially in a year when MPPs, mayors, and councillors are all up for re-election), it will be important for voters to see real action on improving both housing affordability AND affordable housing. Additionally, reforms to local planning rules could shield officials from the toxicity of NIMBYism, which often relies on affluent residents vocally opposing new housing in their communities.
A common issue in some urban neighbourhoods is the tendency of NIMBYs to coopt the language of human rights to make housing further inaccessible to those who need it most. If the province can shield mayors and city councillors from this sort of veto politics, municipal governments can be better equipped to plan for sustainable growth within their communities.
Municipalities can also make the case for a trade between planning autonomy and fiscal autonomy. Canada is an outlier among developed countries when it comes to municipal revenue. In 2020, property tax as a share of all Canadian tax revenue was the second highest in the OECD, and it accounted for over 97% of Canadian local tax revenue. Because provincial governments set most of the tax collection rules for municipalities, cities are highly dependent on property taxes and intergovernmental transfers to fund their services.
One way that Ontario’s cities can gain from housing booms is to have greater control over land transfer tax (LTT) revenue. Currently, only Toronto is allowed to impose a municipal LTT, whereas the revenues for the same tax elsewhere in Ontario are collected by the province. Giving municipalities greater control over land transfer and speculation taxes would provide them with a reliable source of revenue that can be earmarked for investments into below-market options such as public housing and homeless shelters.
Another way that municipalities can plan for density is by having the ability to impose user charges that tie service costs more closely to those who use them. One way in which this can happen is by allowing cities to introduce tolls and congestion pricing for major highways such as the Gardiner and the Don Valley Parkway. The Wynne government vetoed these proposals the last time they were considered, but making people pay for their usage of major routes can play a significant role in reducing congestion and car dependence, while raising critical funds for infrastructure and transit projects.
The province also stands to gain from delegating some of these taxation responsibilities. In addition to shifting more of the tax collection burden away from Queen’s Park, the Ontario government can monitor the housing construction progress of municipalities through legislated timeline targets. The draft report from the Task Force recommends having the Ontario Land Tribunal penalize municipalities that do not build at reasonable paces, meaning that cities can pay a social or financial cost for not doing more.
As Ontario explores ways to fix its housing crisis, having cities be part of the solution will make the province’s job a lot easier. Giving municipalities greater fiscal autonomy in exchange for provincial control over some planning decisions can be mutually beneficial. Cities can be better equipped to tackle social issues without being obstructed by NIMBYs. And with the rest of Canada watching what will happen on this file in the upcoming provincial and municipal elections, Ontario has a unique chance to get it done right.
