Digitizing and streamlining development approvals

When it comes to tackling the housing supply and affordability crisis, we have a very tall mountain to climb. It is critical that we get our act together – and quickly.

Latest figures from Canada Mortgage and Housing Corporation reveal that we need 5.8 million housing units built in the next six years to restore affordability to the market. However, at the current pace, only 2.3 million are expected to be built – leading to a shortfall of 3.5 million.

Disturbing, to say the least.

Just as concerning, the average price of a home in Canada is now $741,400 and the minimum income required to qualify for a mortgage is $195,000. That means even the top 10 per cent of income earners with an average income of $175,000 would not qualify for a mortgage.

But wait, there’s more.

Royal LePage figures that by the fourth quarter of this year the median price of a single-family home in Canada will rise six per cent year-over-year, while the price of a condo will jump five per cent.

Certainly not good metrics for a country that is trying to take concerted action to reverse the trend.

One of the issues is the bureaucracy that developers and builders must wade through to get residential construction projects approved, building permits issued and projects under way.

Nationally, Canada ranks 33^rd out of 34 countries when it comes to the time needed to obtain construction permits, according to the latest Doing Business report published by the World Bank.

In Toronto, for example, development applications are taking 908 days for site plan approval or 713 days for a zoning bylaw decision.

The city also had a weighted average approval time of 32 months in 2022, according to a study done by Altus Group, up from 21 months in 2020.

We also saddle first-time homebuyers with excessive taxation.

So, we are trending in the wrong direction.

Municipalities, and in particular those in Ontario, are behind the eight ball when it comes to systemic problems gumming up the approvals process.

Recently, the Canadian Federation of Independent Business (CFIB) released a report that indicated just how much excessive document requirements for renovation permits are hurting supply.

The CFIB analyzed permitting costs and requirements for a $20,000 project to convert a simple powder room to a full bathroom in 12 major cities across Canada.

The result?

A significant bathroom renovation in Toronto would require 10 forms and permits to be submitted and add significantly to construction costs, according to the report, aptly called Flushing Out the Nonsense. The documents include floor plans, an application to construct or demolish, and even a review by an architect or engineer which could add five to 20 per cent to the cost.

If that is the case for a bathroom renovation, can you imagine the challenges faced by developers and builders when they are trying to build an entirely new home, condo, or subdivision?

The administrative burden also does not bode well for efforts to quickly build more affordable housing. Nor will it help when it comes to building more purpose-built rentals in places like Toronto.

Rents in Canadian cities have been rising quickly. Rental.ca reports that the average asking rents for all residential property types in Canada ended 2023 at a record high of $2,178, up 8.6 per cent from a year earlier. The average rent for a one-bedroom in Toronto was $2,521, up 2.6 per cent year-over-year, and $3,314 from a two-bedroom, up 3.1 per cent year-over-year.

Over the past two years, asking rents in Canada have increased by a total of 22 per cent, or an average of $390 per month.

Compare the scenario to the U.S. where rents were flat to negative in 11 of the 12 major markets in 2023.

The reason? A lot of apartments have been built south of the border which has put downward pressure on rents. There has been a generational high in apartment construction that is expected to continue this year.

To move the needle here in Canada, we must find ways to get shovels in the ground quicker – for all types of housing. One way to do that is to streamline and digitize the development approvals process.

RESCON and other stakeholders have been at the forefront of advocating for a more standardized process in Ontario for decades and have proposed the One Ontario platform as a solution. The platform connects information and processes across many authorities involved in approvals. It is now ready to deploy but requires adoption by the provincial government.

Digitization would speed up the process. It would also reduce the cost of construction. Approval delays can add eight to 14 per cent in additional construction-related costs to a project annually.

Our industry is facing strong headwinds in 2024 and early indications are that we are heading in the wrong direction when it comes to housing supply and affordability. Digitizing and streamlining development approvals would give us a fighting chance at turning the ship around.

Richard Lyall is president of the Residential Construction Council of Ontario (RESCON). He has represented the building industry in Ontario since 1991. Contact him at media@rescon.com.