Item - 2023.PH3.6

City Council recessed its public session and met as Committee of the Whole in closed session on May 10, 2023 to consider confidential information on this Item as it pertains to a proposed or pending acquisition or disposition of land by the City of Toronto; position, plan, procedure, criteria or instruction to be applied to any negotiations carried on or to be carried on by or on behalf of the City; and financial information, supplied in confidence to the City of Toronto and CreateTO, which, if disclosed, could reasonably be expected to prejudice significantly the competitive position or interfere significantly with the contractual or other negotiations of a person, group of persons, or organization.

The Planning and Housing Committee recommends that:

Financial and Budget Considerations

1. City Council adopt the instructions to staff as set out in Confidential Attachment 1 to the report (April 13, 2023) from the Executive Director, Housing Secretariat, for the site at Bloor/Kipling Block 1 (5207 Dundas Street West).

2. City Council adopt the instructions to staff as set out in Confidential Attachment 1to the report (April 13, 2023) from the Executive Director, Housing Secretariat, for the site at 50 Wilson Heights Boulevard.

3. City Council adopt the instructions to staff as set out in Confidential Attachment 1 to the report (April 13, 2023) from the Executive Director, Housing Secretariat, for the site at 140 Merton Street.

4. City Council direct that Confidential Attachments 1 and 2 to the report (April 13, 2023) from the Executive Director, Housing Secretariat remain confidential in their entirety as they: pertain to a proposed or pending acquisition or disposition of land by the City of Toronto; outline a position, plan, procedure, criteria or instruction to be applied to any negotiations carried on or to be carried on by or on behalf of the City; and contain financial information, supplied in confidence to the City of Toronto and CreateTO, which, if disclosed, could reasonably be expected to prejudice significantly the competitive position or interfere significantly with the contractual or other negotiations of a person, group of persons, or organization.

5. City Council adopt the instructions to staff in Confidential Attachment 2 to the report (April 13, 2023) from the Executive Director, Housing Secretariat, subject to the City of Toronto being fully reimbursed by the Government of Ontario for the financial impacts/lost revenues as a result of the implementation of the Bill 23, More Homes Built Faster Act, with written confirmation of reimbursement to be received from the Government of Ontario.

6. City Council request the Chief Financial Officer and Treasurer , Deputy City Manager, Community and Social Services, Deputy City Manager, Infrastructure Development Services, in collaboration with the Chief Planner and Executive Director, City Planning, the Executive Director, Housing Secretariat and the Chief Executive Officer, CreateTO, to work with City divisions and agencies and look for opportunities to better align infrastructure and city-building projects and 10-year capital plans with the delivery of Housing Now sites.

7. City Council request the Executive Director, Housing Secretariat and the Chief Planner and Executive Director, City Planning, to explore ways to use the recently announced Federal Housing Accelerator Fund to support delivery of Housing Now sites, and other key city-building projects such as Quayside, Villiers Island and Toronto Community Housing Revitalization sites.

8. City Council request the Chief Planner and Executive Director, City Planning in consultation with the Executive Director, Housing Secretariat and the Chief Executive Officer, CreateTO to explore approved Housing Now sites and Housing Now sites that are yet to be re-zoned for opportunities to add additional residential density with the intention of increasing housing supply and supporting affordable housing delivery.

9. City Council authorize the Executive Director, Housing Secretariat, in consultation with the Chief Executive Officer, CreateTO and Chief Planner and Executive Director, City Planning, to report back to Council in 2024 with an update on the success of the market offerings referred to in Recommendation 5 above, and to recommend any further program changes required to scale up housing supply.

Program Considerations

10. City Council authorize the Executive Director, Housing Secretariat, in consultation with the Chief Executive Officer, CreateTO, to allow flexibility in the proportion of market rental and ownership units for Housing Now sites, while maintaining a minimum one-third affordable rental units on a program-wide basis, reflective of the geographic-specific market challenges and differences in land values across the city.

11. City Council authorize the Executive Director, Housing Secretariat, in consultation with the Chief Executive Officer, CreateTO and Chief Planner and Executive Director, City Planning to allow flexibility in the mix and types of residential units to be delivered at Housing Now sites, including permitting up to 10 percent of units as studios, or a greater amount for sites delivering new supportive housing, as appropriate.

12. City Council authorize the Executive Director, Housing Secretariat, in consultation with the Chief Executive Officer, CreateTO and Chief Planner and Executive Director, City Planning to use for each site an appropriate set of unit size requirements informed by: i) the Affordable Housing Design Guidelines and the Growing Up Guidelines for affordable rental units and market units, and ii) the type of supportive housing and requirements of tenants anticipated to occupy the affordable housing units  at Housing Now sites, with consideration of optimizing livability and ensuring appropriately-sized units for larger households.

13. City Council request the Executive Director, Housing Secretariat, in consultation with the Chief Executive Officer, CreateTO to look at opportunities to enhance accessibility and include more universal design features in affordable and market rental units at Housing Now sites.

14. City Council request the Executive Director, Housing Secretariat in consultation with the Chief Executive Officer, CreateTO and the Chief Planner and Executive Director, City Planning to ensure that all future Housing Now Initiative sites achieve the Toronto Green Standard Version 4 Tier 2 energy performance level with the aim of achieving net zero.

Land and Planning Considerations

15. City Council request the Executive Director, Housing Secretariat to move the site located at 1303, 1313, 1325, 1337 and 1345 Queen Street West and 220 and 224 Cowan Avenue ("Parkdale Hub") from being a 'pipeline' site to a Phase Three site to be offered to the non-profit, co-operative and Indigenous housing sectors.

16. City Council extend the application of the approvals and delegated authorities set out in Parts 1, 2, 3, 4, 5, 7, 12, 13, 22, 30, 33, 34, and 35 of Item 2021.PH28.2, as adopted by City Council at its meeting on November 9, 10 and 12, 2021 (Housing Now Initiative - Annual Progress Update and Launch of Phase Three Sites), to the site located at 1303, 1313, 1325, 1337 and 1345 Queen Street West and 220 and 224 Cowan Avenue ("Parkdale Hub"), in the in the same manner as the Phase Three sites approved in Item 2021.PH28.2.

Affordable Rental Housing Considerations

17. City Council authorize the Executive Director, Housing Secretariat to offer the Open Door incentives for affordable rental housing, for up to 90 affordable rental homes, for 99 years, and to exempt the affordable rental housing developed at Parkdale Hub, including any applicable ancillary and related amenity space in the Parkdale Hub, from the payment of development charges and provide a waiver of all planning and building permit fees and parkland dedication fees.

18. City Council authorize the Controller to refund any planning and right-of-way fees paid with respect to 1303, 1313, 1325, 1337 and 1345 Queen Street West and 220 and 224 Cowan Avenue, and waive any building permit fees associated with the future development of these addresses that form the Parkdale Hub.

19. City Council exempt up to 90 affordable rental homes anticipated to be developed in the Parkdale Hub from taxation for municipal and school purposes for the term of the municipal housing project facility agreement, with the property tax exemption having an estimated net present value of approximately $3.44 million over 99 years.

20. City Council authorize the Controller to cancel or refund any taxes paid for the affordable rental homes developed in the Parkdale Hub, after the effective date of the exemption for taxation for municipal and school purposes set out in the applicable municipal housing project facility agreement.

21. City Council authorize the Executive Director, Housing Secretariat to negotiate and enter into, on behalf of the City, a municipal housing project facility agreement (the City's Contribution Agreement) with the non-profit developers chosen for the Parkdale Hub, on terms and conditions satisfactory to the Executive Director, Housing Secretariat and in a form approved by the City Solicitor.

22. City Council authorize the Executive Director, Housing Secretariat or their designate, in consultation with the Chief Financial Officer and Treasurer,  to execute, on behalf of the City, any security or financing documents required by the non-profit developers of the Parkdale Hub to secure construction and conventional financing and subsequent refinancing, including any postponement, confirmation of status, discharge or consent documents where and when required during the term of the municipal housing project facility agreement, as required by normal business practices, and provided that such documents do not give rise to financial obligations on the part of the City that have not been previously approved by City Council.

23. City Council authorize the Deputy City Manager, Corporate Services, in consultation with the Deputy City Manager, Community and Social Services, to provide any consent necessary to transfer or encumber the Parkdale Hub or the affordable rental housing portion thereof, and to negotiate and enter into any agreements or other documents required to effect any future transfer or assignment of the Parkdale Hub or the affordable rental housing portion thereof, and the associated legal agreements with the City to another legal entity, on terms and conditions satisfactory to them and in a form approved by the City Solicitor.

Intergovernmental Considerations

24. City Council re-iterate its request that the Government of Canada and the Government of Ontario designate surplus land in Toronto to create purpose-built affordable and market rental housing as part of the Housing Now Initiative.

25. City Council request the Government of Canada and the Government of Ontario to support the delivery of purpose-built affordable and market rental housing on Housing Now sites, and other projects in Toronto by:

a. waiving their respective portion of Harmonized Sales Tax (HST)/Goods and Services Tax (GST) on new affordable rental; and

b. deferring HST/GST on market rental units, interest-free and re-payable after first 10 years following occupancy of projects.

26. City Council request the Government of Canada and the Canada Mortgage and Housing Corporation (CMHC) to consider enhancing its existing programs under the National Housing Strategy, including the National Co-Investment Funding (Co-Investment Fund) and the Rental Construction Financing Initiative (RCFI), to make them feasible within the local Toronto market context:

a. Increase the minimum length of affordability required on projects to optimize public investments and better align with City of Toronto programs;

b. Develop a core group within CMHC that deals with large scale priority projects, including Housing Now sites, with a mandate of expediting the review of complete funding and financing applications;

c. Develop a grant allocation mechanism for CMHC programs which reflect geographic-specific land and construction costs relative to market rents, as well as housing need and demand;

d. Remove the nation-wide per door maximum grant contribution of $25,000 under the Co-Investment Fund, and consider grants of at least $50,000 per rental unit in Toronto and similar urban areas, reflective of the higher cost of building and to support project viability;

e. For RCFI loans, reduce the minimum debt service coverage ratio to 1.0x for residential component with an overall project debt service coverage ratio (DSCR) of 1.05x;

f. For RCFI loans, offer an additional 10-year term renewal for a total potential loan term of 20 years;

g. For both the Co-Investment Fund and RCFI loans, reduce the mortgage stress spread to 50 bps over the 10-year Government of Canada Bonds;

h. For both the Co-Investment Fund and RCFI loans, use projected stabilized net operating incomes (based on market and affordable rent growth) for projects when calculating supportable debt;

i. Lock in interest rate the earlier of executed copy of the commitment letter or conditional construction permit by proponent;

j. For non-profit projects, reduce the security/collateral required in order to make the programs accessible and to help build capacity in the sector; and

k. Permit initial and subsequent monthly loan advances to occur in amounts equal to the developers equity contributed for that month as payments required for the project after the later of the construction start and the proponent having submitted a satisfactory guarantee for 50% of their estimated required project equity.

27. City Council request the Government of Canada and the Canada Infrastructure Bank to make the non-housing infrastructure components of mixed-use/residential projects, including residential building components that enhance sustainability, to be eligible for Canada Infrastructure Bank low-cost financing programs, and allow stacking with Canada Mortgage and Housing Corporation programs, to optimize public investments, increase housing supply within complete communities, and support climate action.

28. City Council request the Government of Ontario to support the delivery of new affordable rental housing projects, including Housing Now sites, and provide grant funding and low-cost financing to augment federal and City efforts to ramp up housing supply across Toronto.

The Planning and Housing Committee recessed its public session to meet in closed session:

- to consider a proposed or pending acquisition or disposition of land by the City of Toronto;

- to consider a position, plan, procedure, criteria or instruction to be applied to any negotiations carried on or to be carried on by or on behalf of the City of Toronto; and

- to consider financial information, supplied in confidence to the City of Toronto and CreateTO, which, if disclosed, could reasonably be expected to prejudice significantly the competitive position or interfere significantly the competitive position or interfere significantly with the contractual or other negotiations.

The Housing Now Initiative is a signature affordable housing program in Toronto and across Canada. It is also a key housing supply program to support the City's HousingTO 2020-2030 Action Plan and Housing Action Plan 2022-2026. Through the Housing Now Initiative, the City of Toronto has dedicated 21 of its prime transit-oriented sites, and earmarked another five pipeline sites, for the delivery of purpose-built affordable and market rental housing within mixed-income, mixed-use and complete communities. To-date, the City has committed over $1.3 billion in land value, capital funding and financial incentives to the program, making it one of the most significant municipal financial investments in housing underway today.

Although the Housing Now Initiative was first approved by Council at its meeting on January 30 and 31, 2019, (Item EX 1.1), and ten sites have been re-zoned to-date, with six market offerings completed, construction has not yet started on any site. This is primarily due to slow downs resulting from the COVID-19 pandemic, current macroeconomic factors impacting the delivery of construction projects, and recent federal and provincial actions impacting Toronto. Specifically, construction costs have increased by over 63% (more than 20% year-over-year) since 2019, making Toronto the most expensive city in Canada to build high-rise residential. Construction costs have also increased nearly four times faster than rents over the last three years. Additionally, recent changes to federal National Housing Strategy programs have resulted in capital grant funding allocations being capped at levels insufficient to support the cost of developing new housing in this city. At the provincial level, the implementation of the Bill 23, More Homes Built Faster Act ("Bill 23") has eliminated housing services Development Charges revenues, which has been the City's primary funding tool to deliver new housing supply. These factors, along with significant increases in interest rates, labour shortages and global supply chain disruptions impacting the availability of materials, have resulted in many housing projects being stalled in Toronto.

At the same time, the need for more purpose-built affordable and market rental housing in the city has never been greater. The current residential vacancy rate is around 1.7%, there are over 10,800 people experiencing homelessness each night, about 40% of the city's renter households (223,188 households) are living in unaffordable housing, and home ownership rates are dropping as affordability falls to the lowest level on record. There is also increased pressure to expand rental housing supply to support population and economic growth through immigration, with federal immigration targets of 500,000 annually by 2025, and a significant portion likely to settle in Toronto.

This report makes a number of recommendations to City Council to help 'unstick' Housing Now projects that can be quickly activated, including ones where developer partners have been selected, and others that have been re-zoned and are ready to be offered on the market in 2023. The sites referred to in Recommendations 1, 2 and 3 of this report are already in-flight and are anticipated to start construction in late 2023, subject to Council's approval of the instructions to staff outlined in Confidential Attachment 1. To advance all other sites, key recommendations include taking a geographic-specific approach to site delivery (including the tenure, mix and types of units), and offering financial grants/contributions particularly for non-profit projects and those located in market zones with lower land values, provided that the City is reimbursed by the Government of Ontario for the housing services revenue losses being incurred as a result of Bill 23 ($120 million per year). In the event that the provincial government does not provide or commit to a multi-year reimbursement of lost revenues beginning in 2023 by the third quarter of 2023, the City will not be able to advance any future Housing Now sites, including the ones earmarked to proceed in 2023/24.

Furthermore, this report outlines a number of other urgent actions required by the federal and provincial governments to support City efforts and to meet their own ambitious supply and growth targets. In the absence of coordinated and sustained action across all orders of government, and new and enhanced investments in housing, the City of Toronto, the Government of Ontario and the Government of Canada will be challenged to deliver the 'right' type of housing supply to meet the needs of current and future residents and support the economic and social growth of the region, province and country.

The recommendations in this report are intended to balance the critical need for more purpose-built affordable and market rental homes with the current market and regulatory forces impacting development projects. They also support the City's shift towards a human rights-based approach to housing by ensuring that a range of new homes, for a range of incomes and needs, can be delivered in all areas of the city despite sub-market differences.

This report has been informed by a number of key stakeholders including City and CreateTO staff, and external housing policy and housing development experts and academics who comprise the Rental Housing Opportunities Roundtable which was initiated in January 2023 following City Council direction through Item 2022.EX34.1.