Condo boom? Why not an “affordable housing boomlet?”

I just learned that half of North America’s construction cranes are in Toronto this year. So why aren’t they building affordable housing?

They could be.

Last month, the Toronto Star described how Toronto’s condo boom could bring with it a mini-boom in affordable housing. Tridel will be building 12 affordable units into its new Ten York, a 62-storey luxury tower near the Air Canada Centre. Another 40 – 50 affordable units in other downtown buildings are in the works, thanks to the efforts of Ward 20 Councillor Adam Vaughan.

The Manitoba Government is going one step further, introducing a bill that would allow municipalities to enact inclusionary zoning by-laws. These by-laws could require a certain percentage of any new housing development to be affordable.

In the US, New York City, Boston, San Francisco, San Diego, Chicago, Philadelphia and Baltimore all have some sort inclusionary housing policies, ensuring new developments include a pocket of affordability.

Why not in Toronto? Why not everywhere?

The public benefits of inclusionary housing are obvious. Wherever new condos rise up, so does the stock of affordable housing – at no cost to the taxpayer. Instead of an increasingly polarized city where only the rich can live downtown, we create seamlessly mixed-income neighbourhoods. Clerks, cooks, and child care workers can afford to live near their work, and people with modest incomes can live where the services are.

It’s no wonder that Toronto City Council has repeatedly sought powers to enact inclusionary housing policies. In 2004, City Council called on the Province to amend the Planning Act to permit inclusionary zoning. It asked again in 2005, 2006, and 2007. In 2009, City Council adopted a 10-year affordable housing strategy that called again for permission to implement an inclusionary housing program.

So why isn’t it happening?

What possible objection could there be to powers that cost government nothing, and yet truly allow “all boats to rise” with new development?

Typically there are four. I pulled these objections from the comments section and editorials that trail media coverage of inclusionary housing. But I suspect spruced-up versions of these objections have blunted political will to make inclusionary housing happen.

Here’s my take.

Objection #1: No-one wants to live beside poor people.

That wasn’t Tridel’s experience at Ten York, where $4 Million units were snapped up. It hasn’t been the experience in Regent Park either. In fact, I am not aware of any evidence that inclusionary zoning drives down prices or makes units unmarketable. It seems that if it’s a good building in a good location, people will buy.

Objection #2: Why should low income people expect to live in neighbourhoods they can’t afford?

Because they were there first. The downtown neighbourhoods that are now the site of rapid condo development – think Bathurst and King, or Queen and Dufferin, or Dundas and Carlaw – all used to be working class neighbourhoods. Inclusionary housing merely ensures that pockets of these working class neighbourhoods remain.

Besides, preserving affordable housing in the downtown is good for us all. It’s far cheaper to keep the people who depend on transit and other public services downtown than to spend billions bringing services to the suburbs after downtown residents have been pushed out.

Objection #3: New condo buyers shouldn’t have to subsidize their next door neighbours.

Nor do they. The price of a new condo is not based on the developer’s costs. It is set at whatever the market will allow. (Just as the resale price of my own home has tripled since I bought it, not because my costs have increased, but because the market has.)

Of course, if the building’s total revenues can’t cover its costs – including the costs of complying with government regulations [1] – then the developer simply won’t build. But it is economic trends, interest rates and consumer confidence that set the price – not the incomes of the people next door.

Objection #4: Developers should not be expected to carry the cost of a social program.

This is the big one. The development industry often argues that public programs should be funded by the public – not by a single sector. I’m all for that! I’d love to see the development industry channel its considerable political power into a call for comprehensive affordable housing funding.

But developers are not right to frame inclusionary housing as a tax on development or a seizure of their rightful profits. It seems to me that any time the City up-zones a property it is conferring a benefit — often worth many millions of dollars — to the owner. The City also enriches local property owners when it invests in nearby streets, sewers, schools or subways. Inclusionary zoning simply asks why the entire value of these public benefits should stay in the hands of developers.

Section 37 deals such as the Ten York project brokered by Councillor Vaughan re-capture some of these benefits. It’s a great start. But what about the developments in other wards, or those that don’t require the rezoning needed to trigger Section 37 negotiations? They too benefit from public investment. Including a few affordable units seems a reasonable way to give back.

Can inclusionary housing solve Toronto’s housing woes?

No. Inclusionary housing has its limits. It only works in a hot development market – you need new buildings to put the affordable units in! And it doesn’t deliver deeply affordable homes. For that you need government funding.

But why waste any opportunity to create affordable homes and keep the “mix” in mixed-income neighbourhoods?

In her latest blog Chief Planner Jennifer Keesmaat called Toronto’s growth “astronomical.” Will there ever be a better time to act?

[1] We take for granted that building codes, fire codes, height restrictions and dozens of other government regulations will limit developer’s profits. These regulations aren’t “taxes on development” or seizures of profits. These policies simply recognize that government has the right to uphold the public interest, even at a cost to developers.