Month: January 2021

COVID-19 will have lingering effects on the supply of new housing in Ontario for years to come.

Developers delayed most of their projects, which were in various stages of construction, over the past year as they came to grips with the pandemic. While the industry has bounced back, there is still much work to do.

The setback will result in belated occupancies on more than 8,000 housing units by the end of 2021. This is cause for concern because we already have a shortage of housing in Ontario, especially in the City of Toronto, where population growth is outpacing new home construction.

Reports suggest we need to build 1.8 million homes over the next 24 years to keep up with projected population growth, but we’re short an average of 12,000 units a year, or 288,000 over that period.

While immigration has declined as a result of the pandemic, Canada’s population is still expected to grow by up to 50% over the next five decades, with Ontario accounting for a good chunk of that growth, which will put even more pressure on our province to provide housing. In other words, a perfect storm is brewing because the population is upsurging and there simply won’t be enough homes to house everybody in the years ahead unless we find a way to bring more units on stream.

It’s critical now, more than ever, to explore innovative ways to get housing built. We’ve chronically underproduced for years, because it takes too long to build in the province, and it will hamper our economic recovery from the pandemic. A University of Toronto study from 2017 found that rezoning for the city’s high-rises, as one example, averaged three and a half years, well beyond the target timeline of nine months. Tens of thousands of housing units are also held up in the appeals process.

The Residential Construction Council of Ontario (RESCON) produced a report, Streamlining the Development Approvals System in Ontario, Modernizing, Digitizing, and E-permitting, which indicated that obtaining a site plan approval from municipal authorities in Ontario almost always exceeds the established 30-day timeline, taking up to 180 days on average. The entire approvals process takes an average of 249 days, almost 100 days more than the average taken for other OECD countries, according to our research.

The solution?

A streamlined and standardized digitized e-permitting system would be a good start. RESCON has been working with ACEO Innovation Lab and other partners in the industry to promote a One Ontario venture that would come up with a set of provincial data exchange standards for use by municipalities.

A unified framework such as this would help speed up approvals by eliminating redundant digital customizations in every municipality. We are hopeful that funds from the Ontario Onwards Acceleration Fund can be set aside for the venture.

Reports prepared for RESCON by the Canadian Centre for Economic Analysis suggest that improving the system would create thousands of new housing units and spur tremendous economic growth.

In the GTA alone, an additional 43,700 more housing units could be built over the next five years if the development approval processes were reduced by just six months. In the meantime, it would also result in 60,100 additional jobs and $6.7 billion in added annual GDP over the same time period. Over 25 years, the GTA could see as many as 100,700 additional units.

Adding new housing stock relative to demand would help make homes more affordable. Not only that but housing, like many other infrastructure and capital investments, also stimulates ongoing economic activity even after homes are constructed, by way of rent, utilities, maintenance, or renovation work.

COVID-19 has no doubt put the system under more pressure and worsened the housing shortage. We need to fix our complex regulatory system and lengthy timelines because they’re barriers to new housing. We’ve had a supply shortage that’s protracted for a generation and driven up costs.

It is now time for concrete action.

 

Richard Lyall, president of RESCON, has represented the building industry in Ontario since 1991. Contact him at [email protected]

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End user condominium purchasers can be surprisingly oblivious to not only their rights owners, but also how good governance can reduce both their short- and long-term monthly maintenance fees.

“Even current owners don’t know how condo corporations are run,” said Alex Balikoev, senior vice president of sales at Sotheby’s International Realty Canada. “That’s why some buildings have higher condo fees—because owners aren’t involved, not because they’re lazy, but because they’re not aware to what extent they can become involved.”

Higher maintenance fees can, of course, diminish a unit’s competitiveness on the resale market. Balikoev cannot count how many times he’s encountered sellers whose reasons for listing were exorbitant monthly fees and dislike of how their buildings were run.

“When people complain about how their building is run, my answer is,’ Why don’t you do something about it?’ People don’t realize they have power over management,” said Balikoev.

An example of good governance, he added, is interviewing 10 to 20 contractors, rather than only three or four, for maintenance work and selecting the cheapest and best one.

“It comes down to how active and involved a condo corp is,” said. “Be aware of who’s on your board of directors and how to get a hold of them. Know when your meetings are, and go to them.”

Balikoev also noted that buildings with larger units tend to have more involved owners because they have more skin in the game by virtue of having to pay higher condo fees.

“I live in a condo with over 350 units, but only a few people show up to board meetings, which is surprising to me. Being on top of things is paramount for the wellbeing of a condo corporation because you can make sure it’s run properly.”

In the luxury segment of the condo market, condo corporations often have strict policies about noise and pet ownership. Moreover, maintenance fees go to atypical services.

“Some of the funds in the annual budget are allocated to services that aren’t typical of a condo corporation, like newspaper delivery, butler service, valet parking, cleaning services, etc.,” said Matt Smith, a broker with Engel & Völkers Toronto Central. “It’s important to understand what the maintenance fees cover because they often appear high compared to other properties, but once you dig deeper, there are often many value-add services that are included in those fees.”

Smith advises his clients to thoroughly examine condo corporations’ financial records before purchasing a piece of real estate in those buildings.

“We recommend obtaining as much information as possible about pending assessments, pending fee increases, potential capital improvements—anything that could affect the financial picture of the corporation,” said Smith. “Don’t be shy to reach out to the board members as well; if well-managed, they are usually proud to share information about the building and the details of the condo corporation.”

Balikoev echoed Smith, stating that buyers should know what they’re buying into, especially because some buildings have artificially high maintenance fees that he suspects are intended to be exclusionary.

“The average monthly condo fee is $0.60 per sq ft while older buildings could be $1 a sq ft, and that’s fine, but some buildings are $1.50-2.00 per sq ft, and if you look into the financials of the buildings there’s no reason for them to be so high,” he said. “There are several buildings in the city where owners and condo corporations keep fees high to become more restrictive of income classes, so that they become like golf clubs. It filters out the crowd.”

Beginning this year, condo purchasers will be given the Ontario’s Residential Condominium Buyers’ Guide, as mandated by the provincial government to ensure buyers are aware of their rights and obligations, and part of it covers condo corporations. Balikoev lauded the move.

“The condo guide will help first-time buyers and explain how a condo corporation is run and what their role, as owner, in the corporation is. First-time buyers, especially, probably grew up in freehold homes and aren’t accustomed to how condos are run.”

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Beginning this year, condo buyers will receive the Ontario’s Residential Condominium Buyers’ Guide upon their purchase. Here’s what’s inside.

The guide advises securing the services of a legal professional to help you sift through involuted documents—including the Preconstruction Agreement of Purchase and Sale—as well as to understand the different kinds of condominium corporations, because choosing the wrong one could easily devolve into a nightmare.

Researching builders is imperative, as noted by the provincial government’s mandatory new guide. While the guide advises homebuyers research builders through Tarion, we at CREW recommend you visit builders’ past developments and ascertain for yourself if the quality is to your liking. Don’t be shy about asking residents how satisfied they are with their units, and remember that you can’t go wrong with perusing builder reviews online.

Have a lawyer review the purchase agreement because it must be fully understood before signed. The seasoned eyes of a legal professional will explain to you what the risks are in purchasing a preconstruction unit, as well as what the stipulations are for terminating the deal on either end.

The joint Tarion and Home Construction Regulatory Authority (HCRA) Addendum includes warranties and important dates, while the disclosure statement educates about bylaws and rules for condo corporations, as well as the budgetary statement for the corporation’s first year.

Under the Condo Act, builders hold all of the funds, including deposits, they receive in a trust, and if the project is terminated the monies will be returned with interest, as required by the Tarion Addendum. Homebuyers’ deposits and other payments fall under the Ontario New Home Warranties Plan Act, which covers up to $20,000. Upon entering an agreement, the buyer is entitled to a 10-day cooling off period during which they can contemplate whether or not their purchase is right for them.

The guide also explains to buyers under which conditions a condo project can be cancelled, which include failure to sell enough units, failure to secure financing, and delays in obtaining necessary planning approvals.

If the purchaser wants to lease their unit, they should familiarize themselves with the Residential Tenancies Act (2006) and their condo corporation’s rules governing rentals.

Understanding interim occupancy is crucial for buyers of preconstruction condominiums, particularly if they’re first-time purchasers. When the builder lets the buyer take possession of their unit before title has been registered, which is required to obtain a mortgage, the purchaser will pay the builder occupancy fees. The fees cannot exceed monthly interest on the unpaid balance of the purchase price, the estimated monthly municipal property taxes, and projected maintenance fees.

Don’t forget the pre-delivery inspection (PDI) because it can uncover deficiencies, whether sloppy craftsmanship or actual damage, in your unit. If any issues are noted, a PDI form will be filled out to establish that the defect occurred before you took occupancy, thereby absolving you of responsibility. However, the PDI form isn’t a warranty, and whatever defects haven’t been rectified before you move in must be catalogued on a 30-Day or Year-End Form.

In addition to knowing your obligations, know your rights. Every unit owner has the right to vote in owners’ meetings, seek election to the condo board (provided they’re qualified under the Condo Act), review the condo corporations’ financials, the documentation of meeting minutes, and more. To become a director, the candidate must be an adult with without bankruptcy status, not have been found incapable of managing a property by the courts, and meet disclosure obligations.

The Ontario’s Residential Condominium Buyers’ Guide provides a detailed explanation about how to become elected and the myriad responsibilities election entails, including how to handle governing documents. It also teaches preconstruction condo buyers about different types of insurance and what the rules are governing common areas.

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