Tag Archive for: Affordable

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We Need Housing that Families Can Afford

When we go to the Committee of Adjustment or TLAB to oppose severance applications, we regularly hear the Planners hired by the builders say that their clients are increasing the supply of housing available to “young families”.

It sounds good, doesn’t it? The builders are helping young families get into the housing market.

You might think this post was going to address affordable housing in the sense of increasing the supply of affordable rental housing or housing for low-income families. Instead, we’re talking about housing that an AVERAGE family can afford.

If you follow the real estate listings in Long Branch, you’ll find that the average price of a home is $834,000. This reflects a mix of house sizes as well as condos and single detached homes.

Source: Zolo.ca

If you narrow this down to single detached houses, you’ll see listings in the range of $1.1 million to $1.7 million. From what we see, the lower end of this scale represents resale homes – a mix of bungalows and modest 2-story homes with 3 or 4 bedrooms.

The upper end of the scale represents homes that have recently been built. Usually, these are larger (approx. 2500 sq ft.), which is what builders say the market wants. And many of these homes are built on smaller lots – often 25-foot frontages – that do not leave much room for gardens or playing area for young children in the back yards.

This begs the question of whether these newly-built homes are within reach of “young families”

The Central Mortgage and Housing Corporation helps first time buyers get into the housing market by offering insurance on mortgages.

According to the CMHC, if you want to buy a home with a down payment of less than 20%, you’ll need mortgage loan insurance. This protects your lender in case you can’t make your payments.

CMHC mortgage loan insurance lets you get a mortgage for up to 95% of the purchase price of a home. It also ensures you get a reasonable interest rate, even with your smaller down payment.

Mortgage loan insurance helps stabilize the housing market, too. During economic slumps when down payments may be harder to save, it ensures the availability of mortgage funding.

However, if the home you want to buy is worth over $1 million – which is more the rule than the exception in Toronto – CMHC does not offer mortgage insurance.

Many mortgage lenders use a CMHC tool called the debt service ratio to determine if potential house buyers represent an acceptable risk. This means looking at the total household monthly income relative to expenses such as heat, hydro, gas, vehicle payments, loan payments as well as the projected mortgage payments to determine just how much house people can afford to buy.

To illustrate, let’s look at an example.

Assume a couple want to buy a home that’s on the market for $1.5 Million – about the middle of the range for newly constructed homes in Long Branch. Let’s also assume they are moving from a rental apartment into their first home and are able to come up with $300,000 as a down payment. This represents 20% of the value of the home.

They want to take out a 25-year mortgage, which would be at 2.5% per year. This would result in monthly payments of $5,383.40.

Now let’s look at their monthly expenses.

Property taxes in Toronto average about 0.45% of the assessed value, which we will assume is the $1.5 million they expect to pay. Their monthly property taxes would work out to $563.75.

Both husband and wife have credit cards and their combined balance each month is $600. Heating their new home could be expected to cost of the order of $200 per month for gas or oil.

When we add up all these expenses, we get monthly expenses of $6,747.15.

The threshold lenders use when determining if a client is credit-worthy is that monthly expenses not represent more than 40% of the combined income.

Using this, for our couple wanting to buy a $1.5 million home, their household income before taxes would have to be at least $202,414. We’ve been very conservative on our estimate of credit card debt and we haven’t allowed for a car loan or lease.

In Toronto, the average household income is $102,721, based on 2015 census data. However, households with incomes over $200,000 represent less than 10% of all households. Household incomes over $200,000 are the exception, rather than the rule.

Such high income levels are not characteristic of “young families”. They represent the elite, not average or typical small families.

So, it doesn’t sound like our young family could afford one of the new homes being built. They might, however, be able to afford something closer to the average in Long Branch. It might be more modest than one of the newer homes, but it most likely will have character and be well-built. And it would be affordable for them. And an entry point into the housing market.

So, a message to planners: please don’t insult our intelligence by trying to pass off developments that will be sold at the high end of the price spectrum as being a way to help “young families” participate in the housing market. The numbers just don’t add up!

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The Economic Issue of Affordable Housing

Housing is affordable, on average, if housing costs can be limited to 30% of a family’s after tax annual income.  Housing includes home ownership and rentals.

Mathematically, a couple whose combined after tax income is $100,000 a year (gross income of about $66k each) would have an upper housing cost limit of $30,000/yr. or $2,500/mo.

Someone paid minimum wage of $15/hr. makes about $30,000 before tax and $25,200 after tax (approx. 16% effective tax rate).  For a couple each making minimum wage their combined after tax income is $50,400 and their housing limit is $15,120 or $1,260 per month for a couple.  For a single person the limit is $630 a month.

The problem with persistent house price escalation is that housing prices can become out of reach for people with lower incomes.

Housing prices rise but, as long as the rate of rise is within capacity of the local economy to absorb, rising house prices are not a significant issue.  A significant issue arises when housing prices rise above what the local economy can really afford. 

There is all sorts of evidence that house pricing has exceeded those limits.  Renovictions, increased Food Bank reliance, increased homelessness are all symptoms of housing costs that are too high.

Solutions proposed that increase housing supply but which are beyond the affordable price range won’t solve high housing prices. Increasing the supply of unaffordable housing doesn’t help and in fact delays other housing solutions.

For the past ten years or so, external demand has increased the price of housing far beyond the capacity of the local population to pay.  Stated another way, how can a local economy with average pay increase of 2% a year cause a housing bubble that saw on average 11.5% increase compounded over the past 10 years.  Until about 2010 the rate of housing increase was about 2% similar to the rate of increase in salaries and inflation.    Something else, beyond the regular local economy has caused significant housing appreciation.

There are likely several sources of external financing that have grown our housing costs.  Pension funds, Investment funds and other large institutions with significant funds to “invest” and others with less of significant fund access have set up investments that capitalize on housing growth.  With rates of return as high as 11%, housing investment is seen a perfect combination of low risk and high return.

Another issue is immigration that tends to move too often to the largest cities. Immigration in the recent past has grown the population, not just replaced our declining birth rates. 

However, unlike, in the past, when immigrants were encouraged to live in rural Canada, immigrants tend to gravitate towards urban centres. That’s where the jobs are. That’s where they are most likely to find elements of their native culture. That’s where they find fellow ex-pats to bond with.

Unfortunately, the Government has seemingly overlooked the needs of immigrants after they arrive in Canada.  Infrastructure such as housing, schools or health care has not kept pace to accommodate the population increase. And finding affordable housing – whether it be ownership or rental – is a prime need for immigrants to be able to settle in their adopted country.

Regardless of the specific source of the financing, the fact that locals are regularly outbid by investors for housing is an economic disaster that continues.  Most countries restrict foreign purchasing of housing, but not Canada.  Canada is one top 10 most desirable countries to live in in the World and the locals have no protection from inflationary housing investment. 

The big money is moving in and the incumbents are being forced out.  This is wrong.  Locals vote, foreign investors don’t.

We need to take steps to significantly reduce housing purchasing by investors – foreign or otherwise- that limits excessive increases and maintains housing at a cost that the locals can afford.   To allow otherwise is irresponsible.  Perhaps a start would be to monitor and report housing inflation and establish benchmarks to maintain similar to how we manage to a 2% inflation target.

To learn more about this, The National Post has an excellent article.

About the author: This post was contributed by Ken O’Brien. Ken is a member of the Board of the LBNA and serves as Treasurer.

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City-Driven Intensification

City Planning has proposed increasing the density in the area around Long Branch Station from a maximum density of 0.35 FSI in Long Branch to a minimum density of 0.6 FSI.

What is behind this proposed intensification and what are its ramifications for us as residents?

Affordable Housing

Excerpt from City Planning document proposing intensification targets., This excerpt is for Long Branch.

The idea behind Planning’s proposal is that it would encourage construction of more affordable housing in Long Branch and Alderwood. They’re not necessarily proposing a high rise jungle like in Mimico: they’re thinking more like basement apartments, triplexes, garden suites and so on.

Current Zoning Permissions

The portion of Long Branch that would be affected by this re-zoning is currently zoned RM. That means you already are allowed to build multi-family housing such as semi-detached homes, duplexes, triplexes, and walk-up apartments. If you want to build a triplex, you can build up to 0.6 FSI already. Same for a semi.

So, this area is already zoned with intensification in mind.

But is this really going to be the result of this proposed change in density? And is there a need for such a change?

What Is Happening

Even with these permissions, developers haven’t been building duplexes or triplexes for decades. No semi-detached homes have been built in this area in the past 15 years. Nor have any triplexes or duplexes. They have, on the other hand, been very active in trying to sever properties to build homes that go on the market for between $1.3 and $1.6 million – hardly what you could call affordable. These homes are built for single-family occupancy, with no provision for having a separate entrance for a secondary suite.

We aren’t opposed to more affordable housing. We just don’t see how the proposed policies will generate more affordable housing for people who need it.

One thing that is NOT happening on this issue – whether here or in the neighbourhoods around other major transit stations where intensification is proposed – is public consultation. We know the developers have been actively and aggressively lobbying for less restriction on density. It’s only fair that the public be given an equal opportunity before this official plan amendment gets passed by Council.

How You Might Be Affected

Two oversized homes. The result of lot severing.

Should the proposed changes in density be approved as part of this official plan amendment, you could anticipate more applications to sever properties in the area shown on the map above. Instead of builders being limited to a ceiling of 0.3 FSI, it appears the City would be giving them carte blanche to build as large as they please and, with the new regulations favouring intensification, it will be very hard for residents to mount opposition.

In step with an increase in severance applications, we anticipate there will be further erosion of the tree canopy in Long Branch. In 2009, the tree canopy in Long Branch was measured at 26.5% coverage. By 2018, this had been slashed to 15.0% – the biggest decline in all of Toronto. The City has a goal of reaching 40% tree canopy coverage by 2028 – just 7 years from now – and it appears Long Branch will fall well short of this.

Just about every development application for a new build going before the Committee of Adjustment has removal or damaging of a tree as part of the application. Uncontrolled development could cause the tree canopy in Long Branch to go even lower.

The Process

This will be discussed at the October 28th meeting, which starts at 9:30 am, after which it will go to City Council for approval in November.

What You Can Do

Because Planning is regulated and administered by the City of Toronto, we suggest you make your views known to our representative, Councillor Mark Grimes. You can reach him at his office at (416) 397-9273 or by email at councillor_grimes@toronto.ca. Be sure to ask about how much Planning has obtained input from residents.

You can watch the meeting of the Planning and Housing Committee on October 28th by clicking on the following link: http://app.toronto.ca/tmmis/decisionBodyProfile.do?function=doPrepare&meetingId=21291

Even better, by writing to the Clerk of the Planning and Housing Committee, at phc@toronto.ca you can actually speak at the meeting to ensure your views are heard. Two Long Branch residents spoke at the last meeting of the Planning and Housing Committee. Why not you?

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