The Real Estate Supply Crisis Archives

How To Add Secondary Units (or ADUs) in Ontario

The New Legislation:

Back in 2019 the Ontario Government introduced a law that allows up to 3 units on a single property without a zoning bylaw amendment. It was up to municipalities to individually change their zoning bylaws and now in 2024, the majority, if not all municipalities across Ontario have implemented some version of this bylaw. Some municipalities are allowing up to 4 units without requiring a zoning bylaw amendment. This may not seem like anything special to an outsider, but this is a very big change in the status quo. If you’ve ever tried to change a zoning bylaw or know someone who has some form of development you’ll understand what I’m talking about.

How Things Used to Work:

Let’s talk about how things would have worked prior to this new law in order to give you a better idea about how these changes make building housing easier. For those who are unaware of how land planning works in Ontario here’s a brief synopsis. The Ontario government administers something called the Planning Act which is the overarching legislation of what Ontario as a province wants to achieve with respect the land use, housing, transportation, environmental concerns etc. The Planning Act provides the basis for each individual municipal government to come up with something known as an Official Plan for their city. This document outlines on a more granular level how the municipal government plans to use all of the land in their municipality. They administer things like building permits and enforce zoning bylaws. A zoning bylaw is effectively a list of requirements for each land use zone. For example you might have agricultural zoning, single family residential zoning, industrial zoning, retail zoning, or mixed commercial and residential zoning. Each of these zones will have rules like maximum building height, minimum setback from the lot lines, maximum buildable areas, parking requirements, etc. Most municipal websites have all of this documented and easily accessible so if you’re curious or you plan to build or develop land, it’s always advisable to get familiar with your zone. You can also find past city council decisions on the municipal website or the Ontario Land Tribunal website to learn what council tends to decide when people want to apply for special exceptions similar to one you might be considering. You can also call up the city and ask a city planner there if your proposed change would fall within the zoning bylaw.

Generally speaking if the change you want to make to your property is within the zoning bylaws rules, even if it’s a teardown and rebuild, you will have no trouble applying for a building permit. However, if you are proposing a change that falls just outside of the zoning bylaws you‘ll have to apply for a minor variance (e.g. taller building height than generally allowed). Depending on how big the change is and how reasonable the city views the change with respect to the surrounding properties you may or may not have your minor variance accepted. This process alone, can sometimes take multiple months depending on how back logged the city is. Then we get into the big scary monster of trying to re-zone a property. All I have to say is best of luck to you if you plan to re-zone something. I hope you have lots of time and lots of money ready to go. Changing zoning bylaws is a system that, in my opinion, was not very well thought out and now leads to significant delays in housing development.

Before this new law allowing up to 3 units on a single lot. If you wanted to change your “single-family residential” property to 3 or more units, that would usually fall well outside the current zoning bylaw and you would have to apply for a re-zoning. When you apply for this re-zoning, you have to hire planners and architects to prepare a proposal for the city, then once the city has received your proposal they put up a big sign on the property explaining the proposed change. Then they mail out a letter to all surrounding properties explaining the proposed change, and set a date allowing people to voice their concerns. Overall, I’m in favour of allowing people who have pre-existing homes to voice their concerns, especially if the proposed change could or would have an impact on the property owners quality of life or impede on their existing properties somehow.

However, like anything, you will get people who will simply disagree for the sake of disagreeing and will not allow ANY change to happen no matter how small. This is where this process falls apart in my opinion (and where the term NIMBY comes from). As cities grow and run out of land, the natural progression is to increase density. So as property values increase you will get developers or homeowners who would like to add a second or third unit legally to their property in order to help pay for the mortgage or simply to add more housing supply to an already suffocating city. But often times this means a re-zoning application. So instead of the city being able to simply approve the building permits and plans like they can now thanks to the updated legislation. There would be a whole rigamarole process that could often take multiple years and could even involve lawyers or paralegals to represent the arguing parties, which adds expense and delays to what often times could be a more simple process.

So effectively your options were, build a unit illegally and hope no one finds out (like a lot of Brampton, sorry Brampton), or spend multiple years and lots of money fighting for a simple change that at most will add a car or two to the street and probably won’t inconvenience your neighbours. I think that two things can be true at once, people having the right to voice their concerns, and the city looking out for the citizenry as a whole. They should consider the needs of the city and make decisions that help solve problems rather than exacerbate them.

Thoughts on a New System of Land Development:

Briefly, I want to discuss very big redevelopment projects and the problem with the way things are currently done. I think that the city requiring developers to submit a plan first and THEN allowing citizens to voice their concerns, and (usually) tear it top bits, is counter-productive and wastes everyone’s time and money. In my opinion a better approach could be allowing citizen to voice their opinions BEFORE tens of thousands of dollars have already been spent (sometimes more). This would allow community groups to consult on how land will be redeveloped alongside developers, architects, and city planners to come up with a plan that considers everyone’s interests BEFORE submitting the application and proposal to the city. I think this would ultimately speed up the city planning process and would make all parties much happier in the end rather than standoffish. With this model all stakeholders were considered and collaborated in the creation of this new development. I’m not sure how practical something like this would be but I think it’s worth considering as a better method of city planning.

What The New Legislation Makes Easier:

As mentioned the new rules allow up to 3 units per lot. Depending on your municipality their implementation of the rules might be a little bit different. For example in Toronto depending on your property you may have access to a laneway, which could allow for the construction of a laneway house or Accessory Dwelling Unit (ADU). There are already companies out there which specialize in developing plans for laneway suites. If you want to find out if your property is suitable for a laneway suite there is a very handy tool called adusearch.ca which allows you to looking up certain cities and determine if your property can have one. In Toronto a majority of the existing land can have an ADU built. There is potential for over 400,000 new units (either attached or accessory to the existing building). The website says that there are currently 126 permitted ADUs in Toronto, I’m not certain I believe that the number is so low. But it could be that most basement apartments in the city do not have permits or maybe don’t fall under their definition of ADU.

In other cities like Mississauga for example you would most likely be looking at building a basement apartment, garden suite, or garage conversion. This was approved very recently in Mississauga in November of 2023. I would recommend looking at proposed bylaw amendments that show how a potential garden suite could be constructed (it’s also just fun to look at the renders). You can find the meeting notes here (pg. 83-134, pg. 112 and beyond are the renders). Depending on the size of your particular lot the allowable garden suite size will vary up to a maximum of around 1000 sq ft. The Region of Peel also has a forgivable loan program which can provide around $20,000 to upgrade a pre-existing basement apartment to a legal basement apartment if certain conditions are met. There might be similar programs in your region or municipality and if you are considering developing a secondary unit I would highly recommend speaking to the city planners at the city and expressing your intentions to see if they might be able to help you with your planning process and make sure that it goes according to plan.

It’s Still Not Enough:

While it’s great that all these changes are being made to add density. Quite honestly, all of these will be a drop in the bucket compared to the actual amount of housing that is needed across the province to help solve our housing crisis. Larger developments and purpose built rental housing will be more likely to put a real dent in the situation. While there is more funding at provincial and municipal levels to speed up development approvals and speed up timelines at the Ontario Land Tribunal we are still quite a ways away from building the housing that is going to be required to improve our current situation. We can’t solely rely on the private sector to develop all the housing the province needs as has become very apparent over the past few decades. There have been improvements to purpose built rental housing over the past few years after an almost 30 year lull in development thanks to different programs that assist larger developers in either redeveloping older properties or providing them HST breaks among other things to make the numbers actually make sense for this type of development. However, I do hope that many people decide to take advantage of the easier development and approval processes across Ontario because any amount of new housing is better than no new housing.

As always thank you for reading, feel free to let me know what you thought in the comments or via email. I’ll see you back here in two weeks.

All the best,

Oliver

Why Are People Leaving Ontario for Other Provinces?

People leaving Ontario for other provinces was a headline that really took off during the pandemic. Everyone was forced to work remotely and it opened up opportunities for mobility. It made good financial sense that you could keep your big city salary and move to a lower cost of living area to make your money go further. This led to a spike in inter-provincial migration numbers and local rural properties becoming more expensive as people left larger cities to find more space. However, for some people the choice to move may have backfired. I am aware of more than one person who moved out from Toronto with the expectation that they would be able to work from home for the rest of time and they ended up moving back in 2022 or 2023.

Migration out of Ontario has been quite variable over the years, from 2003-2015 there was net out-migration to other provinces, from 2016-2019 there was net in-migration, then largely due to the pandemic and skyrocketing housing costs Ontario saw out-migration from 2020-2022. However, Ontario is far from the worst. People have been leaving Quebec, Saskatchewan, and Manitoba every year since 2015 for other provinces. Alberta only recently saw more people come in than leave, as of 2021. Most of the Maritime provinces saw significant proportional spikes during the pandemic.

I could go on and on listing different datapoints, and really it wouldn’t matter all that much since the numbers of total migration between provinces barely tops 100,000 people per year in most years. When we’re bringing in 1,000,000 new residents to Canada in one year we have a larger issue at hand. The more important trends would be to see where people immigrate to, and as you might imagine people will immigrate to where they have the largest networks, or where the most jobs are which tend to be the larger cities. This means that the supply crunch in the Greater Toronto Area is not likely to see relief because people are unlikely to choose to immigrate or migrate in large numbers to other provinces where they don’t have a support network and fewer job opportunities. People want to be where things are happening, and the largest city in Canada, tends to be a solid go to choice.

If you have taken a trip on the TTC at some point in the past 2 years you would have likely seen at least one advertisement encouraging you to move to Alberta. The campaign Alberta’s provincial government came up with is called “Alberta is Calling” and they are pitching Alberta as “affordable, friendly, and rich in opportunity.” I’ve only been to Alberta once for a wedding in Banff, and from that experience I can say that it does have a lot of natural beauty. But from the news this past week, I can also say that it’s cold. -40° C cold. The -10° C in Toronto today feels downright balmy compared to that. Like most of Canada the cold doesn’t last forever and it does eventually just become part of your life, but I can’t help but point out the weather conditions as someone who prefers it to be a bit warmer.

I also want to touch on an article that I came across recently regarding Alberta’s immigration + migration capacity. As mentioned earlier, the whole of Canada is having a bit of a problem handling the number of people that immigrate here every year. Alberta’s campaign worked so well that there is a concern that they will not be able to meet the higher demands on their services like healthcare and education. They had 194,000 people come to the province last year which is a 4.3% increase in population. With the way things are going in Alberta and across the country. The investments and preparation to provide these types of services to a population influx has to take place years or months in advance. There is some concern that Alberta will not be able to just flip the switch to meet this new found demand. Eventually this problem will improve itself with the increased tax revenue from these new residents. But it will be reactionary, as most big moves in politics tend to be. Planning ahead seems to be verboten.

I do completely understand why some people might want to move to cheaper provinces with the current housing prices in Ontario and British Columbia. But comparing and contrasting Ontario with British Columbia shows an interesting trend. In 2020 Ontario saw net out-migration of -18,405, in 2021 it was -47,212. Surprisingly, or maybe unsurprisingly, British Columbia saw net in-migration throughout the pandemic. In the last 50 years BC has only seen 12 years where more people left the province than moved to it. Clearly, even with the highest costs of housing in the country, it is a place that people will sacrifice a lot, in order to have the pleasure of living there. If Alberta’s push to get people to move continues to be successful it is likely that a large number of the migrants into the province will come from British Columbia simply due to proximity, and of course high housing costs. As someone who has never been to BC but has dreamed of going there more than a few times, the pull of BC is quite strong.

The moral of all these inter-provincial migration numbers is that housing is still a crisis. People are not just contemplating moving to less expensive provinces, but are actually doing it. I believe this trend will continue for the foreseeable future, even with the historical investments in housing from all levels of government. Our economies have become so centralized, data is so accessible, and financial systems have enabled us to borrow huge amounts of money to purchase homes. We’ve underinvested in trades, have high numbers of immigration, and anticipate lower interest rates coming over the next decade. All of these factors combine to create a housing supply shortage and a financial system that will both work together to keep prices going up. We’re in a situation now that if prices do fall significantly it likely means there are much bigger problems in Canada than just housing. I want to be hopeful that this problem can be solved by a combination of investing in trades and housing. But I’m not sure that will be enough. It will be interesting to keep an eye on the migration trends in the coming years and I do wonder if at some point we will see emigration out of Canada, or if BC’s natural beauty will be enough to make people want to stay.

How Under-Investment in Early Trades Education Contributed to Canada’s Housing Crisis

As they say, hindsight is 2020. Under-investment in skilled trades has been a serious problem in Ontario (and all of Canada) for quite some time now. Something that will make the problem worse is that 700,000 trades people across Canada will be retiring between 2019 and 2028. We will have to find ways to replace those workers and more if we want to hit our ambitious housing targets. The Ontario government has created a plan to build 1.5 million homes in the next decade with the federal number totaling 10.5 million homes. In recent times due to a lack of trades supply, the labour costs to build housing has absolutely skyrocketed, which is great for wages, but not so great for building houses efficiently, affordably, and at a large scale. If we take a look back at history, it’s not so hard to see how we ended up with the shortage of trades people we are currently experiencing.

In the mid to late 1990s the Ontario government eliminated mandatory grade 7 and 8 carpentry and home economics classes (e.g. sewing, culinary, etc.). This was at a time when there were many cuts being made to education and many changes in the way education was administered in Ontario. A greater amount of standardized testing was being put into place as well as a compulsory curriculum where all students would learn the same “core” concepts. This “streamlining” of education made it easier to administer education (and less expensive) since most students would be learning the same things, but it also meant reducing students options in middle school and high school. Students were no longer being introduced to skilled trades in middle school which meant that when those same students entered high school, they would often just stick to the things that were familiar to them. Attendance in grade 9 elective carpentry and shop courses began to decline and this lead to many of those courses being removed from schools entirely due to under enrollment.

To bring a personal example into this post. At my high school I remember seeing the garages and warehouses of the school building that would have in past years housed (auto) shop class or carpentry. They were at some point replaced with arts and drama studios. Not to say that we don’t need artists and performers, it would be a rather bland world without them. But as someone who did not have much interest in those things and found myself more interested in how things are put together and more recently learning about cars on my own time (with lots of help from YouTube). It would have been nice to have had the option to introduce myself to those things back in high school and I think I would have really enjoyed it.

The only mention of skilled trades I remember was during my high school graduation ceremony, the superintendent basically said, “think about a trades career, you’ll make lots of money.” This was in stark contrast to the amount of fairs and events we would have with every Canadian and American University, often times coming directly to our school to recruit students. In this regard I have to consider myself lucky that my mother worked in construction and building maintenance, because she had amassed a good amount of power tools from her various jobs and absolutely any questions I had about using power tools, or how to properly sketch and design something, she had answers for. This meant that I had the opportunity to learn how to design and build things and I built most of the furniture that I used during my university studies and I learned valuable skills in the process; I also learned about economies of scale (it was not cheaper to DIY). However, now I feel confident in repairing things and learning about other trades. If the house I grew up in wasn’t big enough, or my mom worked in a completely different industry, I likely would not have even thought to try to learn how to use a table saw.

By removing these types of courses from the curriculum it makes sense that university admissions would go up. As would the emphasis on grades and thus grade inflation as university became more competitive and trades school admissions did not keep pace. Students were all being steered towards a knowledge related education or entering the workforce immediately, there was not much in between anymore. I believe that this emphasis on universities also had a secondary effect; devaluing university education. Universities began to admit more and more students to meet the demand for their programs, and it was also around this time that the cost of university began to skyrocket as did student loan debt. Many student were attending university because they did not feel there was another option or didn’t have enough information about their options to make an alternative choice, and I’m not just speculating when I say that. This means many students taking on student debt and going to university for an additional 4 years because you feel like you “have to” and then ending up with a degree that can’t land you a job. We have spend decades wasting human capital and real capital by not creating opportunities to discover diverse career options in high school. We are also continuing to drive up university costs due to increase demand (domestic and international), so why compete on a cost level as an institution when students can just take out loans to fund education and people are practically begging you to take their money. The scales are extremely unbalanced and as the past 30 years of relatively slow housing construction have shown, it may not have been a good idea to stop investing in early education for trades.

I’ve painted a pretty bleak picture, but things aren’t all bad. The Ontario government, however unpopular they might be at times, have spent over $1 Billion in the past 3 years addressing the shortage of skills trades workers, and they are seeing results. In the 2023 apprenticeship registrations have increased from 21,971 to 27,319 a 24% increase from 2022. They also rebranded the Ontario College of Trades with Skilled Trades Ontario, breathing some new life into the corporation with the new injection of funding. Skilled Trades Ontario has been able to advertise more and provide more skilled trades fairs that high school students can attend. The government has also made a change to the Ontario curriculum mandating that all Grade 9 and 10 students starting in September 2024 will be required to take at least 1 Technological Education course, which focuses on opportunities in STEM related technician jobs or skilled trades. Prior to this 39 percent of students had enrolled in a tech ed course and 63 percent were male, making this course mandatory will also introduce women who are under-represented, like my mother was, to a skilled trades careers.

Writing this post I was happy to discover that the skills trade shortage is an issue that is being addressed as we speak, and changes to provide students more options to learn and discover are very welcome changes. I’m not certain that we will be able to accomplish the goal of building 1.5 million homes in the next 10 years. But there does appear to be a surprisingly well thought out and robust plan to at least somewhat improve the skilled trades situation in our province. It’s going to be difficult to undo decades of underinvestment in our future workforce, but one step at a time I think we can get there.

All the best,

Oliver