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Two new reports question wisdom of 'use-it-or-lose-it' housing policy

Housing Minister Paul Calandra first promised a use-it-or-lose-it policy last fall
Paul Calandra, Ontario Minister of Municipal Affairs and Housing speaks during a press conference regarding housing development in the Greater Toronto Area at Toronto City Hall, in Toronto on Thursday, Feb. 22, 2024.

Municipalities have long been clamouring for a “use-it-or-lose-it” policy to force developers to build once all the necessary permits have been issued. 

“I’m talking to mayors saying so many builders have permits, and they aren’t building. That’s unacceptable,” Premier Doug Ford said at an Aug. 25 press conference. On Sept. 6, Housing Minister Paul Calandra said he’d already directed his department to start developing one. 

He recently confirmed to Global News that one will come, though it’s not clear if it’ll be included in the next housing bill expected in the spring.

The ask has become especially acute since the province introduced its Building Faster Fund, which gives extra cash to municipalities for exceeding their housing targets.

Municipalities don't build homes, they just issue approvals, so they shouldn't be judged on how fast local builders get shovels in the ground, especially if they don't have tools to compel construction, cities argue.   

Developers have been accused of land banking — sitting on land already approved for development and waiting for it to raise in price — which contributes to Ontario’s ongoing housing supply shortage. 

A use-it-or-lose-it policy, the thinking goes, would disincentivize land banking and help build more homes. 

Two recent reports, however, call those conclusions into question. 

The first, from the U.K. Competition and Markets Authority (CMA), looked at why Great Britain’s housing market — much like Ontario’s — doesn’t build enough homes. 

The second, from the Altus group, a leading construction and real estate consulting firm, dealt directly with use-it-or-lose-it policies and what the provincial government should consider before making new laws. 

The CMA report said land banking isn’t a cause of Britain’s housing shortage. Instead, “the practice of banking land was more a symptom of the issues identified with the complex planning system and speculative private development.”

The Altus report echoed that conclusion. It said land banking “acts as a hedge against planning risk” created by a complicated system that's difficult to navigate. 

Developers can't simply "stop and restart" their business to wait for more land and planning approvals. 

"If you're a building company, you're not just planning for next year's production. You want to make sure that you've got at least a pipeline of development going and you can plan for that," said Richard Lyall, president of the Residential Construction Council of Ontario. "If you go from (building) 1,000 units one year to zero the next year because you haven't done that, that's not good for your operations because then you have to let people go."

"Removing this fail-safe device for market shocks could have potential economywide implications,” the report said. 

Instituting a use-it-or-lose-it policy before streamlining the approvals process to reduce the planning risk "would be a premature step with significant risks." 

"There are foreseeable scenarios" where lots of approved projects could lapse before the current "economic headwinds" — such as historically high interest rates — "recede" and create a more favourable building climate.

Instead, developers would "scramble" to approve the projects again rather than build, and municipal planning departments would be inundated with the paperwork.  

"So long as housing demand moves at the speed of economic forces, and the supply of approvals happens at the speed of bureaucracy, there will always be a need to bridge this gap with an inventory of development approvals to deal with the uncertainty created by the mismatch," the report said. 

Use-it-or-lose-it policies aren't all bad, the report argued, and can be drafted in a way that helps get homes built. 

It shouldn't apply when the project in question includes affordable housing, if the delay is caused by a provincial or municipal agency, or if there are extenuating circumstances, like a lack of skilled tradespeople. 

Calandra's office did not respond to a request for comment on the reports. 

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