A cornerstone of the federal government’s Housing Accelerator Fund (HAF) is to encourage municipalities to limit their development charges and encourage missing middle housing development.
In response, several municipalities have amended their zoning bylaws to allow fourplexes to be built ‘as of right,’ meaning property owners have the inherent right to develop or use their property in a specific way under existing zoning laws, without needing special approvals, variances, or rezoning. As long as the proposed construction complies with existing zoning regulations and building codes, developers or property owners can proceed without additional bureaucratic hurdles or public hearings. Some cities have also moved to encourage laneway housing. While this rule change enables missing middle housing development, it falls outside the scope of the government’s current funding programs.
From a funding perspective, a key challenge lies in distinguishing between residential and commercial properties. According to CMHC, residential properties are defined as those with 1-4 units, while commercial properties include anything larger. However, CMHC has a separate process for financing 5- and 6-unit properties.
For example, CMHC’s MLI Select financing program is available for 5-unit properties but not 4-unit properties. This creates complications for scenarios where a fourplex is renovated to add a basement suite or a laneway home, raising questions about how such projects fit within the existing funding framework.
It’s unclear whether CMHC would accept this type of development under the program, as it involves adding just one additional unit. To truly encourage more missing middle development, CMHC needs to develop a funding program that addresses the unique needs of this market segment.
Development charges (DCs) are another focal point of HAF’s efforts to remove barriers to missing middle housing, with the expectation that communities accepting HAF funding would freeze DCs. This has not been the case. The lack of transparency in agreements with municipalities, combined with unclear enforcement mechanisms, has further hindered progress.
Ontario communities, in particular, rely heavily on DCs—so much so that municipalities have over $10 billion in unspent development charges. Notably, Ontario includes water and wastewater development in DCs. Municipal service corporations are likely a better solution. While Ontario has been considering this option, progress is happening at a glacial pace.
Furthermore, many cities in Ontario underutilize their borrowing capacity, despite their lower cost of borrowing compared to homebuyers. Reforming DCs will require action by the province. However, despite growing public awareness of their costs, the province is unlikely to take any action before a possible early election.
While we tend to look to CMHC to fix these problems, they have limited control over the process. The Housing Accelerator Fund is as much about optics as it is about outcomes, providing MPs with an opportunity to announce government funding in their ridings. Since policy-making and politics surrounding this program lies with the Housing, Infrastructure and Communities Department and its Minister, looking to CMHC to fix this will not work. The Minister and his department have negotiated the agreements and should be held accountable for any failings. Perhaps getting rid of this program before all the money is handed over to the cities wouldn’t be such a bad idea.
Independent Opinion
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