Where’s the money? Addressing Canada’s Housing and Infrastructure Crisis.

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Transcript

Note to readers: This video session was transcribed using auto-transcribing software.  Questions or concerns with the transcription can be directed to citytalk@canurb.org with “transcription” in the subject line.

CityTalk

CityTalk, November 28, 2024

Where’s the Money? Addressing Canada’s Housing and Infrastructure Crisis

Mary W Rowe Hi, everybody. It’s Mary Rowe from the Canadian Urban Institute, really glad to meet you. I’ve got to say, I just enjoy that few minutes of beautiful quietude and that lovely, gentle music that Wendy always puts on to just ease us into a conversation so, deep breath. Thank you for doing that, Wendy. We always take guesses as to what the piece of music was. If you know what it is, put it in the chat. Thanks for joining us for CityTalk.  We are one week, today, away from the annual summit on the state of Canada’s cities in Ottawa. And this session is, in many ways, a kind of teaser for that to sort of set the stage for part of the, you know, the focus that we’re going to take then. And we’re really appreciative that the panelists that are joining us today. A couple of them will be with us in Ottawa, a couple of can’t be. So, we thought, well, let’s have this conversation to lead into the conversation and lead into next week. I will just say, and you heard it here first, that there are a few, count them, a few tickets still available. In-person tickets. So, if you just are wondering what you could do next week, you could get yourself to the nation’s capital and you could participate at the second annual State of the Cities summit. And I really think we’re having a moment, a moment where we’re really thinking thoughtfully about the quality of our places. We’re thinking thoughtfully about what the future of the country is economically. Just turn the news on you hear whatever’s next that’s ahead of us in terms of what the sort of future trajectory of the economy is. And all of us know that places are critical to… The performance of places are critical to how we function economically, socially, culturally, environmentally, all those things, and the gang that are joining us today on CityTalk are going to help us start to think about that. And we titled it provocatively on purpose, like where’s the money? And we’re talking next week about infrastructure. And in many ways, what these folks do in their working lives is build different kinds of infrastructure, and next week it’s going to be about total range of infrastructure. How are we going to build up what we need around us, for us to have the kinds of quality of life that we know we want, that we want our children want, that our grandchildren want, and that newcomers need as they come and whatever the future of the country is. Just a reminder, I happen to be in Toronto today. The Canadian Urban Institute operates across the country from coast to coast to coast, and Toronto is the traditional territory of a number of first nations, including the Haudenasaunee, the Mississaugas of the Credit, the Wendat, the Chippewa, and we are covered by a couple of treaties, treaty 13, the Williams Treaty, and the Anishinaabe, I may have missed them. And we continue at CUI, and with all our work to try to understand how the legacies of colonialism and colonial patterns, which date right back to property taxes and how we how we actually identify ownership, how do we actually find a way to unravel that and understand how do we get back to what the ancestral heritages that we live on? And many of you put comments into the chat about that, and I appreciate people continuing to reflect with us. No easy answers, but lots of tangible things that can be done, and are being done by Indigenous communities, and in Indigenous communities, and with Indigenous communities. So thanks for joining us for CityTalk. Now I’m going to ask our group to put their cameras on so you can see they’re here and they’re not just a mirage. And we’re going to have a chat about what is happening and what we’re calling where’s the money, or what I casually call where’s the money? I’m old enough to remember that ad. You guys probably aren’t because I’m old. There was a Wendy’s ad, do you remember? Where’s the beef? So, nobody says that anymore. But that is part of the challenge that we’re facing, is we just have to open our eyes and ask ourselves, how come I’m seeing cranes in skies not doing anything? How come I’m seeing hoarding with minimal activity behind it? How come we are hearing every day constraints to supply chains, to labor supply, to availability of any kind of housing unit? How come it takes so long for things to happen? Why is there, why do we seem to have a fairly chaotic environment in certain places where there seems to be an absence of coordination, where lot seems to have been disrupted, but we’re not kind of sure we’re getting there. So I appreciate we’ve got three builders here, three builders and a banker. Really! What more do you need? And I need to hear from each of you. Adrian, nice to see you. You’re in your corporate boardroom table. Did you have to boot colleagues out of there to say, Give me the boardroom.

Adrian Rocca No, thankfully I did not have to do that. But I got an open slot. Thank you for having me, Mary.

Mary W Rowe We’re delighted to have you and I want to just, I’m going to ask each of you to give us a sort of snapshot of what you’re seeing. You know, we always would see with CityTalk, we always use this frame, what’s working, what’s not, and what next, or what needs to be. And I’ll start with Steve Diamond, because Steve and I talked in the summer. We had lunch together with the time with Toronto’s tiny perfect mayor, the original tiny perfect mayor. I suppose Olivia’s tiny too, but with Dave Crombie. And Steve and I had a conversation and I said, What’s going on? And he said, Mary, we have a huge liquidity crisis. I don’t know whether people understand the implications. And I looked at him across the table and I said, I need you to come on a CityTalk and talk about this and explain this to people, because everybody will be very interested to hear your perspective. So I’m going to start with you, and then we will go around the room and we will get different perspectives. So, Steve, welcome to CityTalk. This is your first CityTalk, so thanks for joining us.

Steve Diamond Yes it is, and thanks for having me as well. Thank you, thank you. So to try to address your issue, just to start off with a discussion, it’s apparent that what’s happening on the topic is where’s the money? And for years, when the boom was going on, our industry could afford to pay more than its share and burden of infrastructure requirements. But what’s now happened with rising interest costs, which is an issue, rising construction costs, and now with the soft costs and development charges that municipalities and particularly in Toronto, which is now at 30% of construction, it is clear that it is unfair and inappropriate to continue to tax new homeowners that are expected to pay for all new infrastructure. And what’s happened is we’ve basically told the public, our politicians, that all of this money is related to the cost of development, when in fact, it is really related to infrastructure that is being used by everyone in the city, not just new development. And in terms of new development, the city is also collecting the land transfer tax, for example, development charges, park land charges. And so now that the interest rates have brought development to a halt, we’re about to enter a situation where not next year, but in the coming years after that, because of the fact that people can’t get a shovel in the ground, we’re likely going to experience a very severe housing crisis. And what we have to do, in my humble opinion, is look at new ways to fund infrastructure to keep our cities livable and viable.

Mary W Rowe You’re just full of cheery news here, Steve. I knew I could count on you. I think this is the point that we’re trying to flag, is that in essence, we’re doing it next week on all our infrastructure needs, is that we have to unstick the system somehow. You know, that we maybe, as you suggest, during boom times, the development sector would absorb those infrastructure costs. Now we’re in leaner times, and so where are those resources going to come from? I’m going to go next to Ana and then we’ll come to you Adrian, and then I’ll come to you Jennifer. Can I just also ask my colleagues at CUI to post into the chat, we published with the Infrastructure Bank, a report earlier this year that underscores what you’re talking about, Steve, that it’s 100,000 bucks to just put the basic infrastructure in place for any kind of new unit, whether it’s in an  intensification unit or whether it’s a greenfield site and we’ve got to find new ways to figure out how we’re going to pay for that hundred thousand bucks. And does it make sense to put it all on the burden of the new consumer? So, we’re always about solutions. And I appreciate that we need to have the starkness of this challenge put in front of the brain trust that is the Urban Institute constituency, some of whom are on the call today. And we’ve got to attract the decision makers and we’ve got to attract all the different sectors that need to put our heads together to figure out, and not point fingers. I always feel that this discussion becomes really quickly pointing fingers, oh you big bad developers, oh you slow city government. You know, we do a lot of that, and a lot of us are just saying, come on, how are we going to solve it? So, Ana, how about you? You’ve worn a bunch of hats. You see this from a bunch of different positions. How would you build on what Steve is observing and and how serious of a crisis are we in?

Ana Bailão  And it’s definitely building on I think, I agree with everything Stephen said, and experiencing it myself now in my current role at Dream. And I think the pressure there is on the new homeowner, on the new renter to pay for all these costs. Steven is absolutely right. I think it’s time that we question that. I’ve said this on a few occasions already, I don’t think there’s a generation that has benefited more from the uplift of real estate than our generation. And so is it fair that the way that we respond to the biggest growth we’ve experienced in our country is to put it on the backs of the youth and the young people that are now starting to rent and starting to buy. I don’t think it is. However, however, we need to understand the pressure that municipalities have to deliver on a lot of these services. So 60% of most of the infrastructure that we use on our daily basis is delivered by municipalities. And as you said rightly so, about $100,000 is needed for each new home that we need. And if we’re going to use the numbers that the federal government put out there, we need 5.8 million homes. That’s $600 billion in new infrastructure. In the City of Toronto, for example, just the backlog alone is going to be $26 billion by 2033. So, I think that we need to have a systemic conversation about how we’re going to pay for this growth. We need to look at different methods of revenues. It can’t be the development charges paying for the bulk of this. It’s not sustainable. It’s contributing for a larger housing crisis, as Stephen said. And so, I think we need two plans. If anybody in the government are listening to us, I think we need two plans. We need something to address the situation right now. Immediate. There is a crisis that is going to happen that I don’t think people are really seeing what’s coming in a couple of years because shovels are not getting in the ground and we need to make sure the math is working and it needs to be something quick, and drastic, and bold to get those shovels in the ground so we can have the units coming online in two and three years, like we have this year. A good number of them coming online and we need that. But we need a systemic conversation on how we’re going to pay for this, and what kind of tools we’re going to pay. User fees, P-threes, you know, the transfers, what is being paid by the federal, the provincial government and the city. A review of what, you know, the development charges are being done right now, reviews of their accounts that are happening right now. So I think there’s two conversations that need to happen simultaneously. One for the immediate solution and, you know, and then another one, a more systemic change that needs to be talked about, about how to fund this infrastructure and the relationship with municipalities.

Mary W Rowe Yeah. Thanks. I should have asked both Ana and Steve to clarify the business you’re in. And then I’m going to come to you, Adrian, and maybe when you start, you can just clarify what business you’re in. Ana, just tell people what is the business that Dream is in. What does Dream build? Where is Dream in the system?

Ana Bailão So Dream has office, industrial and residential. And the part of the residential we do is quite a bit of affordable housing as well. We have a number of master planned communities where we do mixed income communities and mixed use communities as well. 

Mary W Rowe  And where?

Ana Bailão GTA, Ottawa, across Canada. With all these verticals, we go across Canada, U.S. and Europe.

Mary W Rowe In communities. Okay. And Steve, just tell people the business you’re in.

Steve Diamond  Sure. Our business is involved with working through the planning process to resolve lands mostly for condominium development or mixed use development, and then building them out. And we started the company about 15 or 16 years ago, and we’ve been involved with about 23,000 units in the GTA.

Mary W Rowe In the GTA. Great. Okay. Adrian, maybe you could start off and just tell us what business you’re in and then tell us your particular perspective. And I appreciate, just the people who are in the chat telling us, you know, what do you see out your door? We appreciate that. Frost, in Vancouver, just saying. But also, just as people are observing the kinds of things that they’re experiencing, it’s useful for us to get on the ground perspectives about it, use these things. Do you see activity taking place? Do you see stalled projects? So thanks, everybody on the chat for letting us know what they see. Adrian, over to you. Welcome to CityTalk.

Adrian Rocca Thanks, Mary, for having me. Just by way of background. So I’m co-founder and CEO of Fitzrovia. We founded the company in 2017. We’d be Canada’s largest rental developer. I don’t believe anyone is developing more rental than we are across the country. We’re fully vertically integrated. We develop, construct, asset and property manage entirely in-house with 10 billion of assets under management. About 9000 units in various stages of development, principally headquartered in Toronto, but also having a regional office in Montreal. As it relates to what we’re seeing in the market, I’d probably walk the conversation back to three years ago where interest rates were very low. It was definitely an economic environment where you can go vertical on purpose built rental. It’s always been a thin strategy, a thin, kind of margin strategy where you’re more focused on long term income and kind of cash flow management. But the reality is that businesses have changed fairly drastically. Interest rates have gone up five, six fold. Hard costs over that period of time went up 41%. It’s now flatlined. We’re seeing a trending down, but not significantly. And we also saw downward pressure on rents and lease velocity. Because of the rise in the interest rate environment, we also saw cap expand, which basically is an inverted multiple. So valuations have come down, which means margins have been really squeezed. So we went from what should be a 15 to 20% profit on costs to take on the risk associated with ground up development down to high single digits. So it’s an environment today which is economically not feasible to go vertical. And the math simply doesn’t work. We have been lobbying all three levels of government because really we believe it’s the only lever where you could actually get shovels in the ground tomorrow. We’re not seeing a significant correction of our costs or soft costs for that matter. Your total development costs really haven’t changed. Interest rates are settling down a little bit. They are trending in the right direction. But we really need meaningful steps, further steps on interest rate drops. And we’re just not seeing that right now, especially with some of the inflationary numbers that are coming in the market. And then, we’re really not seeing any stabilizing in rents right now given the amount of condo inventory that’s being delivered into the market, where anecdotally, 70 to 80% are bought by mom and pop investors and that’s hitting the shuttle rental inventory, right? That’s creating a lot of downward pressure on rents. The only thing we suggested is that government’s got to come in and waive all development charges, waive property tax. We’ve been advocates around potentially waive parklands CBC payments, have a two year sunset, get as much new supply into the market, get some momentum back to the market. And then pull those incentives in the future as the market stabilizes. And there is a step in, as I say, a small step in the right direction. With Mayor Chow’s announcement from two weeks ago linking it to affordable development, rental units that need to be about 20% of the total supply unit number. That unfortunately is reliant on a federal government policy with CMHC where you can procure ACLP debt to unlock those units to make it economically justifiable to go vertical. And so, we would say we really want to disentangle. Projects that want to do 100% market should reap those same benefits and deal with the affordable solution, which is really important outside of that announcement. Deal with it through an affordable housing fund, there’s other avenues to get there. Steve and Ana came out and talked about, you know, a revised economic model on how infrastructure gets funded. I totally subscribe to that. I agree with them. I think the US system, which requires a lot of policy change and legislative change in Canada, where you could issue municipal bonds or infrastructure bonds on the city level to fund that infrastructure, which allows you to bring other capital, investment capital to the table, whether it’s retail or institutional capital to the table, to fund that and not put the burden, the entire burden on who the end consumer is, whether it’s a for sale housing consumer or a renter.

Mary W Rowe Thanks. Just unmute myself there. Thanks, Adrian. Boy. You know, we’ve had many, many folks on CityTalk, but we’ve done 275 of these things since the pandemic, or through the pandemic. And always we get new vocabulary, new acronyms. What? Now, you’ve given me one, the ACIP. I mean, there’s a gazillion that you just used. We may have to have you unpack a few of those for us, but I think the… And verticals, even lots of folks on this call would have their own experience of verticals, maybe slightly different than your definition. But I think what you’re telling us is, and let me put it in my simple language. I think what you’re telling us is that the sort of range of options that a company like yours used to have in terms of building a diverse mix of units has diminished, diminished, diminished. The constraints are more tighter and tighter and tighter. And the cost on things that normally would fluctuate… In the chat someone has mentioned only land costs would come down. They haven’t. So, am I right that that’s what you’re telling us, is that there’s a bunch of constraints now that are just narrowing the capacity for your sector to actually build what it needs.

Adrian Rocca Yeah. And I think, as you all said, I do want to talk about land. Land has actually corrected pretty significantly. I’d say 50 to 60% from peak values. But the problem with land, it’s historically been 12% of your total development costs. So, even with the adjustment of call it 6% of your total development costs, if you’re able to deploy capital into buying new land today, it doesn’t meaningfully change the overall economics. It definitely helps, but it doesn’t meaningfully change. When you’re looking at some of the offsetting issues with rents dropping, with valuation multiples dropping. That’s what’s really impacting the underlying model, the feasibility of a building rental.

Mary W Rowe Got it. And I think, again, I want all of us in the CityTalk world, and watching the chat, you know, there are no simple answers here. I don’t feel there’s a lot of room for ideology, frankly. I think what we have to do is try to understand the different players, the different perspectives, the different constraints, which I appreciate that our folks from industry are providing. Jen, Jennifer, sorry, I don’t mean to abbreviate your name. I don’t know you that well. Jennifer! Somebody’s asked in the chat, What about the banks? And well, we’ve got a bank, we’ve got a financial institution on the call. And you and I talked about this briefly about, where do you see the particular niche for flexible capital, alternate forms of capital. You are talking to your colleagues all the time in the financial sector. What are you saying to each other? What do you think needs to change to allow you to be more engaged and more constructive, supporting more development I guess, basically. Welcome to CityTalk, by the way.

Jennifer Hutcheon For sure. Thank you, Mary, for having me. So Vancity Community Investment Bank is a commercial bank. We’re part of the Vancity group and our business model really focuses on a triple bottom line approach of people, planet and profit. And so, where we invest are two main core areas of business, would be its social purpose real estate, and then also on climate finance. And so, you know, as it pertains to housing, this is affordable housing, this is market rentals. This is anywhere along the housing spectrum that we can support through financing to add value and aid in the solution to the housing crisis, is where we work. On the clean energy front, it’s renewable energy projects, it’s circular economy projects. Again, working in a bit of a niche space where other banks aren’t currently operating. And so, a lot of the work that we do here at the bank has to get creative and we really have to have an environment where we’re partnering with changemakers like everyone on this call, and to work together to really solve these big problems. And so, I think in terms of from my perspective and what’s working, I’m seeing a lot of momentum, both in the housing space and the transition to net zero. And, you know, I’ve been working in the affordable housing space for quite a while. The momentum now, unfortunately, has reached the crisis point. But the momentum and the dedication, I think, is there to pull in the right people. The key here, and I’ll echo what the other panelists said, is finding new ways to finance infrastructure. A lot of the work that we do is partnering with cities, partnering with the Canada Infrastructure Bank, partnering with others to try to come up with creative new solutions to finance different forms of housing. And so, this is an area where I think, if we can focus on building those partnerships, getting the unlikely actors together, having banks replicate what others are doing, you know, we’re doing things. We are a small bank, though. We’re not one of the big banks. And sometimes we do see the big banks pick up on some of the things that we’re doing and replicate it, and we’d love to see more of that. And so, the competition doesn’t have to be that way, there can be more players in the banks that are doing that. And we’re always happy when we see that happening because we can be a bit of a leader in the impact space, and then when the bigger banks pick up for the rest of the market, it allows us to really feel the impact magnitude.

Mary W Rowe If I could ask everybody to put their cameras on, and I’ll ask Wendy to spotlight all of us so that this is the portion of the talk when we all sort of weigh in, and I’m interested to have lots of back and forthing. So, no formality here, just for the guys that are first timers on CityTalk, and feel free to do the Canadian way, interrupt at your will. But, I want to talk about banks, and I want to get a sense from all of you whether or not the banking sector is doing all that it should be, could be, we need it to do. So, open your mikes and have at it. Steve, you want to try, like are banks, where, you’re hearing from Jennifer, she is a particular kind of bank, she’s doing, you know, often the innovation comes at the edge and Jennifer  I’m not being pejorative in any way about VCIB, but you are at the edge. How do we mainstream this? Can we, do we think there’s more that could be done by the banks. Steve then Ana, then Adrian, go ahead.

Steve Diamond Well, I would say today, I don’t put a lot of blame on the banks. First of all, as of today, unlike the housing crisis that occurred in the late 80s and early 90s, the banks have still been pretty good with they’re good clients in terms of loans and understanding the situation. The government’s recently allowed, you know, longer term amortizations. That doesn’t deal with the rental housing issue. There is an issue, and it’s been discussed, whether or not the regulation should allow longer than five year mortgages. But again, that is not a bank issue. The only thing that someone raised with me in terms of the banks, and again, it doesn’t affect the rental housing sector, but should the banks not require 75 to 80% of units to be sold before they’ll agree to finance them, there may be a bit of more risk to the banks. Maybe that’s why we didn’t have as big a crisis as the U.S. did when that occurred in 2008. But that would be the only area that I could see where the banks have an issue. I, and I know this isn’t your question, but what I would say is, where I see the biggest fault is, and it’s maybe the fundamentals of, as Winston Churchill said, you know, democracy isn’t the best form of government, but it’s better than all the rest, is, I see a lack of fiscal responsibility from all three levels of government in dealing with the question of infrastructure and looking long term in terms of housing. You know, just, for example, you know, rental housing is really important. Adrian’s raised some really important points to get rental housing built. But if I look at all three levels of government. First of all, if we look at the city of Toronto, yes, I think that it would be great and they likely could use some additional support. But they’re sitting on $3.3 billion of development charges that haven’t been spent for projects that are dream projects, that maybe they should be looking at. They have just under $1 billion in a Parkland levy fund that hasn’t been spent. And I give credit to Mayor Chow because she was the first mayor in many years to raise taxes. But basically, there has been far too great a burden put on new taxpayers rather than trying to be fair in terms of what is the correct thing to do and where the burden should lie. And then I look at our provincial and federal governments in terms of housing and, in terms of that, in terms of the stats, between 1960 and 1990 between the feds and the province, they put in money to build 120,000 units. And between.

Mary W Rowe 30 years.

Steve Diamond Between 1960 and 1990.

Mary W Rowe My God.

Steve Diamond Between 1990 and 2020, the same 30 year period, that number was 35,000 units. So there’s been a dramatic reduction. Yet, and I hope my friends in the provincial and federal government won’t mind me saying, but then I read about these cash handouts because of elections coming, where the federal and provincial governments are putting checks in people’s hands that probably will amount to 7 or $8 billion going out, which frankly are probably inflationary, basically as bribes to get people to vote for them. And it seems to me to be an irresponsible move forward in terms of trying to say, if we’ve got this extra surplus and they just raised the capital gains tax, which is billions of dollars, what are they doing with this money? And should they be called to account in terms of being more fiscally prudent in coming up with ways and means of addressing what everyone thinks today is a major problem, which is dealing with a housing crisis that is on our doorstep.

Mary W Rowe So, I’m going to come to you next Ana, and you’re perfectly situated to respond to this because you know all about Section 37 and development charges. And then I’ll come to Adrian, and then back to you Jen. You can see lots of action in the chat here about how do we hold the financial sector to account. And the point that you just indicated about, you know, do we have, it’s not just the financial sector, how do we hold all of our, all of the sectors to account, to be accountable  if they are sitting on money, I know that there’ll be lots of folks in this chat that will say, what about all the pension funds? What about all our institutional investors? Do we have the instrumentation to get that kind of money into the ground? So, Ana, do you want to comment a little bit on Steve’s comment about the development charges in Toronto’s case? It’s true across the country we have these pots of money that are sitting there, and then that staggering number about where the federal and provincial governments use to invest, and even then, the numbers seem small to me. In 30 years, we created 120,000 units. Doesn’t that sound small to you? And then you go to 35,000 in the next 30 years. Good God. Anyway, Ana what do you want to see?

Ana Bailão One of the problems is that governments have been stepping away from housing for so long, right? And it got to the point where we are right now. And unfortunately, they’re not stepping back in to the way that they should be right now. And we’re going to be in a worse situation two and three years from now, to be honest with you. With regards to Steve’s comments about the development charges. There’s two things that are happening. So first of all, development charges are collected for projects that sometimes take a long time, right? I mean, like, let’s look at, for example, the gardener, which was over $2 billion to reconstruct. Now it’s going to be uploaded, but it was a big chunk of money. And a lot of that money for projects like that comes from development charges. And so, money has to be put aside. So there always has to be some money put aside. What I think needs to happen right now, and some municipalities have been doing it. For example, I was talking with the mayor of Burlington. She reduced development charges by 15%. And I asked her, how did you do that? And she did a review of all the projects that she was accounting for. And very easily, she said, we could …[inaudible] some projects that made no sense that weren’t even – it was cost sharing projects that weren’t funded by the federal and the provincial, so why are we putting this pressure on housing that we know has such a bad effect, for something that the other orders of government haven’t even financed, and we had it on our books? So, I think that municipalities have an opportunity to be reviewing the kind of projects, even without anything happening. On top of it, they should be having the conversations with the province and the feds to look at what else can it be done by other sources of funding as well. Again, Vaughan reduced the taxes by 50% as well. So, I think that these accounts, these projects that are part of the development charges needed to be reviewed right away. That should be the first step, I would say the second step, I think the first step, Adrian was right. There needs to be an action right now for the next couple of years. You know, when I was talking about the, the two track work that needs to be done, is a deeper systemic review. And then something like what Adrian was saying, so that we can make the math work and get these projects on the ground. And I have to agree with Stephen. Good is on you, because these checks handouts, it’s billions of dollars that, you know what, it will mean nothing. The increase in rents that is going to happen, and the housing in 2 or 3 years, people would be wishing that this money was actually put into infrastructure and into housing because there’s going to be a huge pressure, and the crisis is going to be much bigger. And if this money was actually invested in what we needed in the infrastructure and the housing, it would have a much, much bigger impact on people’s lives in our country and in our province.

Mary W Rowe Ana, can I go back to your previous life just temporarily for a brief moment and ask you this. Do you think this notion of conditionality, I’ll introduce my own special vocabulary word. Do you think that it would be appropriate that the province and the federal government would put some conditionality on to their support for housing in municipalities, conditional on Toronto spending those unspent development charge funds and those, the park levy? Could you ever imagine a world like that where the senior orders would say, not giving you a dime until you deplete those funds? Crazy idea.

Ana Bailão  It’s not a crazy idea. The money could be spent. But what we need to… I think the most important thing is, what are the projects that need to happen that are in the books? First of all, the ones that are actually facilitating the new housing to be built. A lot of these projects are needed. Sewers need to be bigger, so people want to stop some of these projects because then you can’t build the housing as well. So it’s… But  conditionality. Absolutely. Saying that you will get more money if you reduce the development charges, if you actually, you know, have this as a major priority. Absolutely. I absolutely would do it. Where the municipalities are building, for example, the kind of density that there are increasing, all these municipalities should be putting their best foot forward to make sure that they have the best business case to go to the other levels of government and make sure that they get the support. But I have to be honest, in certain municipalities like the GTA and in Vancouver, like people should be having emergency meetings. I’m sure Adrian and Stephen would agree with me. I read a report that in the last quarter there was one project launched in the GTA. Am I correct? Did you guys see the same report? One project. This is going to be so bad if they don’t take emergency action right now.

Mary W Rowe Okay well, there are lots of people on this call that have the capacity to initiate that kind of a meeting. So I’m sure they’re listening to you with great interest. Adrian and then Jennifer.

Adrian Rocca Yeah. The only thing I’d like to add is the concept around incremental policy. I feel like this is an absolute crisis. It’s well-publicized, everyone knows the headlines, and the concept around dipping your toe in. You know, the 7000 units that Mayor Chow announced on the back of 20% having to be affordable. And I do want to talk about, you know, the different loan programs. I apologize. I use some sharp forms there, but they’re actually really critically important.

Mary W Rowe Don’t worry. I wasn’t scolding you, I was more just flagging my own ignorance, and I’m just letting you know that the more you can be detailed in bringing the acronym down, the better we can follow you.

Adrian Rocca Yeah, I know, but the concept around dipping your toe in introducing a one off policy, that I believe actually didn’t have strong private sector engagement, and we’ve spent a lot of time working through the math. They’ve had independent consultants review the math, and none of that policy that got introduced actually ties to what that independent consultant or what the private sector was saying, is not going to do us any favors, right? We have to have bold leadership in this market. It’s got to come from all three levels of government. And we have like, this is going to sound like a sound bite, but the politicking has to stop, right? Because the only thing, the only person that’s getting affected right now is the average consumer, the average renter that’s going to be looking for a home in 2 to 3 years. And essentially, this market does not just turn on by turning on a switch. It’s going to be another 12 months. We’ve had two and a half years of no new supply. It’s going to be three and a half years bare minimum. And if there’s no action, four years, as the immigration story continues to be strong, even with the ramp down in immigration, you’re still going to see lots of household formation and you’re still seeing immigration numbers back to 2018 levels, which is still very strong. So once you clear the existing inventory, we have a problem. And I feel like, you know, we are getting a lot of direct engagement, but I don’t believe we’re getting a lot of listening from all three levels of government. And there seems to be very slow, you know, behind the wheel trying to get policies introduced. And I feel like that’s going to shoot ourselves in the foot unfortunately, as a society. ACLP has accelerated construction loan program. This is a CMHC driven program which I do want to talk about. So, there’s a capacity issue in that project, a very attractive financing tool to get affordable housing built, right? It’s a point system. The federal government came out and increased capacity of $15 Billion in that loan program, right? That loan program is at its capacity? It’s fully allocated. We need to quadruple, if not increase it further than that, that loan program. And it needs to happen yesterday. And then once you get that loan program increase, you need the processing associated with that loan program to be expedited. CMHC unfortunately, is a slow moving quasi government agency. It needs to be enhanced. There needs to be a culture shift that’s better said, easier said than done. But, you know, the processing can’t take nine months, 12 months to get to get a debt lined up. It’s got to be much faster.

Mary W Rowe I’m assuming, Jennifer, that when I get…

Ana Bailão Can I just comment on something?

Mary W Rowe Yeah, go ahead. And then I’m going to Jen.

Ana Bailão  I think it’s important to say that, you know, with all the difficulties, I think that the City of Toronto coming and saying we are going to put some of our, we’re going to defer some of the development charges, province and feds come to the table. I think it was an important step forward. Them recognizing that the development charges have a direct impact in the production of housing, I think it’s a step forward. I think we really need to make sure that the province and the feds come to the table. This is not a solution that only municipalities can solve, especially to the numbers that we need. Yes, 7000 units, it’s really, really small. We should be having 30,000 a year. That’s the numbers we should be talking about. And so, we need all three orders of government to come to the table and say, yes, this is just, this is small. We need more. We need to come together to the table to get this because, there’s been you know, when we talked about housing ten years ago, there was a huge amount of NIMBYism. We have now been able to, in the communities, to get support for the housing supply. People are, most times saying, you know, I can see where we need more supply, we need to live with some more density and so on. I’m starting to see, I’d be curious to see what the others say in this. I’m starting to see pushback from the communities because of the lack of infrastructure, because people are starting to use that as a form of saying, I don’t want this development because I can’t get on the subway, because there’s a sign on your development,  there’s no schools available, because the community center doesn’t have capacity, because there’s no daycare for my kids. And so, this is going to create a lot of pressure with the public as well, in the communities as well, if we don’t address the infrastructure with the housing as well. And you can’t just turn to municipalities and say, just get rid of this without the other tools, without the other governments. So, yes, we need emergency action right now, but this is not something that is going to get solved in 2 or 3 years. We need to fundamentally change the way that we pay for growth. Fundamentally change. It’s not sustainable, the way that we do it right now.

Mary W Rowe You’re just hearing a great advertisement for why you all need to come to Ottawa next week, because these are the kinds of Gordian knots, Google that if you don’t know what a Gordian knot is, it’s my favorite term. That and Overton Window. Those are my two geeky terms. You like them? But the idea that we have to find new collaborative governance, new approaches to solve these regional challenges and we can’t just keep blaming one sector or, you know, when we hear people blaming municipal government for being slow, the city builder constituency will say we just need constitutional change to get more money into municipalities. These become kind of tropes, you know, and that’s the dilemma. I appreciate all my colleagues are going to react to that and say, don’t give up. But we have to be practical, Jennifer. And it seems to me that the credit unions social purpose real estate constituency is trying to create models to do it differently. Correct? Can you persuade the big guys, with all due respect, to get into this business, to be more flexible? Steve said he doesn’t want to hold the banks necessarily responsible, but I wonder if they could be a little more path leading.

Jennifer Hutcheon  Absolutely. I mean, I wouldn’t let them off the hook quite that easily. I think, you know, financial institutions in Canada have a critical role to play. We decide, many times, where the money is invested, how it’s invested. And as a sector, you know, we really have to collectively work better at getting these partnerships together. You know, I think the banks are not limited in what they can do, so it’s not a regulatory issue. And it really comes down to the time and attention and focus it takes to work on some of these issues, and it may not be the most profitable part of your business. And so, it is an interesting difference in the credit union sector where you’re not necessarily purely profit driven. You have other bottom line metrics that you care about and that are important to you. And so, I would say a little bit of that mentality has to shift, and I do think the bigger financial institutions can do a better job of leaning into some of these creative, non-market housing areas where, quite frankly, right now VCIB might be the only one leading in that space, and we have limitations because of our size. So areas like supporting land trusts, retention of existing housing that could be lost to market, converting it and keeping it as non-market housing, co-ops, you know, there’s going to be a resurgence in co-op housing, which is great. Banks are not necessarily prepared to finance all of those, whereas we may. And so these are the areas in there, the smaller developments, these are the sort of, really grassroots but very impactful projects that that help cities with the affordability crisis. And then just quickly on the government dollars and the partnership piece, you know, when you think about how government dollars can be leveraged with private sector dollars together, and invested into these types of projects, that’s where we’ve had, and seen a lot of success, both on the climate front and the housing front to combine forces. And it’s not necessarily that it has to be 100% government funded to support housing. If we can leverage those dollars by forcing that partnership with the private sector to drive those financing arrangements, that’s, I think, a very powerful proposition.

Mary W Rowe I mean, it just boils down, again repeatedly to partnerships, partnerships, partnerships. How do we get all the right players to the table in the right roles that we need them to be in, and what is the impediment to that? Sometimes I just feel we all know what has to happen and we can’t seem to get our shit together.

Ana Bailão And Mary, I think that people don’t look, governments don’t look enough at the opportunity cost. For example…

Mary W Rowe  To not doing something.

Ana Bailão Yeah, well, if you’re not tackling, for example, the situation over the next two years, and you know, it is tough and we need the governments to come on board. The easiest way is to deal with the development charges on this. If they don’t do this, the housing that doesn’t get built, the issues that are going to be created, those same governments are going to be spending a lot more money on health care, on social services, all kinds that if they were to come together, deal with the situation to make sure that the math would work, and we could actually get the units and get shovels on the ground.

Steve Diamond Mary in terms of the issue that you raised. It’s interesting because, you know, I was involved with Waterfront Toronto for a number of years, which was, you know, three levels of government coming together.

Mary W Rowe You had a full head of hair when you started that, I remember.

Steve Diamond Exactly, exactly. But, I made a suggestion to Mayor Chow at one point, and I said, you know, why can’t we convene a meeting in your office and get, you know, federal and provincial and city people together, and the development industry, and work together to come up to a solution. And it astonishes me, but I mean, to date, and that suggestion was  probably made 4 or 5 months ago, that still hasn’t taken place. I don’t know why, but it seems that to coordinate our three levels of government, because I think there’s a lot of good ideas out there that are coming from the private sector. It seems very difficult to get the three levels of government to work together and to, in such a serious issue, and to think about these various issues. And I don’t know why, but I think you, you know, when you said, you know, we need to get people working together, it surprises me that there isn’t some sort of a committee or board or whatever dealing with all three levels of government that would come together on housing issues.

Mary W Rowe I mean, this is kind of why the Canadian Urban Institute exists, but there are entities like ours across the country. Adrian, I’m wondering if you would agree with Steve about this. The dilemma is you said get rid of the politicking. And I think that’s the dilemma that your colleagues are lamenting here, is that elected governments have a shorter horizon and the political winds are changing. And so, how do we, when you’ve got governments that are thinking about their own futures, how do we get this kind of concentrated thing? And I hear you, Ana. If we don’t do something, there’s going to be a whole bunch of challenges ahead. Adrian, what’s your perspective on that? What’s your experience been, trying to get government to come to the table, different governments, what Steve just mentioned?

Adrian Rocca So it’s easy for them to come to the table. What I’m finding is the inaction after they’ve come to the table, and I feel, I see a lot of finger pointing, whether it’s the, you know, the province pointing fingers at the city, the city pointing fingers at the province, people pointing fingers at the feds. Everyone is either broke or has too much money depending on where you are on that side of the equation. And so, that’s where it’s been really frustrating. Now, you know, my answer would be how quickly is that going to happen? Well, we have two major elections coming up. I think once you get through those elections next year, you have people that are going to need to be dealing with the realities of that crisis four years later. And so I’m hoping post-election, when the politicking has subsided and you actually are going to be looking at policy and results, that we will actually get the policy changes that we need. It’s unfortunate we’re going to have to wait another 12 months for that to happen. But I think that’s the unfortunate situation that we’re in right now. Let me know if anyone disagrees with that. But I just think it’s a wait and see game. I don’t see anyone stepping up.

Mary W Rowe You’re saying just head to the bar for a year. Like, I honestly don’t know if we can do that. Can we? Can we really?

Adrian Rocca  We will absolutely be the last person to head to the bar for a year, but, we will continue to lobby, we will continue to drive dialog. But we’ve been doing that for two years, right? Ana, Steve, myself, we’ve been really leading the charge with those conversations, and I’ve yet to see big, bold action from any level of government right now. The last one was the HST waiver, which was big. That was really, really critical, really important. But since then, it’s been very, very quiet.

Mary W Rowe You know, there’s been suggestions in the chat. The chat never disappoints us on CityTalk, lots of great ideas here and including, you know, one of the areas where we are seeing investment is from indigenous communities. Some of the largest housing projects that are happening across the country are coming with indigenous capital. Are there comments on that in terms of, well, would we have expected that or known that would be one of the sources? And are there other possibilities while we get the political stuff sorted? Are there other sources of capital that could help break the logjam? I’m going to ask each of you to do that and it’ll be your last time on the on the dais here. And while you’re there, if you’ve got one thing you want people to focus on, add that in. So, Steve, you first. Other unusual sources of capital, and is there one thing that you think we need to be pushing in the next 12 months, I’ll say? How about that? Go ahead.

Steve Diamond Well, I would go back and say the one thing I would push is even though there’s an election coming, instead of all of us heading to the bar, is still pushing for all three levels of government to come together, despite the fact that there’s an election coming, which I think would be really important, and to flesh out some ideas because in terms of different sources of capital, I think there’s lots of suggestions in terms of things that could be made. I mean, Adrian mentioned them, one of them earlier on about, you know, different funding mechanisms in terms of bonds, which is not something that’s permitted right now in this country. But again, you know, it requires everybody getting together and trying to to move forward. And so, I think that that’s, you know, that’s got to be the key or we’ll just be a year into this and a year into the into the crisis further.

Mary W Rowe It is interesting that an announcement comes from D.C., about a 25% tariff and the premier’s meet in 24 hours with the Prime Minister. Like, it can happen, they are able to gather together quite quickly. Ana. Adrian, then Jennifer, go ahead, Ana.

Ana Bailão I would just add to what Stephen said, in terms of sources of capital for the housing, yes, we’ve seen some really interesting projects coming about. I mean, in Toronto, one of the first few housing now sites, it was an indigenous group. You know, it’s now at a 26 story apartment building of affordable rental. So very good investment. But the hard thing continues to be, for any of these investors because they do have a fiduciary duty, is when you get a government bond that gets you just as much as some of these rental projects, it becomes very hard to get that capital to be invested in some of these projects with all the risk that projects come with as well. So, as long as we don’t make the math work, we’re not going to get shovels on the ground.

Mary W Rowe  I hear this, but we’ve got to de-risk. We have to… Let’s all, for those of you who are putting AI summaries on, AI assistant, listen to this. Make the math work. Adrian, over to you and then Jennifer.

Adrian Rocca Yeah. The only thing that I want to call back to Mary is you made a comment around pension plan capital and institutional capital and, you know, maybe creating a policy that gets them to invest more locally. I want to be really careful around that, right? I don’t believe pensioners should be subsidizing government inactivity or bad policy or, you know, inefficient balance sheets or inefficient spending at the government level. I would say they need, it’s more carrot versus a stick. We need to create an environment, where these  pension plans can invest globally. They’re very sophisticated pension plans. They’re looking for the best risk adjusted returns so they could fund liabilities on the back of their constituencies, their fiduciaries to their pensioners. And so we need to create an environment that’s going to get them to invest here. They want to invest in Canada, they want to invest in housing, but the economics simply don’t work. If I change, I’m going to triple down on a comment, if I had to change any source of capital right now, it’s quadrupling the size of the ACLP, accelerated construction loan program. If you could do that, I think that would really move the needle.

Mary W Rowe We got at ACLP and CMHC is on this call and they’ll be with us in Ottawa. As somebody who’s a little closer to that pensioner category perhaps than you are, Adrian, I think your point is very interesting. Why would that capital pool be the one that would be burdened necessarily or disproportionately? But of course, as Ana said, my demographic is the one that had the uplift and has the resources in the first place. It’s a lots of Gordian, back to my note, Gordian Knots. That’s a philosophical question. Jennifer, last word to you. One thing.

Jennifer Hutcheon One thing I think is just the mindset of how we think about affordable housing. And when I think of things like, you know, indigenous participation and ownership, you know, this is the new economy. You know, the the indigenous economy is huge. There’s opportunity there. There’s opportunity with the transition to a clean economy, so trying to think about it more in those economic principles, that it’s good business, it makes sense for the economy. It’s not necessarily just to support social purpose, but there’s an economic benefit to it. And so, I think having that in mind to try and pull in those pieces of engagement through levels of government, private sector is a key part.

Mary W Rowe The whole notion of de-risking is fascinating, and also you’re operating at a scale, particularly smaller scale, where Steve and Adrian are talking big scale, and Ana also big scale. So we always have to figure out how these scales can meet each other, right? How we can actually have impact in communities. Thanks very much. We always say at CityTalk, you know, this isn’t the end of the conversation, it’s just the beginning. And in this particular case, it will be continuing a week from today and on future subsequent CityTalks. So could I thank Adrian, Jennifer, Steve and Ana, thank you for being with us on this – Where’s the Money? And all you CityTalkers, if you’re not coming to Ottawa, come. And if you’re not coming, watch for an email tomorrow morning. Thanks, everybody. Thanks for joining us at CityTalk.