Development Charges, Surety Bonds & Policy Changes

[00:00:00] Welcome to the Canadian Real Estate Investor, where hosts Daniel Foch and Nick Hill navigate the market and provide the tools and insights to build your real estate portfolio.

[00:00:12] Welcome back to the Canadian Real Estate Investor podcast. Very special episode today. We are live. Well, I guess they call it live, but we're technically not live. This is a live recorded episode from Niagara Falls, Ontario. Does that jingle just play in your head, the Marineland jingle? Screw Marineland, but thumbs down to them, but that

[00:00:30] Niagara Falls, Ontario. We're at the OHBA conference, the Ontario Home Builders Association conference in Niagara Falls, Ontario at the Fallsview Casino Resort, where Nick Hill, I watched him go in and lose $200 almost instantly at the casino. I was sad. I shed a tear for you.

[00:00:48] You had to start off the episode with that? Yes, if anyone is wondering.

[00:00:51] I didn't actually get to see it because I didn't have any ID on me, so I just sat outside, like just working on my phone.

[00:00:57] I was like, I'll either be back in two minutes or 20 minutes, and I believe it was less than two minutes.

[00:01:04] Take my real estate advice. Don't take my gambling advice.

[00:01:07] Yeah, I mean, my advice is just don't do the gambling stuff. It's a pretty bad ROI.

[00:01:12] Hey, trust me. Roulette. I'm a Roulette guy because I'm a very unsophisticated gambler and put $100 on black. It was red. Put $100 on red. It was green.

[00:01:24] Double zero. So pretty bad for me, but that was the only bad part, Dan. I had an amazing time. Sherwin Williams was kind enough to send us there. So big shout out to them. And spent so many really amazing people doing amazing things. Tons of policymakers there. And I had a really good time.

[00:01:47] You had some pretty heated arguments at the dinner the night before, actually. I thought we were done. I thought our show was done.

[00:01:56] Never invited back.

[00:01:58] No, there were some good – we had some really good discussions, arguments as well, but like civil ones where you're actually debating. We were debating with someone from Canadian Home Builders Association about whether or not the Canadians should be – or the Canadian dream of homeownership should still be alive.

[00:02:14] And it was actually a really – I was listening to Nick. It was good because he was spewing a bunch of my talking points, but I didn't have to do it.

[00:02:21] And I was listening and I was kind of just trying to see how it went. But anyway, fascinating.

[00:02:26] Dan, you're like my coach. You're like my coach in the corner.

[00:02:29] Yeah. You got wrecked well, to be fair.

[00:02:31] Oh, come on.

[00:02:32] But – so we'll have – I think we'll have him on the show at some point, which was great.

[00:02:36] We met a lot of amazing people.

[00:02:38] And three of those people are going to be featured in pretty great length interviews, pretty exhaustive interviews in today's episode.

[00:02:47] So who are they and what are we going to be talking about with them, Nick?

[00:02:52] Yeah, exactly, Dan.

[00:02:53] So what you'll hear, again, not our traditional episode here, but packed full of tons of value with people that are much – have much more expertise on the subject matter that they discuss.

[00:03:04] So in no particular order, you'll hear from three different individuals.

[00:03:08] Mr. Dave Wilkes, who is the president and CEO of Build, that is the Building Industry and Land Development Association.

[00:03:15] He's going to be talking about how development charges have increased.

[00:03:18] They are putting out a recent study and how that development charges are going to impact housing prices and what some of the solutions could be.

[00:03:26] You'll also hear from Bob Schickendance.

[00:03:29] I can say it, but I can't spell it.

[00:03:31] Really great guy there as well.

[00:03:33] And Dan, you spoke to him.

[00:03:35] He is a past OHBA president and partner in Farsight Homes.

[00:03:39] And this was really interesting, something that I didn't know much about.

[00:03:42] But Dan, of course you did because I'm still waiting to find a subject matter you don't know something about.

[00:03:47] The benefits of surety bonds.

[00:03:50] Surety bonds in construction and building.

[00:03:53] And then the last person you'll hear from, another amazing person, Kristen Jensen, OHBA vice president of policy and advocacy and relationships.

[00:04:06] And she has worked tirelessly on building industry policies and has been advocating for its members changing red tape and reducing it in order to get more homes built.

[00:04:23] And that was kind of the general theme of the conference and kind of the general theme of this episode is what these experts will talk about in their own rights, the specific subject matter.

[00:04:34] But the overall goal for this whole thing was how do we get more homes built faster and how do we increase affordability?

[00:04:41] And I think you and I both learned a ton while being there.

[00:04:45] Yeah.

[00:04:46] And I hope our audience will as well.

[00:04:47] I don't have much more to add than that other than, again, a huge thank you to Sherwin Williams and to the Ontario Home Builders Association for making this happen.

[00:04:55] Hopefully you'll hear a lot more from both of them in future episodes and iterations.

[00:05:01] We have done this before.

[00:05:02] We did our Mike Moffitt episode and a couple of other ones.

[00:05:04] So, yeah, I think let's just get right to it.

[00:05:07] Awesome.

[00:05:07] Okay.

[00:05:08] Let's bring in our three guests.

[00:05:11] One at a time, we'll be doing Dave Wilkes, Bob Shicken Dance and Kirsten Jensen.

[00:05:17] I'm here for our first interview of the day with Dave Wilkes, president and CEO at Building Industry and Land Development Association, otherwise known as BUILD.

[00:05:28] Dave, thanks so much for joining us at the OHBA conference.

[00:05:31] And we are here to talk to you about development charges, a controversial subject.

[00:05:39] In the world of real estate today.

[00:05:42] Let's start off with how development charges have increased in the past decade.

[00:05:47] So, Nick, thank you very much for the opportunity.

[00:05:49] It's great to be here.

[00:05:50] The conference is great.

[00:05:52] It just came out of a great panel at OHBA, hosted with, I think, seven representatives of provincial ministries, including six ministers.

[00:06:00] So, the energy is really strong here.

[00:06:02] And the energy around talking about what it's going to take to build the 1.5 million homes that Ontarians need is palatable.

[00:06:09] And you can feel it.

[00:06:10] And we're having a different conversation than we ever had.

[00:06:14] And I think that conversation, I will get to your question, is because the industry is in a bit of a state of challenge right now.

[00:06:21] Sales have stopped.

[00:06:22] We're just people aren't buying homes.

[00:06:24] And there's two root causes for that.

[00:06:26] One, the cost to build is just too high.

[00:06:29] And people within our industry can't build homes that people can afford.

[00:06:34] And obviously, the changes that we've seen in monetary policy around interest rate where, you know, if you are able to buy a home, the cost to carry is too high.

[00:06:43] But even if you fix the interest rates, even if you, some of the great work that has happened from our colleagues at the Canadian Home Builders Association to extend amortization rates, that's not still fixing the cost to build.

[00:06:55] And that's where I think the D.C. discussion is a really important one.

[00:06:59] If you look at what it costs to build a home, you've got to finance the land and the building from the builder's perspective.

[00:07:06] The materials that go in, and there's been tremendous increases in materials, labor.

[00:07:10] All of those things are influenced by market conditions.

[00:07:14] So they'll go up and down with supply and demand.

[00:07:16] They're stickier on the way down than they are on the way up, in that case.

[00:07:20] Development charges and other government fees and taxes that are put in place, like parkland charges,

[00:07:25] education development charge, HST, which is another that we could talk, as well as development charges,

[00:07:31] are now representing about 25% of a cost of a new home.

[00:07:35] So if you look at that from a, you know, a person's mortgage, you're taking a quarter of it, you know,

[00:07:41] seven, eight years just to pay off the government fees and taxes.

[00:07:44] And so I really think what we need and what I'm hearing is we have to have a different conversation around D.C.'s,

[00:07:52] development charges, that are designed to pay for the costs associated with growth.

[00:07:57] That's where they were originally designed from.

[00:08:00] That conversation needs to happen on are D.C.'s working?

[00:08:05] Are they going up too fast and too much?

[00:08:09] And are they the right tool for municipalities to fund the growth-related services that need?

[00:08:17] And are municipalities the only government that should be funding that?

[00:08:20] We believe that the answer to those questions is no D.C.'s time is done,

[00:08:24] and we need to have a different conversation about them.

[00:08:27] Long answer, but it gives you some context.

[00:08:29] No, great.

[00:08:29] I appreciate the context and great insights.

[00:08:32] And I think myself and a lot of people in the industry are on the same page finally about this stuff, right?

[00:08:39] Now, you recently put – your organization recently put out a study on development charges.

[00:08:44] Walk us through some of the key findings in that study

[00:08:47] and how you think they will eventually have an impact on house prices here in Ontario

[00:08:54] and then maybe in Canada overall.

[00:08:56] So we're about to actually, two days away from putting out our –

[00:09:02] Coming soon to a newspaper or a broadcast near you.

[00:09:07] So on Wednesday, we're actually releasing our biannual look at government fees and charges and approval timelines.

[00:09:14] So it's a benchmarking study.

[00:09:16] Build is focused on the GTA, so it's looking at the municipalities within the greater Toronto area.

[00:09:21] And, you know, what we are finding – and I'll just give you two numbers I'll quote.

[00:09:26] In the last two years alone, on average, across the GTA,

[00:09:31] D.C.'s have gone up $45,000 in the last two years, exactly.

[00:09:36] At a time when the economy's not been, you know, firing on the list.

[00:09:41] And $36,000 for a condo, once again, on average.

[00:09:45] Mississauga's fees have gone up 57%, Toronto 44%, Oshawa 61%.

[00:09:51] So we're seeing the trend go on.

[00:09:53] Now, I will say we're seeing beginnings of an understanding that these costs are unsustainable.

[00:10:01] The city of Vaughan, recently Mayor Del Duca there passed a motion,

[00:10:05] looking at staff to report back on how to lower DCs by 25%.

[00:10:09] We've seen Burlington take a hard look at their most recent increase.

[00:10:13] Now, it still was an increase, but it wasn't as much as they had originally planned.

[00:10:18] We're in conversations across the GTA saying, look, we got a problem.

[00:10:24] Sales in the GTA in August were historically low.

[00:10:28] They were like well below the 10-year average.

[00:10:31] And that's in an environment where interest rates moderate,

[00:10:35] where we're seeing amortization announcements that you can carry the loan over a 30-year period.

[00:10:40] People still can't afford.

[00:10:42] And so I think governments are recognizing that they have to be part of the solution.

[00:10:47] And what the paper is going to highlight is the fact that, you know, DCs are still too high.

[00:10:54] Approval times are still too long, Nick, if I could just deviate into that.

[00:10:57] 21 months.

[00:10:59] 21 months it takes on average.

[00:11:01] Now, there have been some improvements once again.

[00:11:03] And the conversation is happening.

[00:11:05] But we need to, you know, Minister Klander talked about, you know, quicker, quicker, quicker.

[00:11:10] We need those improvements quicker.

[00:11:13] And we need that uncertainty that we're going to see timelines come down substantially

[00:11:17] because time is money, truly in this case.

[00:11:20] So what we're going to do with this paper is shine a light.

[00:11:22] But more importantly, we're going to have conversations with our municipal partners

[00:11:27] and with those of the province and the federal government around.

[00:11:31] Let's look at a different way, back to what we were talking about, of how we fund growth

[00:11:35] and how the DC tool is no longer the right tool to fund that growth.

[00:11:40] And we need different ways of doing it.

[00:11:41] I couldn't agree more.

[00:11:44] Now, you mentioned a lot of great things in there from, you know, the extension and amortization

[00:11:49] and just permitting processes and just the length of time it takes.

[00:11:54] When we're talking about DC specifically and the government maybe finally realizing that,

[00:12:00] you know, they have to make the change and it can't just be the industry because we rely heavily on legislation.

[00:12:06] What are some solutions, if you could leave us with this, what are some solutions that you're seeing

[00:12:11] and that your organization and other organizations here at OHBA and CHBA and across the country

[00:12:16] that we're working towards and trying to change and bring into the system to actually see this?

[00:12:24] Let me bucket that into two immediate and a little longer term structurally.

[00:12:30] Structurally, we've talked a lot about Nick, like how do you take a look at a system that was in place

[00:12:34] for growth, funding growth and DC's funding that growth?

[00:12:41] And I've heard encouraging conversations that we know that that model needs to change.

[00:12:48] Growth in the way it's currently constructed, the burden is too high.

[00:12:52] It's not sustainable, right?

[00:12:53] We're realizing that the hard way.

[00:12:55] So we've seen some investments, substantive investments, excuse me,

[00:12:59] from the federal and provincial government on funding water and wastewater.

[00:13:02] And so that takes the burden off of the new homeowner directly for that and places it on a much bigger base.

[00:13:09] I think that's really key.

[00:13:11] We're looking at ways, another paper that we're going to be releasing,

[00:13:16] a timeline to be determined, but either later this year or the first quarter of 25,

[00:13:20] is a really hard look at the DC regime.

[00:13:22] And so I'd love to come back and talk to you about that when we got that work finalized.

[00:13:28] And we're going to be engaging with municipalities on that conversation, right?

[00:13:33] Because we know that municipalities have needs.

[00:13:36] Our industry wants to build homes that people can actually purchase and afford.

[00:13:40] So how do we work together to do that?

[00:13:42] So the structural one is having a honest conversation about funding growth.

[00:13:46] And we've seen the beginning of that with the infrastructure investments that we've seen from our provincial and federal colleagues

[00:13:53] and the recognition that it can't be on the back of new homeowners.

[00:13:56] Immediately, I think we need to call on municipalities that, I have a phrase that I'm using too much right now, zero, zero, zero.

[00:14:04] So if you're not collecting DCs, because no one's, you know, the starts that I really worry about is,

[00:14:14] and I have to take a deep breath when I say this, in 27 and 28,

[00:14:18] today's sales are two to three to four years starts out.

[00:14:23] And, you know, you do see, once again, with my bias in the GTA, you know, starts are continuing.

[00:14:28] You are still seeing buildings getting built, but they're finishing up.

[00:14:32] And those are sales that were occurred back when there was a very different monetary policy environment

[00:14:38] back when, you know, we were coming out or in the pandemic.

[00:14:42] 27 and 28, zero, zero, zero on DCs.

[00:14:45] So what do we do now to anticipate that change?

[00:14:49] What relief do we have on government fees and taxes?

[00:14:52] How do we take a mindset of addressing a crisis of affordability in the same way we look at, you know,

[00:15:00] I'm going to give you an example, investing in EV battery manufacturers.

[00:15:04] What type of investments can government make today to lower the cost to build directly by addressing government fees and taxes?

[00:15:13] That's about indexing the HST rebates, which haven't been indexed since they're originally brought in since 1991.

[00:15:20] The cost, you don't get a federal rebate on your home from HST if your home is over $450,000.

[00:15:26] Can't find a home in the GTA for that.

[00:15:28] Yeah, what are those?

[00:15:29] They don't, not in the GTA.

[00:15:31] So we're calling on, you know, that indexing rate to be increased.

[00:15:35] What happens if there is a holiday on DCs for a short period of time?

[00:15:39] Well, it's Christmas for developers.

[00:15:42] So what can we do today?

[00:15:43] And sorry to jump on that, Nick.

[00:15:45] It's not for developers that it would be that relief.

[00:15:48] If you lower the cost to build, if you extend the, extend the, and trickle down.

[00:15:54] It trickles up and it trickles down.

[00:15:56] That's industry-wide, but not even just industry-wide, that's Canada-wide and GTA, GTHA.

[00:16:02] So that's what we're looking at.

[00:16:04] Immediate relief that impacts the cost to build.

[00:16:08] And structural change that looks at a different way to fund growth.

[00:16:12] Amazing.

[00:16:12] Thank you so much for stopping by, Dave.

[00:16:15] It's always great to see you and great to hear your insights.

[00:16:17] We will be having you back for those other two studies.

[00:16:20] Thank you for tuning in and thank you for all the work.

[00:16:25] Anytime.

[00:16:25] These are important conversations I'm passionate about.

[00:16:28] And I believe we need to bring facts to the table and solutions to the table.

[00:16:33] And that builds a commitment to our stakeholders and the folks that are looking to make the GTA their home.

[00:16:38] Wonderful.

[00:16:39] Thank you.

[00:16:40] Thank you.

[00:16:40] We are joined here by Bob Schickendance, past OHBA president and partner at Farsight Homes.

[00:16:49] And today we're going to be talking a little bit about surety bonds, the benefit of them,

[00:16:53] and how they can help get more housing built.

[00:16:55] So can you give us a little bit of a high-level overview on that and sort of how you see it taking

[00:17:00] place in the future?

[00:17:01] Okay.

[00:17:02] Well, thank you.

[00:17:04] Maybe a lot of your audience doesn't really realize how important the use of surety bonds is to the industry.

[00:17:11] But essentially when builders and developers provide housing across a province, they have agreements with municipalities.

[00:17:19] And these agreements stipulate what the builder and the developer must build.

[00:17:26] And to provide guarantee that it will be built according to the plans and specifications that were approved.

[00:17:33] The builder and the developer has to provide some form of guarantee to the municipality in case they default on their obligations.

[00:17:41] And up until this point in time, typically that was done with a letter of credit from one of the main charter banks.

[00:17:48] So you had a very limited resource to provide this guarantee.

[00:17:54] Municipalities would, for the most part, only accept a letter of credit.

[00:18:00] The problem with a letter of credit is, and I'll give you a brief example.

[00:18:04] If you have a project, say, that is a $5 million project, so the developer has to give a $5 million of letter of credit.

[00:18:13] But essentially, as far as the bank is concerned, they need $10 million worth of line of credit,

[00:18:19] just like a homeowner may have a line of credit.

[00:18:22] So they need $5 million to provide the letter of credit to the town.

[00:18:26] And they need $5 million to borrow to pay for the services.

[00:18:31] So if you repeat this over and over again, you find that the developer, the builder,

[00:18:37] runs out of the borrowing capacity to build homes.

[00:18:40] And that chokes off how many homes that get built.

[00:18:44] So surety bonds work a little bit differently.

[00:18:48] It goes through surety companies, an extension of the insurance industry.

[00:18:54] And these instruments provide the same level of guarantee as a letter of credit.

[00:19:01] They're payable on demand.

[00:19:04] On default, they're automatically renewed.

[00:19:08] They have all the same features.

[00:19:10] But as far as a builder is concerned, it doesn't impinge on their credit rating.

[00:19:17] So they don't need that extra credit rating.

[00:19:20] In other words, the surety company does their own evaluation of the company,

[00:19:24] the company's track record, its balance sheet, the ability to do the job, etc., etc.

[00:19:32] And they establish with their own methodologies whether they would extend that credit to the builder to give them a surety bond.

[00:19:41] So this is an alternative to a letter of credit.

[00:19:44] And the government is working very quickly towards making a surety bond as an acceptable alternative to a letter of credit.

[00:19:55] And so the ultimate outcome of this is, would it be that it lowers the cost of capital for the developer

[00:20:01] or that it allows them to take more credit to do more projects or maybe both?

[00:20:07] I think great question and more of the latter is ultimately, just like anybody, you have a limit to how much you can borrow depending on...

[00:20:17] And the Canadians are learning that the hard way, right?

[00:20:19] Oh, God, yeah.

[00:20:20] Unfortunately, so.

[00:20:21] So depending on what your net worth.

[00:20:23] So you have a cap there.

[00:20:24] And if that cap is used up by guaranteeing or providing security or collateral for letters of credit,

[00:20:31] that certainly impinges on the ability then the company to say, okay, I have this other project over in this other town.

[00:20:38] Now I want to build homes over here.

[00:20:40] But I can't.

[00:20:41] I can't get the money, the bank to forward the money.

[00:20:45] And it even gets worse in terms of, in the case of most situations, whereby towards the end of the project,

[00:20:53] the homes are all built.

[00:20:55] They're all occupied.

[00:20:56] The builder still has to warranty the services, the roads that were placed, the sidewalks, etc.

[00:21:02] until those warranty periods expire.

[00:21:06] So now the bank doesn't have any land to secure that letter of credit anymore.

[00:21:11] So in many instances in that circumstance, they require the builder developer to put a cash deposit to collateralize one-to-one.

[00:21:21] So to your former point is then ultimately you have your cash sitting in the bank, not being able to utilize that to build more homes.

[00:21:31] So it certainly has a snowball negative impact.

[00:21:35] I guess this probably could have really helped builders capitalize a bit more on the cyclical nature of the industry as well.

[00:21:43] Like a lot of developers who sold probably a limited amount of supply in 2020 and 2021 when the market was really hot,

[00:21:51] probably would have loved to have been able to sell all of their product during that period of time.

[00:21:55] But they couldn't because, like you're saying, they were limited in the capacity that they could build at one time.

[00:22:01] And now we're at the end of that cycle and people aren't lining up to buy brand new houses anymore.

[00:22:06] And they still have probably a lot of entitled units that they'd like to put into the market.

[00:22:13] And it's kind of created this, I guess, a bit of a gap in the supply pipeline simply because they couldn't do what you're describing.

[00:22:19] Yeah, that's an interesting observation for sure is that, you know, it does, you know, ultimately as you lay that out,

[00:22:28] it does a pinch on the builder's ability to deal with the cycles of the marketplace and to provide, you know, more housing projects.

[00:22:39] Like I said, go into different communities and just build more.

[00:22:43] And that's collectively right across the province.

[00:22:46] Whether you're a small builder that builds like two, three, four homes a year,

[00:22:51] or you're the biggest that builds hundreds, if not over a thousand homes a year,

[00:22:55] this hurts the industry, you know, uniformly across the board and measures, you know, to have alternatives.

[00:23:05] And mind you, not every company will qualify to use a surety bond.

[00:23:09] It has to go through its own strict underwriting process, which each surety company would implement.

[00:23:15] So not everyone would qualify.

[00:23:18] But to have good and viable alternatives is so important for the industry, particularly as we're, you know,

[00:23:26] today's day and age where we're stressed right now, where the market is stressed and capital, quite frankly, is in short supply.

[00:23:33] Very well said.

[00:23:34] Is there anything I missed that you would like to add to the discussion?

[00:23:38] No, I know as we started this conversation, I mean, this is something that flies under the radar screen that, you know,

[00:23:46] certainly the general consumer has no idea the importance of this when you say, well, a surety bond is a letter of credit.

[00:23:53] Well, what difference does it make?

[00:23:54] And I understand municipalities are concerned, like, are they protected?

[00:23:59] But, you know, we as OHBA has gone through a rigorous process with the surety companies to ensure that, you know,

[00:24:07] there is guardrails in place.

[00:24:09] And not every surety company is rated high enough to provide these type of products.

[00:24:15] So we've covered all the bases.

[00:24:17] But at the end of the day, it's all about creating more opportunities where we have so many other roadblocks that we have to deal with that,

[00:24:25] you know, provide the opportunity, like I said, to build the homes that we need.

[00:24:30] And that's what it's all about.

[00:24:32] I think for the municipalities as well, like it's not like bonding is a new theme in the construction industry.

[00:24:37] Like you see it on Tarion Bond, you see it on CMHC Construction in a lot of cases, right?

[00:24:42] Like, you know, construction companies are bonded.

[00:24:45] It's not like it's new.

[00:24:46] It's just who it's being applied to, I think, that's changing here.

[00:24:50] Well, that's a great point.

[00:24:52] I mean, that was part of the challenge as we, you know, I took a lot of time to have meetings with various municipalities

[00:25:01] and stakeholders to explain.

[00:25:03] So these on-demand surety bonds are different than, say, a construction bond.

[00:25:09] And unfortunately, that's what many people had baked in their brains is like, you know,

[00:25:14] a construction bond for, you know, the construction companies post if they default.

[00:25:19] And the problem with those construction bonds are that you have to prove default before payment.

[00:25:25] And we're talking about a completely different animal.

[00:25:29] Although it's a surety bond, it's a bond, but it's a pay-on-demand instrument.

[00:25:34] In other words, if I default and don't, you know, fulfill my obligations,

[00:25:39] the municipality can write the surety tomorrow, say, you know, Bob's defaulted, Farsight's defaulted,

[00:25:46] and demand payment in five days, the money's in their account, exactly like a letter of credit.

[00:25:52] But again, this is an alternative.

[00:25:54] And the more alternatives we have is ultimately it benefits the consumer.

[00:26:00] It doesn't benefit, you know, me as a builder all that much other than I can do more projects.

[00:26:06] But ultimately, more projects means more product for consumers, more competition,

[00:26:13] and, you know, hopefully lower price points.

[00:26:16] Yeah, 100%.

[00:26:17] I guess we'll leave it there.

[00:26:19] I really appreciate all the insight.

[00:26:21] I think this is a great piece to inject into the discussion.

[00:26:24] I agree.

[00:26:24] It's one of those things where it flies under the radar, so it's hard to get attention.

[00:26:29] It's hard to get people excited and passionate about it like it is development charges,

[00:26:32] as an example, where they see it in their invoice when they go buy a new house.

[00:26:38] Right.

[00:26:38] But I think it's obviously going to do quite a bit of work,

[00:26:41] and I'm looking forward to seeing the results of it over the next couple of years.

[00:26:45] You and I both.

[00:26:46] So thanks for the opportunity.

[00:26:47] My pleasure.

[00:26:48] Here for the final interview of our journey at OHBA here,

[00:26:55] and I'm here with Vice President of Policy, Advocacy, and Relationships, Kirsten Jensen.

[00:27:03] Thank you so much for joining us today.

[00:27:05] Tell me a little bit about what you do.

[00:27:07] That's quite the title.

[00:27:09] It is.

[00:27:10] Yeah.

[00:27:10] So actually, I'm new to OHBA.

[00:27:12] I was formerly in the homebuilder world with the West End Homebuilders,

[00:27:15] which is the Hamilton-Halton local, and I just started again with the Ontario Homebuilders about three weeks ago.

[00:27:20] I've been brought in to lead the government relations team.

[00:27:23] Policy is my background.

[00:27:24] I'm a planner by trade.

[00:27:25] Planning policy is kind of my thing,

[00:27:28] and the OHBA had a need to fill way more advocacy efforts, way more government relations focus.

[00:27:34] We heard from our membership that there was a huge gap in staffing and just the need to be way more focused on what we're doing at the provincial level,

[00:27:41] but also the municipal level.

[00:27:42] So I now have a team that we are going to obviously work on our engagement with the province,

[00:27:48] but now we're way more focused on our municipal advocacy too.

[00:27:51] So the entirety of my role is just making sure that we are interacting with all levels of government on topics that are obviously impacting the industry.

[00:28:00] Yeah, I love that.

[00:28:01] I mean, I think advocacy is obviously so important in this whole industry,

[00:28:05] but relationships are extremely important,

[00:28:08] and I think we've seen that today with the amount of politicians that have been here interacting

[00:28:13] and trying to make those strides, listening to the building community here,

[00:28:19] and trying to then go back and take those and make policy out of them.

[00:28:22] Now, speaking of policy,

[00:28:24] the ministry just created a new provincial planning statement to PPS.

[00:28:29] Tell me a little bit about that, and then I've got some other questions.

[00:28:32] Perfect.

[00:28:32] Yeah.

[00:28:32] So the provincial planning statement is a renamed planning document that guides basically the overarching policy for planners to follow for the entire province on how we approach different applications.

[00:28:45] So there was the provincial policy statement 2020,

[00:28:49] and then there was a place to grow, the growth plan for the greater golden horseshoe.

[00:28:52] And what the ministry has now done is integrated those into one single streamlined policy document,

[00:28:59] and the goal is to reduce duplication, provide more flexibility, help municipalities and planners and developers all work together,

[00:29:07] so they're on one single page.

[00:29:09] As a planner, whether you're in the public sector or the private sector,

[00:29:12] a planning application has to be justified that it's in conformity with and consistent with

[00:29:18] and addresses policy across these various documents that have to be considered when you're approaching an application.

[00:29:25] But the problem was just so much duplication.

[00:29:28] The growth plan only set out policies for the greater golden horseshoe,

[00:29:31] and what the ministry back in 2022 when this whole thing started was trying to do was recognize that the whole province is a place to grow.

[00:29:39] It's not just the greater golden horseshoe anymore.

[00:29:42] And the policy documents, the various ones that you had to approach as a planner,

[00:29:47] it was just so much different pieces of legislation and red tape and policies that was too much time added to the process of approving an application.

[00:29:57] And when you're writing a justification report as a planner, you have to know to look at this document and this document and this document,

[00:30:03] and it was just too much.

[00:30:04] So this new PPS, Provincial Planning Statement, which is much better named now because it is the planning framework for the whole province,

[00:30:12] it's much shorter.

[00:30:13] That's a key piece that Minister Klint just spoke about yesterday.

[00:30:17] Hundreds of pages reduced between the two documents,

[00:30:20] but it also acknowledges that there's no longer just like the former PPS had a list of large and fast-growing municipalities,

[00:30:27] and the way that the growth plan spoke to those was basically focused on those are the ones that have to grow,

[00:30:33] they have to do it this way, they have to set these targets,

[00:30:35] and now that's been removed, and it's acknowledging that like every single municipality across the province,

[00:30:41] 445 of them have opportunities to grow.

[00:30:44] They all have to consider different ways that they can set intensification strategies and targets and strategic growth areas,

[00:30:50] but it's not just the GGH anymore.

[00:30:53] It's across the province, and that was the key messaging in 2022 when this was released that the consultations were going to start,

[00:31:00] was everywhere in Ontario is a place to grow.

[00:31:04] I mean, I couldn't agree more.

[00:31:06] I've always thought it's so ridiculous that, you know, especially if you just look at the 401 corridor,

[00:31:12] that that's essentially the only place that people have ever considered,

[00:31:16] and we still don't have like the infrastructure even along that corridor to support it.

[00:31:20] Now, by the sounds of it, you're here doing God's work in making this whole process simpler, which is fantastic.

[00:31:28] I do want to ask, you mentioned duplication a couple times.

[00:31:31] Can you elaborate on that?

[00:31:32] What does that mean from your perspective?

[00:31:35] So kind of what I alluded to just in my last answer, there was all these different policy documents that you had to approach as a planner.

[00:31:41] So you'd have the growth plan, which would have policies about intensification, boundary expansions,

[00:31:48] how to do an employment conversion to add more residential to a site that maybe was mainly employment before that.

[00:31:55] All those policies existed in a growth plan,

[00:31:57] but then there was similar policies that also existed in the provincial policy statement,

[00:32:04] and sometimes they were at odds with one another.

[00:32:06] They were consistent with one another to an extent,

[00:32:09] but depending on how you approach an application,

[00:32:11] you had to be consistent, especially in the GGH,

[00:32:14] you had to be consistent with both policy documents,

[00:32:16] and there were instances where maybe you were consistent with the language in one of them,

[00:32:21] but maybe not so much the language of the other one,

[00:32:24] and then there was opportunities that existed in one document,

[00:32:26] but not the other one for other municipalities outside the GGH.

[00:32:31] And so rather than have these two documents speaking to kind of the same thing

[00:32:35] and trying to achieve the same goals, but just in like a focused geographic area,

[00:32:39] the point was remove having two documents.

[00:32:43] Like there's no point.

[00:32:44] They can be integrated,

[00:32:44] and policy areas can speak in one document to things that previously,

[00:32:49] I mean, there's other policy documents that come into play too.

[00:32:52] So it's not just those two, but those are the two that were obviously integrated for this.

[00:32:55] But actually to your point, the duplication side of things,

[00:32:59] there's other things that we also have to look at as planners.

[00:33:01] Like then you go to official plans, you go to zoning, right?

[00:33:04] Obviously that's local level stuff,

[00:33:05] but they all integrate with one another and speak to one another,

[00:33:08] and you have to make sure that every time you're justifying a project,

[00:33:11] you're addressing policies across the board.

[00:33:14] So reducing the amount of times you have to look at different policy documents

[00:33:18] was kind of one of the goals of this whole approach.

[00:33:20] Sounds like a great goal because that sounds like a nightmare.

[00:33:22] It sounds like you're cutting one piece of red tape

[00:33:24] to just find another piece of red tape to find another one.

[00:33:27] So making that process simpler and just speeding that whole thing up,

[00:33:32] I think is great.

[00:33:33] Now, talk to me about some of the key pieces that came out of this

[00:33:37] for the home building industry

[00:33:39] and what you guys have been advocating for with OHBA

[00:33:42] and all the other regulatory bodies here and advocacy bodies.

[00:33:46] What are some things that the members are happy to see?

[00:33:51] Okay.

[00:33:51] There's actually a lot of things.

[00:33:53] The first one off the top, I will say,

[00:33:55] has to be the use of the Ministry of Finance population projections

[00:34:00] and growth numbers.

[00:34:02] So the old PPS had the municipalities using numbers that were established

[00:34:08] quite some time ago.

[00:34:09] I don't even know what year they were established,

[00:34:12] but these different growth projections

[00:34:14] that the Ministry of Municipal Affairs and Housing came up with

[00:34:17] using an independent consultant firm,

[00:34:19] Hemsyn Consulting Growth Numbers.

[00:34:21] And there was no real indication of where those numbers came from

[00:34:26] and if they were accurately representing the way that the province was growing

[00:34:29] and immigration levels and just how many people were coming into the province

[00:34:32] and the numbers.

[00:34:33] And so the Ministry of Finance, again, with the duplication,

[00:34:37] they also had their own numbers.

[00:34:38] And so a lot of our members were like,

[00:34:39] why aren't we using the ones that the ministry,

[00:34:41] like your government, is putting out there for us to be also consulting

[00:34:46] and using as projections?

[00:34:48] So they've now integrated that into the new document, which is huge.

[00:34:52] It's a lot more accurate,

[00:34:54] and they're a bit more flexible to change under the circumstances

[00:34:57] of how the province is growing over the next however many years it is.

[00:35:00] 20 to 30 years is like the common timeline you'll see throughout the PBS.

[00:35:04] Okay, interesting.

[00:35:05] Yeah.

[00:35:06] Another area that was pretty important was the concept of settlement area

[00:35:10] boundary expansions.

[00:35:11] So in Ontario, obviously, there's a lot of municipalities who have,

[00:35:16] it's called white belt land,

[00:35:18] lands that are outside of the urban boundary

[00:35:19] that municipalities have to consider as future developable lands.

[00:35:23] There's a lot of members that we have that own properties in those lands,

[00:35:26] planning for the future.

[00:35:28] If the boundary expands, we own those lands, we can develop them.

[00:35:31] Land supply is a huge, huge problem for the province right now.

[00:35:34] And the previous growth plan had a concept called

[00:35:38] the Municipal Comprehensive Review, which has now been removed.

[00:35:41] And that was basically a 10-year planning activity

[00:35:45] that municipalities and regions had to undergo,

[00:35:48] whether you were a single tier or a two-tier municipality,

[00:35:51] like regional local municipalities.

[00:35:52] And through that 10-year process is the only time you could apply for a conversion

[00:35:57] for a site from employment to residential or to mixed use,

[00:36:00] which I will also speak to next.

[00:36:02] But the settlement area boundary piece is really, really critical

[00:36:05] because there's been places across the province like Hamilton, Waterloo, Ottawa,

[00:36:10] where land supply has been restricted for many, many years.

[00:36:13] Those are all quite contentious topics over the last couple of years in the ministry world.

[00:36:19] But land supply was not available.

[00:36:21] And there's so many opportunities for those lands to be brought online.

[00:36:25] Very, very contentious opinions out there from the,

[00:36:28] I would say, public planner versus private planner position,

[00:36:31] but also environmental groups.

[00:36:34] Environmental defense is very, very active about what those white belt lands should be used for.

[00:36:38] All that to say, what has happened now in this new document

[00:36:41] is that the MCR process is removed.

[00:36:43] So you don't have to wait every 10 years to be able to bring more land online.

[00:36:47] You can go and file an application as long as you have proper justification

[00:36:51] that there's infrastructure servicing.

[00:36:53] There's a need for those lands to be brought online.

[00:36:55] But any landowner can now, they don't have to wait 10 years to make an application

[00:37:01] to make a case for this, I don't know, 20, 40, 60 hectare parcel of land.

[00:37:06] We can build homes there.

[00:37:07] We've also made that process, sorry, not we.

[00:37:10] The OHPA was advocating that that process be made appealable.

[00:37:13] So one of the key pieces that was a huge win for the industry was that

[00:37:19] if you were rejected under that MCR process

[00:37:21] and you were not allowed to bring land online into the boundary,

[00:37:25] you couldn't appeal it.

[00:37:26] You were just dead on arrival.

[00:37:28] Like, thank you for your attempt, but you're not going anywhere now.

[00:37:33] So that's now become appealable, which is a huge win.

[00:37:35] Because again, the housing crisis, we need more land to build houses.

[00:37:40] But the problem was you have no repercussion for when you don't get that land supply brought online.

[00:37:47] And the industry just really needed those kind of opportunities.

[00:37:50] The other key piece that I'll highlight is the conversion process.

[00:37:55] There's so many employment parcels out there in various municipalities,

[00:37:58] and specifically Toronto is one of them where there's just employment land everywhere.

[00:38:02] And you could only apply to add residential to your property every 10 years

[00:38:06] through this massive exhaustive exercise that just took ages and ages and ages.

[00:38:11] And it all goes up to the ministry.

[00:38:13] And the minister is the guy or the girl who has to just make a decision

[00:38:16] on all these different like hundreds of requests for conversions.

[00:38:20] So what the new PPS does is it redefined what an area of employment is.

[00:38:24] So now employment actually means like true core employment uses,

[00:38:28] manufacturing, chemicals, industrial, research, warehousing,

[00:38:33] all those kind of things fall under what's a core employment parcel.

[00:38:36] So if you're not using your property for those kind of uses,

[00:38:40] like if it's an office or a service type use or commercial,

[00:38:45] that's not true employment in the grand scheme of like the planning world.

[00:38:49] Those parcels should have the opportunity to have residential mixed in with them.

[00:38:52] Like end of sentence.

[00:38:53] Like those types of uses can collaborate and work together easily.

[00:38:57] And so now you can apply to have those types of uses brought into your lands at any time.

[00:39:03] You don't have to wait 10 years.

[00:39:04] The way it's written actually, if you're not in an area of employment,

[00:39:07] your parcel is technically considered mixed use and able to have residential brought into it.

[00:39:12] So it's not even a conversion anymore.

[00:39:13] It's just now we have so many more opportunities for general employment is what they were called.

[00:39:18] Those types of uses to incorporate residential into them.

[00:39:21] Then I would say the other major key thing that we were really focused on at OHBA was strategic growth areas

[00:39:27] and opportunities for housing around transit.

[00:39:30] It used to be that only large and fast growing municipalities were the ones that were directed to establish strategic growth areas

[00:39:36] and incorporating housing at a way like more intense rate close to transit.

[00:39:43] But now the way it's written is that all municipalities across the province are being told,

[00:39:48] if you have a strategic growth area and you have a place in your municipality that you see as a place where people are going to come and grow,

[00:39:55] that can be delineated.

[00:39:57] You have the opportunity to do that.

[00:39:58] You don't have to be a large and fast growing municipality.

[00:40:01] And if you have transit or you're thinking about transit for your community,

[00:40:04] how do you incorporate that into a strategic way to get those areas to be growth places?

[00:40:10] I would say like overall, the reason that the OHBA is so happy to see that this came out,

[00:40:16] it was a two-year consultation process, many, many versions of this was consulted on.

[00:40:20] It's just the flexibility that it provides and the opportunity for our members across the province

[00:40:25] to now plan better for where they want to purchase land, build different types of housing opportunities.

[00:40:33] Even the agricultural policies now have the opportunity for two additional residential units

[00:40:36] on an agricultural property, which is not a common area where you would think about adding additional units.

[00:40:43] That was a lot.

[00:40:45] No, I mean, first of all, you're blatantly an expert and you should be.

[00:40:49] You helped put this whole thing together.

[00:40:51] And I think my major takeaway, which is fantastic, is that everything that I just heard you say

[00:40:59] leads to more homes getting built faster, right?

[00:41:03] Removing hundreds of pages, removing these archaic laws,

[00:41:10] these municipalities that want to grow but aren't allowed to because of these policies that you guys are moving.

[00:41:18] So I really commend you on the work that you're doing.

[00:41:20] And Kirsten, thank you so much for joining us today.

[00:41:22] I really appreciate it.

[00:41:23] Yeah, it was great.

[00:41:24] The Canadian Real Estate Investor Podcast is for entertainment purposes only and it is not financial advice.

[00:41:32] Nick Hill is a mortgage agent with Premier Mortgage Centre and a partner in the G&H Mortgage Group.

[00:41:38] License number 10317.

[00:41:41] Agent license M21004037.

[00:41:46] Daniel Foch is a real estate broker licensed with Rare Real Estate,

[00:41:51] a member of the Canadian Real Estate Association,

[00:41:55] the Toronto Real Estate Board,

[00:41:56] and the Ontario Real Estate Association.