Significant Changes Ahead: What You Need To Know About The More Homes Built Faster Act, 2022 - Real Estate

Key Highlights

The proposed legislative changes are part of the government's long-term strategy to build 1.5 million new homes in Ontario within a decade.
Some of the key changes in Bill 23, if passed, will have an immediate and significant impact on developers.
Bill 23 will open the door for a policy framework that could significantly benefit developers to build more homes.

Introduction: Goals of the Bill

On October 25, 2022, the Ontario Government introduced the More Homes Built Faster Act, 2022 (Bill 23), which is an omnibus bill impacting nine different development-related Acts, as well as proposing a new Act to implement the construction of needed sewage infrastructure to service the York and Durham regions. The omnibus bill proposes extensive changes to the land use planning regime throughout the entire province as part of the Conservatives Housing Supply Action Plan (the Plan). This Plan is part of the government's long-term strategy to increase the housing supply by an additional 1.5 million homes over the next 10 years.

Recognizing this as a substantial goal, the government has announced that, in addition to amending specific development related Acts including the Planning Act, the Development Charges Act and the Ontario Heritage Act, there will be a review of the Provincial Policy Statement (the PPS) and The Growth Plan, as well as new regulations, to complement and support the changes contemplated in Bill 23. Commenting periods for the first round of regulations, released to this date, have been set at 30 days.

Keep in mind, however, that the legislation announced is a first reading and is, therefore, likely to be amended. Prior to receiving Royal Assent, the legislation will pass through two additional readings before it may be adopted by the legislature. It is anticipated that Royal Assent could be obtained as early as December 2022. As for the regulations, some may be adopted on November 24, 2022, following the commenting period, while others may be adopted early next year.

The Highlights: Proposals That Will Help Promote Development

With the release of this proposed legislation, there are many proposals which could, especially when combined, have a significant benefit to assist developers in achieving the provinces goals under the Plan. There are so many changes, all cannot be detailed in a single post, but what follows is a general summary of several proposals which could be of particular significance.

One concept that permeates throughout the proposed legislation are amendments intended to put some restrictions over spiraling governmental "costs" in the development of new housing in Ontario. Building off amendments from the last four years (including the introduction of the Community Benefits Charge (CBC), the "freezing" of development charges and the introduction of the right to appeal parkland by-laws), the province has proposed a number of policies that will slow, if not reverse, several of the spiraling costs to new development. Proposals include:

the introduction of a new "affordable housing" definition (likely in response to the definition introduced by Toronto in 2021);
setting a five percent gross floor area cap on inclusionary zoning units;
limiting CBC to new development;
removing development charges;
CBC and parkland from affordable units;
further reducing the capital costs to which development charges can be applied; and
creating mandatory phase in periods for new development charge by-laws.

Particular attention was paid to rental housing. Rental housing is proposed to receive mandatory reduced development charges as compared to market units, and will benefit from a new cap on the interest municipalities can charge in the period where development charges are "fixed". In addition, changes are proposed that would allow the minister to make regulations controlling the powers of municipalities to prohibit demolition of residential rental properties with the goal of providing greater flexibility to demolish residential units, to allow for revitalization of the deteriorating rental housing stock. As it relates to parkland contributions, the province proposes to ensure parkland is only charged against "net new units", which could address a longstanding issue where older "tower in the park" sites are effectively charged for parkland against units that may have been there since the decades immediately following the second world war.

The province also continued to build off their recent changes to the parkland contribution process. As noted above, Bill 23 proposes to alter the maximum parkland contribution rates (to 1 ha per 600 units for contribution of parkland, and 1 ha per 1000 units for cash-in-lieu), and it is expected that a total cap of 15 percent of site area will be introduced as part of the Plan. In addition, a new procedure has been introduced that would allow developers to propose parkland to a municipality, including lands with "encumbrances" such as underground services, and take any dispute to the Ontario Land Tribunal (OLT) for resolution.

Further highlights relate to many changes to the processing of applications. Site plan approval has been further clarified in an attempt to control the steady expansion of site plan applications from their original intended purpose (of literally controlling the siting of public access and public areas of a development) to the "catch all" it has become in many municipalities.

Bill 23 also includes proposals to limit those who can file OLT appeals and the tribunal has been given new powers to award costs and dismiss certain applications. Further proposals include timelines for the processing of OLT appeals and giving certain housing matters priority.

The Lowlights: Some Proposals to Be Concerned About

Unfortunately, not all the proposed changes are advantageous with certain ambiguities within the legislation causing particular concern. The "devil will be in the details".

Of these, perhaps the most concerning is the proposal to take away the rights of landowner's to appeal municipally driven planning applications (official plans, zoning by-laws). These changes are somewhat surprising given that the general thrust of the remainder of the legislation is to benefit the development of housing. It is not unusual for municipalities to incorporate a variety of "poison pills" in their official plans that can have devastating impacts on future development, even where the same may run contrary to recent provincial approvals or policy. An inability to bring municipally proposed changes to an independent third party such as the OLT could easily be abused by municipalities to trigger a wide variety of mischief that runs counter to the general objectives of the Plan.

High Level Summary of Additional Proposals

Planning Act

Should the legislation pass, the Planning Act will be amended in a number of ways to promote housing construction. One significant "infill" change would be to permit up to three residential units "as of right" per lot on the majority of land zoned for one home in residential areas without requiring a municipal by-law amendment. To further encourage this form of increased housing, these units would be exempt from both development charges and parkland dedication fees.

Additionally, to reduce approval timelines to meet planned minimum height and density targets near major transit stations, municipalities will be required to update their zoning by-laws within one year following "key" policies being approved for major transit areas.

As mentioned above, Bill 23 also proposes restricting/prohibiting third party appeals of official plans and amendments, zoning by-laws and amendments, consents, and minor variances. Bill 23 would impose similar restrictions for appeal rights for these planning instruments as already exist for plans of subdivision, and would create a prescribed list of "specified persons." Appeal rights would be maintained for key participants, except where appeals have been restricted elsewhere (such as a minister's decision on a new official plan). Appeal rights of industry against municipal proposals to the official plan or zoning by-law are also proposed to be eliminated.

The proposed amendments would have a retroactive effect, applying to any matter that has been appealed, but has not yet been scheduled for a hearing as of October 25, 2022. Importantly, this means third party appeals in process, but without a hearing date established prior to October 25, 2022, would be dismissed.

Further, Conservation Authority appeals under the Planning Act will be limited to matters that affect land owned by them, or where the Conservation Authority is the applicant. In the future, a Conservation Authority may only act as a public body in specific appeals, to be listed in the revised statute, where the appeal is made under a provision relating to natural hazard policies in the PPS.

As for projects with fewer than 10 residential units (some exceptions applying), proposed changes would remove site plan control requirements with the intention of speeding up housing proposals. In other circumstances, site plan approval will no longer be needed to consider design details and landscaping, as municipalities would be limited in what they can require in a site plan application.

To further increase efficiency the proposal also suggests re-allocating responsibility for certain land use policies and approvals from upper-tier municipalities, including Region of Durham, Region of Halton, Region of Peel, County of Simcoe, Region of Waterloo, Region of Niagara and Region of York, to lower-tier municipalities, allowing for greater community influence by reducing duplication of review.

Rental Housing

With this new legislation, the Ontario government is seeking to provide certainty with respect to inclusionary zoning rules to create better conditions for building more affordable and purpose-built rental housing. New regulations associated with the proposed legislation would create a maximum 25-year affordability period, a 5 percent cap on the number of inclusionary zoning units and a standardized approach to determining the price or rent of an affordable unit under an inclusionary zoning program.

Development charges would also be reduced for rental units by 25 percent for 3+ bedrooms, 20 percent for two bedrooms and 15 percent for smaller units. Further, the legislation seeks to clean up the five years to pay system by clarifying that it is five years from occupancy or occupancy permit and setting the maximum interest rate on the development charges to a rate equal to the average prime rate of the major Canadian Banks (the base rate), plus one. The base rate would be adjusted four times a year.

Freezing, Reducing and Exempting Fees

Through amendments to the Planning Act, the Development Charges Act and the Conservation Act there will be an increased ability to freeze, reduce and exempt fees. An example highlighted by the Ontario government is the exemption of affordable and inclusionary zoning units, in addition to select attainable housing, to be defined in future regulations, and non-profit housing developments, from development charges, parkland dedication levies and CBC.

Additional proposed changes aimed to reduce the cost of housing through freezing, reducing or exempting fees include:

freezing parkland rates as of the date a zoning by-law or site plan application is filed, as further discussed below under the parkland heading;
rental construction would also benefit by receiving reduced development charges; and
conservation authority fees for development permits and temporarily freezing proposals.

Ontario Land Tribunal Act

Proposed changes to the Ontario Land Tribunal Act include:

allowing regulations to prioritize cases meeting certain criteria and to establish service standards;
clarifying the tribunal's powers to dismiss appeals due to unreasonable party delay or party failure to comply with tribunal orders; and
clarifying the tribunal's powers to order costs against unsuccessful parties.

To provide additional support to the tribunal, the government would also invest $2.5 million in resources with the intention of reducing the tribunal's

The New Attainable Housing Program

In addition to making changes to existing programs, the proposed legislation intends to create a new program that will leverage provincial authorities, surplus or underutilized lands and commercial innovation and partnerships. The goal of this new program will be to rapidly build attainable homes in mixed-income communities.

New Home Construction Licensing Act

To ensure greater follow-through on proposed housing projects and to provide greater protection for home buyers the legislation proposes doubling the maximum fines for unethical builders and vendors of new homes who unfairly cancel projects or terminate purchase agreements. The maximum would increase from $25,000 to $50,000 per infraction.

Should this change be enacted, any contravention occurring on or after April 14, 2022, would be caught by the increased fines. The funds from these penalties would then be allowed to flow back to affected consumers as the Home Construction Regulatory Authority would be enabled to use funds from the penalties to provide money back to the consumers.

Ontario Heritage Act

Changes to the Ontario Heritage Act are significant and would revolve around municipal requirements when relying upon the Act. Changes include:

new prescribed criteria required to be met to add a new non-designated property to the municipal register;
the minister would be provided with the ability to review the determination, or any part of the determination, in the process for identification of properties;
new proposed amendments which would provide for the removal of non-designated properties from the heritage register in certain circumstances. For example, where the property/building is on the register as of the day before the Lieutenant Governor proclaims subsection 3(4) comes into force, it will be removed from the register if the council of the municipality does not give a notice of intention to designate the property on or before the second anniversary of the date of proclamation; and
where a non-designated property is removed, it would no longer be allowed to be included by the municipality in the register for a period of five years.

The changes would also create a new power to allow the Ontario government to establish a detailed criteria for the creation of Heritage Conservation Districts. Municipalities would only have 90 days to designate a property after a "prescribed event" (to be defined in regulations), with the intent of requiring resolution of designation activity early in a development application, allowing for greater certainty as to what could be designated.

Affordable Housing

Should the new legislation be enacted, the definition of affordable housing will be modified so that "affordable" will mean either 80 percent of market rent or average purchase price. For greater clarity, the Ontario government will start publishing a bulletin setting out the averages.

The proposed changes would also exempt affordable housing, attainable housing and inclusionary zoning units from development charges, CBC and parkland dedication. It additionally emphasizes the need for collaboration with the federal governmental to work on potential HST incentives, including rebates, exemptions and deferrals, to support new ownership and rental housing development.

The legislation further provides that Ontario will start exploring potential refinements to the property tax assessment methodology used to assess affordable rental housing to better address the reduced rents received by these housing providers. Consultations with the municipality would occur to discuss potential ways to reduce the current property tax burden on multi-residential apartment buildings.

Parkland

To create greater certainty regarding parkland dedication rates, the proposed legislation would implement a 10 percent cap on the amount of land that can be conveyed or be paid in lieu or its value for sites under 5 ha, and 15 percent for sites greater than 15 ha. As referenced above, the alternative dedication rates would also be reduced to 1 ha per 600 net residential units for land and 1 ha per 1000 net new units for cash in lieu, where net new units means taking the number of residential units before a proposed development from those after the proposed development

Also significant, the parkland fee would be determined much earlier in the planning process, with the calculation occurring at the site plan stage, or in the absence of a site plan, at the time of zoning application. Where no site plan or zoning applications were made parkland will be assessed at the time of building permit issuance. These changes will apply to both residential and commercial projects and, in some markets, may have a significant impact on the valuation of cash-in-lieu.

In addition, affordable and attainable housing units, including those required under inclusionary zoning, will be exempted from parkland dedication requirements. The calculation will be based on the number of affordable and/or attainable units, relative to the total residential units in the development. Not-for-profit housing developments, as well as second and third residential units on a lot, will be exempt from parkland dedication requirements.

Bill 23 also proposes the following notable changes with respect to municipally prepared park plans:

encumbered parkland/strata parks and privately owned publicly accessible spaces (POPS) would be eligible for parkland credits;
landowners would have to identify land intended to be provided for parkland with the municipality being afforded the ability to appeal to the OLT if there is a disagreement; and
park plans would be required prior to the passing of any future parkland dedication by-law.

Development Charges

In addition to the matters set out in other areas of this summary, development charges are intended to be lowered through a few additional changes:

mandatory "phase in periods" for development charges including no more than 80 percent in the first year, 85 percent in the second year, 90 percent in the third year and 95 percent in the fourth;
removal of "housing" from a permitted capital cost to include in development charges; and
development charge by-laws would last 10 years, rather than the previous five years. Note, however, that municipalities would still be allowed to complete their studies earlier.

Vacant Homes

Lastly, the government has emphasized that the proposed legislation, if enacted, will focus on setting up consultation on a policy framework regarding local vacant home taxes to provide owner's with greater incentive to sell or rent their homes.

Conclusion

While extensive this summary is not a comprehensive coverage of all the changes that will be made should Bill 23 receive Royal Assent, rather it presents the most poignant amendments with the most immediate and significant impact on land owners.

Together, these proposed amendments have the potential to fundamentally change the land use planning regime. Accordingly, Bennett Jones will continue to monitor the developments in relation to the More Homes Built Faster, 2022 and the related policies and will provide updates as additional information becomes available.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

Canada: Significant Changes Ahead: What You Need To Know About The More Homes Built Faster Act, 2022