Staff at the City of Toronto have proposed a new initiative that they project will support the development of 20,000 new rental homes.

The Purpose-built Rental Homes Incentive will provide breaks on development charges on purpose-built rental homes, which could reach as much as $37,000 per unit; and a 35-year, 15-percent reduction in property taxes, which could be worth as much as $20,000 per unit.

To qualify for the incentives, projects will need to include at least 20 percent of units as affordable rental homes which meet the city’s new income-based definition of affordable housing, for a period of up to 99 years and for at least 40 years. Projects will also have to start construction by the end of 2026.

Staff have also recommend that city council approve a new tax subclass for multi-unit properties. The new class would provide a 15 percent tax break for eligible rental developments through the 2025 budget.

City staff expect the measures will help spur the development of 20,000 new rental homes including up to 16,000 purpose-built rental homes and a minimum of 4,000 affordable rental homes.

The city aims to kick-start the first phase of this program and release a call for applications immediately to identify and approve 7,000 new rental homes, including 5,600 purpose-built rental homes and at least 1,400 affordable rental homes.

“Our city has reached a critical point in the need for stable, rental housing, and today’s steps will lay the foundation for creating secure, long-term housing options for all income levels, including middle-income earners and essential workers,” said Councillor Gord Perks, who chairs the city’s planning and housing committee. “This is a crisis that has been decades in the making, and now we are asking other levels of government to join us at the table and ensure we have a robust, affordable housing system that meets the needs of current and future residents.”

Toronto is facing a significant shortage of purpose-built rental homes due to insufficient investments from all orders of government since the early 1990s. Staff expect the gap to worsen due to high interest rates and financing costs, inflation and increasing construction costs which have caused a significant slowdown in new residential development. Meanwhile, it says, demand for new rental homes is only expected to grow due to population growth and a home ownership market that remains out of reach for most moderate and low-income residents.

And although the city says it is prepared to lead the way with new programs such as the rental homes incentives, it says it needs help from the province and the federal government.

“Toronto is taking bold action to address the housing crisis,” said Mayor Olivia Chow. “We’re offering up incentives to build thousands more purpose-built rentals and affordable homes. With partnership from the provincial and federal governments, we can build thousands more homes and reshape the housing landscape for a more inclusive and affordable Toronto for everyone.”

The staff report recommends that city council call on the provincial government to provide the city with a rebate $1 billion for, equivalent to the value of development charges and 85 per cent of the value of property taxes, for 35 years for new purpose-built rental homes.

The extra money would help the city launch a second phase of its incentive stream and extend its call for applications to approve an additional 13,000 new rental homes, including 10,400 purpose-built rentals and 2,600 affordable rental homes.

The report also calls on the federal government to immediately allocate a $7.3 billion portfolio of low-cost financing to support the delivery of the 20,000 new affordable and purpose-built rental homes outlined in this report.