As housing developments across the province falter, the province is using its newly formed Building Ontario Fund to invest up to $178 million in one that will deliver 1,700 rental units near the Scarborough Go Station.
It’s the second use of the fund, an independent Crown agency with a mission to invest and attract private capital into needed infrastructure that makes a profit, for market housing.
The province announced in March an investment with High Art Capital to bulk buy unwanted condos and turn them into rentals.
While the province says the Scarborough development falls under the mandate of the fund, one critic says the investment is part of a taxpayer-backed bailout of developers.
The project will form part of the new Scarborough Junction community, expected to eventually include 7,700 homes, as well as parks and amenities, according to a press release from the province.
The same release describes the provincial money as an “equity investment” — where investors purchase shares and become partial owners — in a joint venture with Republic Developments and Harlo Capital, a private equity firm.
The project was “stalled” before the new funding, the release added.
Matt Young, the president and CEO of Republic Developments, called the investment a “game changer” in an email, and said the fund is “taking a 50 per cent equity stake.”
He said 340 units (20 per cent) will be City of Toronto Rental Housing Supply Program affordable units, for 40 years. A city spokesperson said in an email that they “look forward” to receiving an application from the developer for this program. She added that “affordable” means households in the 50th to 60th income percentile pay no more than 30 per cent of their income on housing costs.
Young added that the site was intended to be “mixed-use” and they “always planned to explore both condo and rental on a phase-by-phase basis.”
He added that Republic submitted a proposal that met the fund’s investment criteria and responded to the mandate of investing in affordable housing.
Harlo did not respond to a request for comment.
Asked about the criteria for funding, Julia Sakas, a spokesperson for Building Ontario Fund, said in an email that its mandate is to “close financing gaps and enable priority infrastructure projects to move from vision to reality across six priority sectors, including affordable housing.”
The Scarborough project had a number of strengths, including transit connections, and the fact that it delivers rental housing in an underserved area, Sakas added.
The fund “receives a return on its equity investments in the form of capital appreciation, but we also measure our return based on the public benefits associated with the project, which in this case is long-term affordable housing connected to transit,” she said.
She added the return is based on the increase in land value as a result of improvements to the site. “Project profitability and affordability are not mutually exclusive,” she said.
The first phase of the project will be completed and occupied starting in late 2030, she said, and the fund intends to sell its interest once the buildings are completed, subject to market conditions.
Sarah Chapin, director of strategic communications and issues management with the Office of the Minister of Finance, said in an email the fund is investing in “high-impact, revenue-generating infrastructure projects that otherwise would not happen.”
On top of affordable housing, the other priority areas are: energy, transportation, long-term care, municipal and community infrastructure, and critical minerals.
Jeremy Withers, a senior researcher and outreach co-ordinator for New Housing Alternatives, a Canada-wide research partnership based at the University of Toronto, said other recent announcements of taxpayer money going to developers include the HST and development charges cuts, as well as the investment in High Art Capital.
“What we’re seeing is the rollout of an enormous government bailout,” he said.
“And it seems it’s very clearly aimed at restimulating an unstable and inequitable approach to homebuilding.”
He pointed to research that found, in general, that financial firms are more aggressive with evictions in Toronto.
There are other ways to increase affordable rental housing, he noted, like the large co-op housing project now underway just north of the Scarborough Junction, which will include affordable and market rent-controlled units.
Ricardo Tranjan, Ontario research director and senior researcher with the Canadian Centre for Policy Alternatives, said a better model would be for the government to build housing, and noted the market units won’t be rent controlled.
“We can’t have housing be an extremely attractive investment and be affordable. We can’t square that circle,” he added.
In March, the province announced a $300-million investment through the Building Ontario Fund in partnership with High Art Capital to support a plan to buy 2,200 unsold condo units and turn them into rentals.
The Toronto-region condo industry has been struggling with an oversupply of small units, which are no longer in demand as investor interest has dried up.
For the first time in three decades there were zero new condo projects launched in the Greater Toronto and Hamilton Area in the first quarter of the year, according to real estate market research firm Urbanation.
Almost 1,000 condo units were cancelled across the Greater Toronto and Hamilton Area in the first quarter of this year, and they are all being converted to rentals, Urbanation found.
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