How Does Bill 23 Affect Kingston, Ontario?

On November 28, 2022, the Ontario Government passed Bill 23, the “More Homes Built Faster Act 2022.” The purpose of this bill, as the name suggests, is to increase the supply of houses in Ontario as quickly as possible.

The bill has been reported on extensively in the news, so in this article, we’re going to cover some of the key points as they relate to Kingstonians. The three major components of this Bill that we want to cover are:

1. “As of right” zoning permitting up to three residential units per lot.
2. Reductions to development charge rate increases.
3. Reduction in the building requirements and approval process.

How Does Bill 23 Benefit First-Time Home Buyers?

The greatest obstacle for first-time homebuyers in Kingston is the down payment. At first, a minimum down payment of 5% seems attainable, but with the average cost of housing in Kingston at $636,150 as of October 2022, that means first-time home buyers need to have over $30,000 saved. For the average Kingstonian making $62,000 after taxes, that’s half a year’s salary. And that’s the average. Typically, first-time home buyers are younger, so you would expect them to be making less than the average.

The second greatest obstacle is securing a mortgage loan. A common complaint amongst younger Canadians is how they pay $2500 per month in rent, but can’t convince a bank to give them a mortgage with the same (or lower) monthly payments.

So, what is Bill 23 doing to help with these issues? Two things. First, it increased the permitted number of additional dwelling units (ADU) from two to three (though this does not mean every home will be able to accommodate secondary units); second, it sets out to “freeze, reduce and exempt fees, and spur the supply of new home construction.”

You may not realize it, but the fees and taxes associated with building a new home significantly increase the price—and therefore the down payment. The Canadian Mortgage & Housing Corporation (CMHC) reported in July 2022 that these fees can increase the cost of a new home by up to 20%. For first-time homebuyers, an increase like that can break the bank. So, while these fees collected by the municipality help fund important community projects, they are exacerbating perhaps the biggest hurdle to home ownership.

How do ADUs help first-time home buyers? According to Statistics Canada, 15% of Canadians between the ages of 20 and 34 have roommates, and many young Canadians are deciding to buy houses with friends and family to get into the market. The biggest turn-off for this type of joint ownership is having roommates. Allowing additional dwelling units will help young Canadians get into the market AND keep their independence. Having “roommates” doesn't sound as bad when they have their own entryway and independent living space.

How Does Bill 23 Benefit Investors?

The housing crisis is a complicated issue to solve, but one major contributor is the costs associated with building a new home. As we mentioned in the previous section, municipal fees and taxes greatly increase the cost of new construction, and this increased cost negatively impacts the housing supply. The Government of Ontario estimates fees and taxes can add $250,000 to the cost of a new home depending on the area.

The Ontario Government intends to remove this burden by reducing and removing these fees. Bill 23 exempts “inclusionary zoning units, select attainable housing units, and non-profit housing developments are exempt from municipal development fees.” As well, rental units will see development charges reduced by up to 25%.

The decrease in the up-front cost of building is just one benefit investors will enjoy. Another major pain point for new construction is the bureaucracy surrounding it. It can take time to get approval for new construction, even for small projects like a new family home. And at the same time, zoning requirements are so exacting that we’ve seen ADU plans discarded because a property was 2 inches too small. To tackle this, Bill 23 made amendments to the Planning Act to reduce the number of required approvals for “small housing projects.”

How Does Bill 23 Benefit Rural Ontarians?

It’s unfortunate, but the real beneficiaries of Bill 23 are urban Ontarians. When it comes to additional dwelling units, the existing infrastructure is really the most important factor. If you do not have sewer or septic capacity, for example, you still won’t be permitted to add a unit—and the cost of upgrading your septic tank can range from $40,000 to $60,000. And there is also a focus on increasing density near existing services like transit.

What are the perceived downsides of Bill 23?

Some Kingstonians are concerned that the Bill could increase property taxes, and Cataraqui Conservation Authority has said they are concerned about the ability of conservation authorities to mitigate the risk of natural disasters.

While increased density around public transit services will be beneficial to cities with robust transit systems, cities like Kingston that already face issues with public transit are likely to see increased strain.

Conclusion

While Bill 23 is far from perfect, it does a lot to benefit Ontarians. Increasing the supply of rental units through ADU development and cutting costs associated with building new houses should help Ontario get on the right path to ending the housing crisis.