U.S. housing experts paint ‘dire’ picture of upkeep, availability of private rental apartment units in Toronto

A group of American experts who recently visited Toronto to provide insights on what to do about tower renewal, say this city’s one per cent rental apartment vacancy rate has created a “dire situation” in terms of economic growth.

“In a city that wants people to come, work and make their way up, a city that is full of immigrants — a rental housing unit is the first stepping stone to a good future . . . into the Canadian dream,” Purnima Kapur, a planning consultant and former director of city planning in New York City, recently told a panel discussion in Toronto.

“So you’re undercutting the basis of that economic growth by not producing adequate rental housing,” she went on to say.

“Toronto needs to have broad consensus across the city that this (one per cent rental vacancy rate) is a dire situation,” Kapur told the gathering at the Munk School of Global Affairs and Public Policy, an audience that included Toronto deputy mayor Ana Bailao, who also chairs the city’s affordable housing committee, and chief planner Gregg Lintern.

Kapur was addressing a panel put on by the city of Toronto, Toronto’s Tower Renewal Partnership and the Urban Land Institute (ULI), a Washington, D.C.-based non-profit dedicated to providing leadership on the responsible use of land.

The topic of the panel, held earlier this year, was “Scaling up retrofits of Toronto’s aging apartment towers and driving future tower renewal work in the city.”

The discussion stemmed from a visit made to Toronto by representatives from the ULI, including experts in areas such as city planning, affordable housing, real estate and economics, for four days in February.

The group looked at aging private rental towers in the Thorncliffe Park and St. James Town neighbourhoods.

They were tasked with the challenge of answering “how to renew towers for safety, comfort, sustainability and resilience without raising the rent.”

The result of the ULI research in Toronto is a nearly 50-page, recently released report entitled “Affordability and Resilience: The Challenge of Tower Renewal in Private Rental Apartment Buildings.”

The report concludes that Toronto’s rental apartment towers are the “backbone” of the city’s rental housing stock and keeping these buildings economically viable is “crucial since no alternative housing currently exists for much of the city’s residents.”

Kapur, the planning consultant, told the panel that tower renewal is a “de facto affordable housing policy” because of the lower rent that landlords who operate these aging buildings charge their residents.

These towers were “built for the long term — and with good maintenance and deep retrofits, they can remain a vital part of the city’s housing stock for the next 40 to 50 years,” the ULI report goes on to say.

A deep retrofit can include extensive upgrading of services such as electrical and heating systems, plumbing, windows, fire safety systems and elevators. The panel in Toronto heard that a deep retrofit in an aging apartment building in the city can cost between $10 million and $15 million.

But only a small number of private rental apartment building owners in Toronto have done these extensive upgrades because they are costly.

“Investments in infrastructure haven’t kept pace with aging of the buildings. For instance, many don’t have updated heating systems and windows, and are inefficient and susceptible to failure. Many do not have backup power to allow residents to shelter in place, meaning key systems like heating, water, elevators and lighting may not work in a power failure,” the ULI says.

The organization’s report recommends that to preserve affordable rental units while accelerating investment in retrofits, “a combination of government grants and simplified low-cost financing” should be made available and tied to maintaining affordability targets.

For example, the city could offer a “government grant or no-interest loan (as a percentage of construction costs) to owners who are willing to include a modest additional affordable housing goal in their renovation,” the report says.

Among several other recommendations, the ULI report says “structural biases” that favour condo construction over rental apartment buildings need to be removed in Toronto.

The project approval process for apartment buildings needs to be streamlined and shortened to make rental returns more attractive. The city should also consider “reducing permitting fees for creating additional affordable units, or zoning for midrise buildings, which require shorter construction windows,” the ULI recommends.

And while some condo units end up in the market as rental units, they shouldn’t be considered a substitute for dedicated rental stock, the ULI says. That’s because condos can be sold by the owner at any time, displacing renters. In addition, condos are targeted toward a higher income market and generally aren’t sized for families, the ULI report points out.

City of Toronto staff told the panel meeting that the massive Aug. 21, 2018 six-alarm fire at the private rental apartment highrise at 650 Parliament St. was the “tip of the iceberg” and an example of how Toronto is living on “borrowed time” in terms of its aging towers in Toronto.

The large fire in the St. James Town tower forced 1,500 residents from their homes for about 18 months. The fire was determined to have been caused by the building’s electrical system. Wellesley Parliament Square, the owners, have estimated repair costs to be between $60 million and $70 million.

Billy Grayson, ULI’s executive director for the Center for Sustainability and Economic Performance, told the Toronto panel there’s a return on investments for the public when it comes to tower renewal.

“Savings in public expenses for ambulances, fire, health care and social services. These are not squishy things. These are hard numbers that are quantifiable,” Grayson said.

He later added: “a deep retrofit in a large number of these towers will reduce overall expenses to the city for social and emergency services.”

According to city figures, there are more than 500,000 Torontonians living in nearly 1,200 towers consisting of eight or more floors — buildings constructed before 1985. About 800 of those towers are purpose-built rental apartment buildings. Most of them, 85 per cent, are privately owned.

Those towers contain just over 153,300 individual units, housing for about 13 per cent of Toronto’s population. (The numbers do not include Toronto Community Housing buildings, other social housing, co-ops, etc.)

Toronto has had a tower renewal program and department since 2009.

Under the program, tower owners can apply for the High-Rise Retrofit Improvement Support Program (Hi-RIS). According to the city’s website, the program assists apartment building owners when it comes to making improvements that reduce energy and water consumption.

The program provides financing with up to 20-year terms at competitive fixed rates to owners of residential apartment buildings in the city with three-storeys or more.

In a statement, Aderonke Akande, manager of the city’s Tower and Neighbourhood Revitalization Unit, said the city is still reviewing the ULI document.

“These older buildings are important to the city and require investment to continue to be safe, comfortable and healthy places to live for the more than 500,000 residents.”

In an interview, Bailao said the ULI report falls in line with the city’s goals of being resilient and combating climate change.

“We can’t effectively address these things if we don’t address the renewal of the many towers we have in the city,” Bailao said.