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‘Affordable’ Housing Factors – general

There are several factors that determine whether housing is affordable or not. The “Duh!” factor of course is the definition, one’s income (present and projected in future) is less than the cost to purchase or rent housing.

An actionable factor is where one chooses to buy or rent. You live within your means.

There is the ‘supply versus demand’ factor. Economics tells us that when supply drops below demand, costs rise. However, supply can be manipulated.

When approvals for new construction have been made and the developer chooses to not build while waiting for its input costs to build drop, or return costs (selling/rental prices) to rise with the market over time, then it could be argued, housing supply is being artificially manipulated to benefit someone at the expense of someone else?

How does one regulate greed? In the Region of Waterloo, “…up to 36,000 units have been registered and draft approved but are waiting to be built…” Those 36,000 units represent somewhere between 36,000 and 100,000 people who could be accommodated. Those 100,000 people could attain housing, but can they afford what is being built? [See link above.]

A frustrating factor for the potential buyer/renter is when the cost to purchase or rent increases faster than one’s ability to save enough to ‘enter the market’. [See limited supply. Also, competitive bidding practices used by realtors cause very rapid ‘artificial’ price inflation.] The national inflation rate has been relatively steady until COVID: 2018 was 2.27% (+0.67% from 2017), 2019 was 1.95% (-0.32%), 2020 was 0.72% (-1.23%) and 2021 was 3.4%. In Ontario, it was 3.467%.

Another factor is the rollover of buildings from one investor to another. Rental regulations permit rent increases when a new owner enters the picture, or when “improvements” are made on a property. Owners, often absentee landlords not even in the city or province where the property exists raise rents by 50% – 75% and tenants are forced to move out and probably “down”.

‘Affordable’ Housing Application – Wilmot

Spoiler Alert: Here is my conclusion about “affordable” in any proposed development in Wilmot. It is restated at the end of this page. Read through, anyway, to see how I got to this conclusion.

A realistic comparator definition for “affordable” should be some % rate (70-80%) of the median/average rental rate in the Wilmot Township market, NOT the Waterloo Region median rental rate.

Using the regional market as the comparator skews the rent artificially upward. The Waterloo Region Market includes some sub-markets that have much higher rental rates than Wilmot Township. Cambridge/Galt (both close to the 401 and the GTA market), and Kitchener/Waterloo (both close to the internal Grand River Transit buses and surface rail, and fast access to the Conestoga Parkway, the #8 Expressways to Hwy. 401 and the GTA), have higher rental rates than Baden, New Hamburg, New Dundee, St. Agatha, Petersburg, Philipsburg.

If the rental rate in the proposed development uses the regional market as a comparator, then it will artificially inflate the rental rates in the rest of Wilmot, putting financial stressors on people who already live here.
There is an acknowledged need for additional residential development in Wilmot Township, including “affordable” accommodations.

The definitions of “affordable” are numerous and depend on:

  • who is speaking, (beware of ‘think tank’ biases)
  • where is the potential site located,
  • when do you do the calculations,
  • what are the comparators used for “relative affordability”,
  • and who is supposed to subsidize the construction costs?

STEP ONE: A developer finds suitable land, creates an architectural plan for the proposed building, or for a proposed subdivision,  submits an application for development/subdivision in compliance with all provincial and municipal regulations, and submits it to the planning/building department of the local municipality. It is a negligent/naive developer that does not include the concept of “affordable” into any development project presented to a Municipal planning department and Council. [That word appears to encourage exponential support for any project.]

After the approval process through the Municipality, to the Region, to the Province, and back again is completed, the developer is ready to find building contractors if it does not already have builders as part of its corporate structure. The developer then sells the land (one unit for one building or multiple units of land for a subdivision) to the builder(s).

Another method that a developer will use to reduce its development expenses, and eliminate public comment by the citizens living in the area where the proposed development is planned, and thus “do what it wants”, is to use a Minister’s Zoning Order. This MZO bypasses almost all public input and reduces dramatically any regulation a Municipality wants to impose on development after it first leaves the hands of the Municipality.

STEP TWO: A builder’s base fixed cost, is the price it paid to the developer for the land.  That land price is determined by the developer, and the developer will sell land units for as much as it can, as profit is why it is in business. If a subdivision is being developed, it is usual for a developer to use multiple builders so that they are each bidding against themselves to get individual building lots.

Thus, as a subdivision is developed over time, and the developer holds back lots for later sale, the developer can charge an ever-increasing amount for subsequent lots sold to builders. Lot prices can change by the month, the week, the day, the hour. Once a subdivision is approved by a Municipality, it is the developer that determines the sale price of units of land. Of course, it is the final tenant/buyer who pays for this escalating price over time. [It is commonly known that the “highest rate of return on investment” is by the developer, not the builder and not by the Municipality. There are huge profits to be made as a developer!]

A Municipality’s source of “return on investment” is over the long term after many years through residential tax rates. It is the current taxpayers who subsidize any Municipal investment in infrastructure for example. That is why many Municipalities are finally ‘awakening’ to the concept of making the developer pay “upfront” for infrastructure costs, and the developer, then, putting those costs into the lots’ pricing.

After that, the cost of constructing a previously approved building design, in that specific place, at a specific time, does not change based on whether it is going to be used for a) market value sale or b) “affordable” sale to potential buyers. The building has a fixed cost, which depends on who the builder is. Different builders will use different quality materials, different suppliers and different contracted workers, but in the end that particular building has a fixed cost. It was determined by the builder, not the developer, not the municipality, not the province, not the federal government. A building costs what it costs!

STEP THREE: a) If the building is to be for lease, then each unit is marketed based on “what the market will bear“. Obviously in a hot market, at the builder’s direction, a leasing agent will price the units at the highest rental rate it can. The higher the rate, the higher the rate of return on the builder’s money.

b) If each unit in the building is for sale, the same rule applies. Each unit is sold for the highest rate the market will bear. Additionally, if the sale’s agent uses a multiple-bid process, then each potential buyer, in a hot market, will be bidding against multiple other offers and the eventual sale price may be much over the “initial asking” price. Sales agents will often make the “initial asking” price artificially low, thus encouraging multiple buyers to make offers and in the heat of the moment find themselves bidding amounts that they would not normally place as a “reasonable value” for the property. Ironic? The developer puts it to the builder, the builder puts it to the buyer. [Opinion: The multiple-offer/open bidding system in Ontario is artificially inflating the ‘true value’ of properties. This is a government decision whether to regulate.]

STEP THREE: c) If the building is marketed as being “affordable housing”, then we go back to the bullet-point list at the top.

Let’s look at, • what are the comparators used for “relative affordability?

There presently is an MZO application before Wilmot Township Council, by Cachet Development (NH) Inc., that includes, on page 20, sections 7 & 8, its definition of affordable housing units. The affordable housing units will have rent equal to or less than 80 percent of the median market rent of a unit in the regional market area.” This definition applies to both seniors’ housing and others. All of this housing is rental housing, none of it is for sale – for a family to own outright.


  • these “affordable” units are rentals, not units to buy,
  • it uses the “regional market” as a comparator, not the Wilmot or Baden, or New Hamburg markets,
  • it uses a median market rent, not an average or lowest comparable rate

Definitions from our math days:

  1. Average: add up all the rents in an area, and divide the total by the number of rents you added up. Ex. add up the 9 rents, get the total, divide the total by  9. In example #4 below, the average or mean would be $91.88.
  2. Mean: exactly the same meaning as average
  3. Median: the rental rate value in the exact middle when all rents are listed in order from smallest to largest. Ex: $100, $100, $98, $98, $98, $90, $85, $80, $78. $98 is the median rent.
  4. Mode: the rental rate that is most frequently seen in the total list of rents. In example #4 above, $98 is the mode rent.

You’d have to ask a housing accountant/statistician to determine the optimum, for a potential renter, method of calculating “affordable”.

The criteria of using, market rent of a unit in the regional market area, is subject to debate. Using the regional market as the comparator skews the rent artificially upward. The Waterloo Region Market includes some sub-markets that have much higher rental rates than Wilmot Township. Cambridge/Galt (both close to the 401 and the GTA market), and Kitchener/Waterloo (both close to the internal Grand River Transit buses and surface rail, and fast access to the Conestoga Parkway, the #8 Expressways to Hwy. 401 and the GTA), have higher rental rates than Baden, New Hamburg, New Dundee, St.Agatha, Petersburg, Philipsburg.

A more realistic comparator definition for “affordable” should be some % rate of the median/average Wilmot Township market rate.

If the rental rate in the proposed development uses the regional market as a comparator, then it will artificially inflate the rental rates in other parts of Wilmot, putting financial stressors on people who already live here.

STEP THREE: d) If the building is marketed as being “affordable housing”, then we go back to the bullet-point list at the top.

Let’s look at, • who is supposed to subsidize the construction costs?”

As we saw the cost of constructing a building does NOT depend on its end-use. Construction costs are fixed regardless of whether its end-use is i) a unit rented at the market value, ii) a unit sold to private owners, iii) a unit rented at a subsidized value to define it as “affordable“. Once the building is constructed, it can be marketed for any of the 3 uses, depending on the agreement between the developer and the builder.

Thus, if a particular development has 200 rental apartment units, and 50 are defined as “affordable” we know that every one of the 200 costs the same to construct. Thus, to lower the rental rate by, for example, 20% below some “market value”, then that construction cost has to be covered somehow. This is not magic.

In the past, that subsidy was covered by Ontario Provincial and Municipal governments. The present Provincial government has eliminated its “affordability” subsidies, and so have Municipalities. Does that seem to imply that the “added burden” of these rentals will be borne by the other units at a higher rental rate which does not have to be controlled by any regulatory body other than the local market? The other 150 units will be “carrying” the “affordable” units? Or, the rest of the entire development will be priced to cover the ongoing “affordable rental rate” of the 50?

The same logic would apply to the “Senior Citizen Residence” where 15 of the proposed 150 seniors’ rentals would be internally subsidized.

There is a catchphrase made popular in the film, All the President’s Men, which stated, “Follow the money!”

“No one does (play fair) if they think they can get away with it.”, [Lewis Carroll in Alice’s Adventures in Wonderland]

Wilmot needs a lot of questions answered by any developer, for any project.

See also:

Clickable Links:

  • Minister’s Zoning Order for Residential Development
  • …losing affordable housing as mortgages end (KW Record)
    • “Providing truly affordable housing is expensive,” said Coun. Elizabeth Clarke at the meeting. “I don’t think we can simply assume all providers are going to be fine when they’re no longer getting this (mortgage) assistance and can continue to deliver affordable housing.”
  • …mayors call for collaboration to fix housing crisis (KW Record)
    • “…the impact of investment purchases”,
    • “availability of cheap credit”,
    • > “those with financial resources are able to bid up prices for purchases”.
    • “COVID driving demand out of the GTA”,
    • “materials supply and labour shortages driving construction cost”,
    • “might be tempting to blame municipalities for adding…with approval processes & fees, there is much more happening”,
    • “but we need to also look at why approved units aren’t being built”,
    • “change the economics of development”,
    • “All 3 orders of government…need to match supply to population”,
    • “we’ll need continued provincial and federal investment in subsidized and social housing”,
    • “Respecting local decision-making will increase the chance of success as we grow housing supply….in a coordinated and thoughtful way”.
  • “Housing crisis is a ‘complex challenge,'” (KW Record)
    • “The push is to see more varied forms of “gentle density” such as duplexes and triplexes in areas with single-family homes and along main corridors that are close to transit.” [Nafziger Rd. is not the main corridor, is not close to transit, and Cachet’s application calls for rows of 6-storey high density, not duplexes and triplexes.]
    • “In the region, up to 36,000 units have been registered and draft approved but are waiting to be built…” [Maybe, get the 36,000 built and then plan potential development on Nafziger Rd? There is no emergency and thus no urgency to use an MZO.]
    • “You need supply so that people can both enter if they are New Canadians for example or move along the continuum, creating other spots for people to enter at different spots,…” [Development needs to follow a process, that can be modified and coordinated for effective efficiency, BUT that does not involve an MZO.]
  • “Finding a way out of our affordable housing crisis” (KW Record)
    • lack of affordability is a lack of supply
    • $45 million toward region finding ways to cut red tape & speed approvals [See 36,000 awaiting build above],
    • change Urban zoning rules to permit duplexes, triplexes, small apartment buildings [something Wilmot’s present rules already permit],
    • “If that happened, more people could secure a home in one of Ontario’s cities without having to leave that city’s footprint on the surrounding countryside.”  [Leave Scarborough and core Kitchener/Waterloo out of Wilmot. 6-storey buildings are not compatible with Wilmot’s ambiance/streetscape.],
    • “Ontario voters will go to the polls in both provincial and municipal elections this year.” [Are you going to vote for a Scarborough streetscape or a Wilmot streetscape?]
  • Absentee Owners (KW Record)
    • post-secondary education campuses have attracted investors to supply the student rental market
    • “… team at the Region of Waterloo reviewed the Statistics Canada data on Friday, it said in a statement it recognizes the critical importance of affordable and attainable housing, and are in the process of crafting a draft policy framework that will advance and support the creation of missing middle housing across the region.”
    • “This policy framework will aim to support long-term population growth, social equity and inclusion objectives, along with greater talent attraction, transit-supportive development and affordable housing opportunities.”
  • Province needs to throw its weight…” (KW Record – opinion)
    • This piece was written by Benjamin Dachis. His academic qualifications are in economics. He has been employed for over 13 years by the C.D. Howe Institute which is based, not anywhere near Wilmot Township, but rather at 67 Yonge Steet in downtown Toronto:

      • His research fellowship was, “Primarily engaged in researching and collecting data on the tax burden placed on the Canadian transportation industry with other tasks…”. He also spent time, “… analyzing the role of developers and homeownership in determining growth patterns in the United States from 1976 to the present.”
      • “Among right-leaning or pro-business think-tanks in Canada, two – the C.D. Howe Institute in Toronto and the Macdonald-Laurier Institute in Ottawa – have confirmed to The Canadian Press they are not currently under audit for political activities. Two others – the Fraser Institute in Vancouver and the Montreal Economic Institute – have declined to comment on the matter.”
      • The C.D. Howe advertises itself as ‘an independent not-for-profit research institute whose mission is to raise living standards by fostering economically sound public policies. Notice that its standard is based on economics, not sociological or community compatibility factors, thus any considerations about the appropriateness of ‘imposing the big city standards on rural areas is not on its sensitivity radar.
      • Note the article’s photo: A row of houses that are left and right versions of four similar floor plans and only the brick and shingle colours distinguish them. Don’t walk home drunk or you’ll end up in a neighbour’s house – they all look the same.
    • “The debate on why housing costs are so high is settled. Study after study shows supply restrictions are behind the price rises. One C.D. Howe Institute study shows delays and extra costs add hundreds of thousands of dollars to home costs.”
    • “…that the province make all residential areas of the province allow up to four units per lot.”
    • “Local officials have already started complaining that the task force’s recommendations would trammel on their zoning authority. Local councillors and mayors will call the Minister of Municipal Affairs and Housing. They will call their MPPs. The government will try to appease.”
    • “Cities across the province will likely reject changes if given the option. And if it’s a unified opposition from the municipal sector, it will make any further action hard.”
    • “The province should set out clear parameters for which zoning reforms, among the many other reforms, are mandatory for cities to implement. For example, zoning reforms could apply in all areas of the largest cities in the province. At a minimum, the province could make the zoning increase mandatory in specific parts of cities — around transit stations, for example. Or mandatory in areas in which the existing density is close to, but still below, the ideal density from more intensive development.”
      • Definitions? “all areas of”, “largest cities”, “specific parts of cities”. Who defines what and where and how much if it’s “mandatory”?
  • Provincial task force…favours easing obstacles to development [KW Record]
    • The province’s housing affordability task force recommends sweeping changes that would allow developers to fast-track some housing projects, pay fewer fees and at times forgo public consultation and other planning processes.”
    • “…the report said municipalities conduct too much public consultation for political reasons.”
    • “It’s written from a big business perspective and that is one perspective on how to build houses however there are other perspectives — planning perspectives, proper consultation perspectives, local citizen perspectives,” Waterloo Mayor Dave Jaworsky said. “And when we’re planning things out for 30, 40, 50 years … it’s good to give thoughtful consultation.”
    • “Under the Planning Act municipalities are required to hold one formal public meeting at which a vote is taken to approve or not approve a project.

Waterloo conducts an informal meeting first to introduce big projects to residents.

The report says those practices should be scrapped.”

    • “Because local councillors depend on the votes of residents who want to keep the status quo, the planning process has become politicized. Municipalities allow far more public consultation than is required, often using formats that make it hard for working people and families with young children to take part,” the report reads.
    • “The task force was not asked to consider subsidized housing as part of its report.

      It also recommends that development charges be waived for certain projects.

      Development charges are fees developers pay for items related to growth like roads and sewers.


      “If those costs aren’t paid for by the developer then they’re borne by the existing citizens through property taxes … and that is not acceptable,” Jaworsky said. “Growth should pay for growth.”

      Regional Chair Karen Redman said the province also needs to be looking at hospitals, schools and highways to support any new growth.

      “We can’t just build houses and not have services available that everybody expects to be there and they need to be funded by the province,” Redman said.”

    • “Kitchener Mayor Berry Vrbanovic said the report could have benefitted from municipal input.”
  • Larger builds lead to less-livable cities [KW Record]
    • “A recent report from the Ontario Housing Affordability Task Force surmises that residents and the planning process are the main impediments to affordable housing supply, and once both are disarmed, supply will flow. This view is flawed.”
    • “Upzoning also decreases housing affordability through “land value uplift.”. . . Investors smell upzoning like sharks smell blood in the water, with similar responses. Expectations for approval of high-density builds drive land prices too high for cheaper low-rise high-density builds to be economically viable. Municipal authorities need to send clear signals about zoning constraints to control land value uplift. The report proposes removing this power.”
    • “Dismantling urban design protections such as setbacks, stepbacks, and shadowing guidelines is a terrible idea. While it may result in larger builds, it won’t result in more livable cities. Design protections preserve the function, esthetics, and environmental health of cities.”
    • “The report purports to advocate for young families, but such dense, poorly planned urban environments are particularly unfriendly for children. Instead, it’s widely recognized that families need low-rise high-density housing, with green space. Strangely, the report excludes such forms from their definition of “missing middle” housing.”
    • “What policies would increase affordable housing supply? Allowing more units on residential parcels is a start. The planning process for low-rise “missing middle” can be simplified, but should not be thrown out, as the report proposes. Instead, I’ve proposed to work with developers, municipalities, and residents to create generic “missing-middle” site plan templates, whose approval could be streamlined — essentially, the Model T design of fourplexes.”
    • “Thus, the market needs non-profit financing to demonstrate the viability of more affordable low-rise, high-density housing and to allow developers to finance purpose-built rental instead of condominiums.”
    • “The Region of Waterloo is a provincial leader in intensification, with 70 percent of new development within built-up areas. Within the ongoing Major Transit Station Areas planning, the region should develop policies that facilitate more affordable low-rise “missing middle” housing builds, without destroying existing highly functional and relatively affordable neighbourhoods.”