The Friday Rant: Smoke & Mirrors

The Friday Rant

10 minute read

November 12, 2021

Did I ever tell you that I was really into magic as a child?

Name a child that wasn’t, right?

My friend Jeff and I signed up for magic class in the “after-4 program” at Bessborough Public School in 1990, and of course, we were promptly kicked out for being annoying, loud, obnoxious kids who ruined the class for everybody else.  However, in that short time before our unceremonious removal, I realized just how passionate I was about magic.

This was before the Internet, mind you.  I’m sure today, you can look up how David Blaine performs any magic trick, which ruins the entire concept of magic, but human beings are no longer capable of delaying self-gratification so I’m willing to bet that anybody watching a David Blaine special on TV is simultaneously on their iPhone, Googling how he does his tricks.

Whether it was a magician snapping his fingers and creating smoke, or clapping their hands and creating fire, I loved the small elements of magic.  Flipping through a child’s colouring book, with none of the pages coloured, then waving a wand, and flipping through to show all the pages coloured – it’s so simple, yet so amazing.

The big tricks, however, didn’t amuse me quite as much.  I didn’t enjoy the spectacle.  All the fluff.  All the dancers, the ribbons, the music, the pounding of the drums…..the smoke and mirrors.  I would later learn that this was all in order to distract the viewer, but at the time, I just found it unnecessary.

The moment that magic died for me was some time in the early 1990’s.  I’ll never forget it.

I was enjoying an episode of Baywatch, as was every adolescent male at the time.

There’s a scene where a magician intends to wrap himself up in thick, heavy chains, complete with a massive anvil to weigh him down, and jump into the ocean – only to free himself under water!

Baywatch lifeguard, C.J. Parker, played by Pamela Anderson, is uncomfortable with the plan.  She’s a mature, professional, caring lifeguard, and the idea of intentionally putting oneself in peril, in the water, doesn’t sit well with her.

The magician and C.J. argue, over and over, until finally, he comes clean.

He tells her how he intends to “magically” unlock himself from the chains and the anvil.

“I have a key here, in my toes.”

A key?  In his toes?

That’s the trick?  That’s the answer?

I couldn’t believe it.  I was so disappointed.

I felt like this magician was a cheater.  I felt like the answer couldn’t be that simple.

Except, all magic tricks are this simple.

Those of my vintage may remember “Breaking The Magician’s Code: Magic’s Biggest Secrets Finally Revealed.”

This was on TV in 1997.  I was in Grade 12.  It was absolutely fascinating, and again, somewhat disappointing to see that all these amazing magic tricks were actually quite simple.  A seven-minute trick, with the magician trapped in a box, which eventually blows up as it’s suspended in the air over the stage, reveals that he snuck out of that box in the first twenty seconds – among the dancers who are there to distract the viewers.

Smoke and mirrors.

Metaphoric, or literal, that’s how these tricks are done.

Being disappointed as a 9-year-old is fair.  I wasn’t supposed to know.

But what about being tricked, duped, or distracted by smoke and mirrors when you’re an adult?  You, and a million other people?

This is how I feel when I read virtually any political announcements.

I’ve written about this time and time again, but this will clearly be the time again after that.

On Thursday, we were inundated with the news that Toronto City Council had voted, by a tally of 23-2, to pass legislation requiring developers to provide homes below market value.

There’s no shortage of coverage on this.

CBC News: “Toronto Council Votes To Require Developers To Build Affordable Units In Some New Condo Towers”

CP24: “Council Adopts Sweeping New Zoning Policy That Will Require Some Developers To Construct Affordable Housing Alongside Market-Rate Units”

And here’s the official press release from the City of Toronto: “Toronto City Council Adopts New Inclusionary Zoning Policy To Get More Affordable Housing Built”

If you’re like me, and you know what this is about, before you’ve even read it, you’re mad as hell.

I’m not mad because I happen to work in real estate, or because I’m a jerk who wants to screw the less fortunate.  I’m mad because, as with most announcements like this one, it’s just more smoke and mirrors.

From the CBC article:

After a battle between the city and province that’s lasted for decades, Toronto will soon require developers to build affordable units in new condo buildings in an attempt to add thousands of homes below market value in the coming years.

Councillors voted 23 to 2 to use a new power called inclusionary zoning, which allows the city to compel developers to make five to 10 per cent of units affordable in new towers within 500 metres of major transit stations starting in September 2022. That percentage will increase to eight to 22 per cent by 2030, depending on the neighbourhood.

Ownership and rent prices will be geared to households earning between $32,486 to $91,611 a year and won’t exceed 30 per cent of their income, a staff report says.

The city says it’s developing a website for people to apply for an affordable unit, staff are considering a lottery system. Toronto will work with community housing groups to manage renting and selling the units, although details are still being worked out.

Units will remain affordable for 99 years, with resale prices pegged to inflation, according to city staff.

I’m going to avoid the low-hanging fruit here and not comment about the hysterically-amusing use of the word “lottery” alongside the concept of “fair.”

First, I want to just summarize what’s being done here.

The City of Toronto is going to require condominium developers to set aside units that will be sold, or rented, at “affordable” prices.  Let’s leave the definition of “affordable,” or “market rent,” for another day.

The story is that, apparently, this is “a big day,” per Councilor Mike Layton.

The story is that we’ve finally been able to build much-needed affordable housing in Toronto!

And maybe, just maybe, the biggest story yet is that the brilliant City of Toronto, with their NASA-caliber, MENSA-certified brain-trust of city councilors has found a way to get developers to build and pay for this affordable housing!

Huzzah!

Except that, this is no different than the magician on Baywatch jumping into the water, covered in chains, with a key held in his toes.

It’s smoke and mirrors.

It’s complete and utter bullshit, and if you’re a resident of this city, you ought to be infuriated.

At the most basic level, we should be asking: is it the job of condominium developers to build and pay for affordable housing?

Maybe it is.  Maybe this is part of “giving back,” or making the city a better place.  Perhaps it’s the cost of doing business in this city, and if a developer wants to play ball, they’ll play the game as instructed by the city.

However, maybe it’s not.  Maybe it’s actually the job of the City of Toronto, via the city councilors, and that they should find a way to provide affordable housing on their own.

You hear a lot about “public-private” partnerships as it pertains to infrastructure in major cities.  I’ve written before about how we, here in Toronto, seem incapable of grasping this concept.  You want a new subway line?  Great.  Let a company have naming rights, advertising rights and revenue, in exchange for building and/or investing.

But this City Council legislation doesn’t seek a partnership with developers.  It’s simply forcing something on them; something they don’t want.

So what’s going to happen in the end?

Smoke and mirrors.

If you think, for a single moment, that developers are going to absorb the cost of this legislation, give your head a shake.

Developers are going to pass this cost along to the buyers.

If a developer is building a condo with an expected $500 Million in gross revenue, and they’re losing $40 Million of that revenue by building affordable housing, they’ll simply increase the price of those free-market units by $40 Million.

Voila!

There’s not a chance in hell that this doesn’t happen.

And yet, Toronto’s city council isn’t going to mention this because they’re too busy celebrating their big “win.”

The vote passed 23-2 with only Doug Ford and Stephen Holyday voting against it.

Why would any city councilor vote against this?  It’s career suicide!  It’s not like the masses are going to look into this story any further.  It’s not like they’re going to see the smoke and mirrors, because they’re too focused on the magic trick!

Massage-therapists in Toronto must be booked solid today, what with all that back-patting going on at City Hall after this vote.

The self-congratulatory nature of this sham legislation is appalling.

And what did the city’s resident wet-noodle, John Tory have to say?

“When you have two polar opposites that are coming at you in respect to opinions on something, with one side saying you’re doing too little and the other side saying too much, you probably, within the margins, have arrived at about the right place with the kind of balance you need in order to achieve what you’re setting out to do,” said Tory.

Wow, John, you didn’t disappoint!

I was expecting you to string a bunch of words together, hyperbolic and cliche, that means nothing when combined to form a sentence, and you knocked it out of the park as you always do!  You are the very definition of a “politician.”  Bravo!

The quotes coming from City Council are scary.

It’s like these people have no clue how to address a “housing crisis.”  Some of them seem to think that building housing isn’t actually the answer.

Eglinton-Lawrence Councilor, Mike Colle:

“The flood of development is frightening.  And nothing’s being done to slow it down.” 

Wait a moment.

Why would we want to slow down development in a city that’s starved for housing?

The truth is: the city of Toronto has absolutely, positively no clue how to address the housing crisis.

I’ve told you before, in passing, that I had a land assembly shot down by a very prominent Toronto city councilor.  A dozen houses, many derelict and forgotten, would be razed so that a 500-unit tower could be built, including a whopping 30% affordable housing.  The exact words from this city councilor, “Not in my ward.”

That’s the problem.

We have an election coming up next year, and no city councilor is going to stick her neck out and risk it being chopped off by angry constituents.

The job of a city councilor is impossible.  We need housing, desperately, so city councilors need to green-light development.  But city councilors also need to keep their jobs, and that means giving the red-light to any developments that will anger voters.

Mission: Impossible.

There’s another land assembly that I was going to work on.  Twenty-four houses, all under-utilized, all in a prime location downtown.  There could be two towers on this site, probably close to 1,000 new units, but this falls in the same city councilor’s ward, so I’m not going to bother.

It seems that there are so many solutions to this housing crisis, but municipal and provincial governments aren’t listening.

The Ontario Real Estate Association put out a press release last month which almost nobody noticed, except for, of all media outlets, BlogTO.

Here is the press release from OREA: “To Fix the Housing Affordability Crisis, Ontario Should End Exclusionary Single-Family Zoning in High-Demand Areas”

Here is the BlogTO article: “Experts Say Archaic And Exclusionary Rules Are Fuelling Toronto’s Housing Crisis”

Maybe if the CBC weren’t busy doing hidden-camera expose’s on real estate agents, they’d have time to cover such an important topic and share it with Millions of Canadians that BlogTO simply can’t reach.

OREA President, Tim Hudak, said this:

“In too many Ontario cities, it defies common sense that you can take a bungalow and turn it into a monster four-storey home for one wealthy family, but you cannot build affordable townhomes for multiple families without red tape, runaround, and exorbitant costs.  Exclusionary zoning policies are at the heart of Ontario’s housing affordability crisis in high-growth areas and it’s time the Province steps in to modernize these archaic laws.”

He’s absolutely right.

And while I personally don’t want a six-plex built next door to me, I wouldn’t be opposed to legislation that allows it.

If you look at major cities around the world, especially in Europe, there’s one major difference between Toronto and most other highly-populated metropolitan areas: they are far more dense.

It’s incredibly punitive to build a triplex in Toronto.  Why would anybody do it?

If you can build a single-family home and pay no development levies, versus building a three or four unit property and paying the City of Toronto through the nose – perhaps hundreds of thousands of dollars, why in the world would you choose the latter?

Our city is set up for single-family development, plain and simple.

And this latest piece of legislation from Toronto’s City Council is going to do nothing to help alleviate our housing woes.

City Council is so lost, and so arrogant.

In response to the new municipal legislation, David Wilkes, the CEO of the Building Industry and Land Development Association, suggested that the fees and taxes should be waived on the affordable units so the city would share some of the cost of construction and development.

Do you think that went over well with city councilors?

Not a chance!

City councilors seem to view condominium developers as an enemy.

Mike Layton is already going at Doug Ford, suggesting that he’s going to challenge the new bylaw at the Ontario Land Tribunal:

“The risk is Ford might appeal if we ask too much from his developer friends. But that’s a risk I’m willing to take.  Developers are going to say anything to get the city away from their profits. It’s time for us to stop enabling them.”

This is politicking.

Ford’s “developer friends.”

It’s like when the provincial budget came out and Andrea Horvath said, “While Ford’s buddies get whatever they want, his budget update has no help for everyday people.”

That’s just a sound byte.  There’s no evidence.  No names.  No examples.  Just hot air.

So when Mike Layton suggests that, “Developers are going to say anything to get the city away from their profits,” what should we make of that?

Does Mike Layton think that Tridel, Lanterra, Daniels, and Lifetime are all not-for-profit companies?

Does Mike Layton understand how business works?  Can he understand that companies operate in search of profit, otherwise, they don’t operate?  Is that the end game here?  I mean, if you continue to push developers far enough, maybe they just won’t build at all!  This legislation could, in theory, stifle development.  Less development means less inventory.  Less inventory means higher prices.

Does Mike Layton see this?

It’s so hard to cut through all the political rhetoric these days.  There are so many sound bytes.  There’s so much fluff.  So much voter candy.  And in the end, I don’t trust that any of these people are equipped to do the job.

This new legislation from Toronto’s city council is going to increase the price of new condos, which will make real estate less affordable for condo buyers.

Take a penny from Peter and give it to Paul.  You still collectively have one penny.

Forcing condominium developers to include affordable housing, means affordable gets built, but it means that condo buyers pay more.

Ergo, condo buyers are paying for affordable housing.

Yet another zero-sum game, the likes of which I’ve talked about on TRB with respect to every political promise, announcement, or plan so far this year.

Maybe this is just too deep a conversation for a Friday.

Wanna lighten things up a little bit?

Watch C.J. Parker help rescue a magician who’s lost the key in his toes and is about to drown!  Oh no!

Will C.J. get there in time?

Can she breathe air into his mouth, while underwater, searching for a key at the bottom of the ocean, which for some reason is bright as day?

Only this video can provide answers…

Have a great weekend, folks!

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

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15 Comments

  1. RPG

    at 8:03 am

    So a lottery will help a lucky few and then city council can say they helped. City council should take the number of units divided by the number of people that sign up for this lottery and use that figure as their success rate. It will probably be less than one percent.

  2. David

    at 8:42 am

    I completely agree with you on the rest of the condo owners subsidizing the affordable units – expect the cost per sq ft to go up substantially. But at least we know what’s going to be done with the second floor unit facing the garbage dumpsters.

    Here’s something that the act-first-think-later councillors haven’t thought of…John wins the affordable residence lottery and buys his condo for 40% of market value. 6 months later he decides that he “doesn’t really like it there”, so he sells it and pockets tens of thousands of dollars in tax-free capital gains. He’ll make more in those 6 months than 3 years of working at his job.

    P.S. The current Etobicoke councillor is Michael Ford, not Doug Ford.

    1. Katie

      at 9:33 am

      Exactly!!
      The government made millionaires out of the winners of the cannaibis license lottery. They all opened shops and sold them as soon as the law allowed.
      The same will happen with these affordable units. They’ll buy and flip.

    2. Ed

      at 10:45 am

      John can only flip the condo sale price in line with inflation.
      Still stupid.

      1. David

        at 10:53 am

        Good luck with the enforcement of that.

        How do they account for transaction fees? Is it inflation plus R/E commission? Land transfer tax? Lawyer fees? I see there being a huge black market for these units where the “list” price might be cost plus inflation, but in order for the seller to sign the agreement there would be tons of money under the table.

        1. Bryan

          at 4:50 pm

          This is a really good point. The other really interesting question I have about this is who gets to buy it on the re-sale market if everything is “above board”? There is a lottery for John to purchase it in the first place, but let’s say he buys his 2nd floor dumpster facing 1 bedroom unit for, say, $300k. When he puts it on the market 3 years later, only being able to sell for $330k (or whatever it ends up as), which of the 50 buyers that want to submit an offer at that price wins the bid? How do you differentiate offers when the prices are mandated to be the same?… Maybe another lottery?

    3. Steve

      at 1:14 pm

      Also that one unit on every floor which is awkwardly close to the garbage chute.

      1. Izzy Bedibida

        at 5:15 pm

        Let’s not forget the unit next to the elevator which has the walls of the elevator shaft intruding

  3. Pragma

    at 11:44 am

    The solution is pretty simple and we all know it. Other areas have done it (Minneapolis, Seattle, California is finally waking up…). We have to take decision making away from the local level. At the local level the incentives are completely at odds with wider society. (Most) People will be always opposed to any development as they benefit from maintaining the scarcity of land supply, and the subsequent rise in prices. And local Councillors obviously want to keep their constituents happy so that they get re-elected. Maybe what we need to do is to make the OMB appeal process easier, cheaper, and faster.

    The other thing we can do is put in blanket approvals along the lines of “within 1km of a subway station your are automatically approved to increase density to x level”. I believe the city has made a few steps in this direction. This would help the city get out of its own way.

    1. Misha

      at 11:27 pm

      Hooray.
      Local control is good for local issues. Development is not a local issue except in the details, and should not be controlled locally except in some details.

  4. Nick

    at 1:36 pm

    I never understand these lottery systems. I guess it could be argued fair but it just sounds like nonsense to me.

    Why not take the current list of applicants, break them down into categories such as who needs housing immediately, or first come first serve, or by wage, and then just plow through?

  5. Appraiser

    at 10:38 am

    Speaking of affordable:

    Average Rents in Canada Continued Climbing in October, Up Monthly and Yearly https://storeys.com/average-rents-canada-up-monthy-yearly-october/

    “Likewise, in Toronto, average rents for a one-bedroom were up 3.5% monthly and 4.3% yearly to $2,006, while two-bedroom units were up 1.9% monthly and 5.2% yearly to $2,678.”

  6. Keith

    at 10:32 pm

    Look up Whistler’s affordable housing strategy.

  7. mike stevenson

    at 4:14 am

    Don’t they sell condos for as much as the market will bear regardless? They can’t just add $40 million to what the market will bear because they feel like it.

    1. John

      at 5:22 pm

      Correct, they dopy. But if “what the market will bear” is not financially sound, they just won’t do development, limiting the overall supply. Hence, in either scenario the net result is higher prices, whether through the increase in cost or the reduction in supply.

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