Good afternoon, honourable members. It's wonderful to be here today.
You will hear some of the themes my colleague just outlined reiterated in my presentation.
I'm trained as a professional planner, but I've now switched teams and I'm a developer, developing housing in the GTA.
In 2019, I created a development company with my colleague, Jason Marks, who had been building rental housing in the city of Toronto for nearly a decade. Our objective in creating this company is to build affordable, transit-oriented rental housing in close proximity to transit. The objective is to build a much more sustainable urban form than the urban form we've been building in the GTA and across the country.
Surprisingly, one thing that has been a key driver behind this housing crisis, which has really been in the making for nearly a generation—my entire life—is how we have primarily been building housing in Canada. Seventy-five per cent of all new housing over the course of the past 10 years has been built as urban sprawl. It's been built on the periphery of our cities and greenfield sites.
This has proven to be unsustainable for municipalities from the perspective of providing infrastructure. It is unsustainable from the perspective of being able to integrate transit into these communities, largely because there simply isn't a high enough density to enable the frequencies that make transit viable. This, of course, drives up household costs. The second-highest cost for Canadians after paying the rent or the mortgage is the cost of transportation.
Part of delivering a much more sustainable approach to how we live in Canada is building housing in the right places and also building the right types of housing. This is as much a land-use planning problem as it is a construction problem and a financing problem.
In order to solve the housing crisis, we need to look at the problem from all three of those lenses: where we build housing; the materials we use and the design of that housing; and then, lastly, how we finance housing. All three of these areas need a fundamental reboot.
I would like to spend a couple of minutes talking about some of the key issues that we see in building housing today.
When we started our company in 2019, of course, it was a low interest rate environment. Our very first project is 1,530 homes in the north of Toronto, where we are building mostly a missing-middle typology. They are six- to eight-storey buildings and a couple of taller buildings as well. That development was initially 100% rental, and 50% of those units were attainable or affordable and designed for middle-income earners.
Essentially, as a company, we self-imposed rent control. Rent control is a way of taking housing out of the market. The minute you put rent control on a building, it is no longer going to be subjected to the typical fluctuations you see in the market. We essentially did that as a company.
However, as interest rates began to increase, we discovered that we had a fundamental problem, which was the cost of borrowing for our construction period. Not only did our construction costs go up significantly, but the cost of borrowing went up significantly. From when we began our project to the completion of our approvals with the City of Toronto, we saw a $75-million increase in our borrowing costs. That's just the cost of borrowing—$75 million on that one project of 1,500 homes.
In order for the project to proceed, we have reduced the amount of affordable housing. We initially—approximately two years ago—changed the project to be a combination of a rental and condo, as a result of the cost of borrowing. Of course, when you're building a condo, you can finance the construction through the down payments on the condo.
I do have some very good news. From a policy perspective, once the waiver or the forgiveness of the GST was announced, we immediately re-evaluated our entire portfolio. I would like to give you two examples of the impact of that. On the project I just mentioned, we are now going to, again, build 100% rental housing as a result of the forgiveness of the GST. It's a very powerful policy change. The changes at the provincial level on the PST are a welcome addition to that in the province of Ontario.
We have a second project. It's a 350-unit condo adjacent to the subway in the city of Toronto, where it was only viable to build a condo. As a result of the forgiveness of the GST, we've now changed that project. It is going to be a rental project, with 30% affordable housing.
What's really critical here is that when we add affordable housing that has an affordable period for the life of the housing, so in perpetuity, and there's rent control, the impact of that is that we are building housing that is really non-market housing, and it stays affordable over time.
I'd like to close by saying that I wanted to highlight for you the incredible impact of the cost of borrowing on housing delivery, in particular rental housing. Recalibrating the rental construction financing program, which really brought an entire generation of rental housing to the market over the course of the past 10 years, is really critical to ensure we can provide low-cost and long-term mortgages through CMHC for the delivery of more affordable rental housing in Canada.
Thank you.