Toronto builder waging war on housing price crisis
Mitchell Cohen writes policy papers and show tunes about affordable housing. He wears a pork pie hat, favours fleece over pinstripes and is easy to tear up when talking about local “empowerment.”
He’s also president of The Daniels Corp., one of Canada’s biggest developers.
The closely held firm has built about 30,000 homes around Toronto, a quarter of which were sold below-market prices. It’s also a lead developer in the transformation of Regent Park, one of North America’s biggest social-housing makeovers -- and the subject of Cohen’s musicals.
Being an affordable housing advocate and a big-time developer may not be a contradiction for Cohen. But he said governments are going to have to nudge more companies into action to tackle the growing affordability crisis.
“Without the government engagement, the private sector is not going to create affordable housing,” said the 68-year-old in an interview at Bloomberg‘s Toronto office.
Cities from Sydney to San Francisco are grappling with how to do just that after years of relentless price gains. Berlin plans to freeze rents for five years. And in San Francisco, tech giants are trying to reverse some of the housing inflation their wages have helped create: Google has said it would spend US$1 billion over the next 10 years repurposing its own land for residential use and incentivising developers to build affordable housing.
Toronto is no exception. Home home prices surged 60 per cent in the five years through June and the vacancy rate for rentals is hovering near 1 per cent. Mayor John Tory has pledged to create 40,000 affordable rental units in the next 12 years and Prime Minister Justin Trudeau is pushing a $55 billion 10-year program promising 125,000 new homes.
Tackling supply is key and that means developers have to be at the table, said Cohen, who runs the day-to-day operations of Daniels, which has averaged annual revenue of about $200 million in its last two fiscal years. The company was founded in 1983 by John H. Daniels, former chairman and chief executive officer of Cadillac Fairview, now owned by the Ontario Teachers’ Pension Plan Board.
“Developers are creative, they will find a way to work within the system,” Cohen said. Companies are becoming sensitized to the fact that affordability is becoming important, even if it might not be as “crazy profitable.”
Cohen reels off a few policies that could work: intentional disposition of land, where governments sell or lease public land to developers on the condition they build affordable units; inclusionary zoning which requires developments to include affordable units; and down-payment assistance for first-time buyers -- now part of the federal government’s platform.
“You want to create an environment where developers can not only live with but hopefully even become comfortable with the regulations because ultimately you want them to be your allies,” Alan Mallach, a senior fellow at Washington-based Center for Community Progress, said.
Creating allies has been Cohen’s playbook since 1973 when he was working for the YMCA in Montreal. Tenants in the dingy complex that housed his office came in waving eviction notices. The landlord wanted to demolish the site and build condos -- they had 30 days to vacate.
“I saw how vulnerable people are and how close to the margins people can be,” he said. “All of a sudden, I was a community-development worker turned shit-disturber activist overnight.”
Justin Trudeau’s father, Pierre Trudeau, was prime minister and had just created a national housing plan that offered funding for co-operatives to buy or lease land. It was the ammunition Cohen needed: he marched 300 tenants to city hall to protest the demolition. Under the media glare, he negotiated with the landlord to build condos on half the land, and formed the co-op on the other. It had a 99-year lease and is still operating today.
Fast-forward nearly 50 years and Daniels is allying with the city of Toronto to pull off the massive renovation of Regent Park, a mix of subsidized and market-rate rentals and homes for purchase. After almost 15 years and a more than $1 billion investment from Daniels and the city, the 69-acre site barely resembles the crime-pocked neighbourhood it was. Decrepit apartment blocks constructed in the 1940s and 1950s have been razed and replace by modern new buildings. Once a no-go area for big business, brands such as Royal Bank of Canada have moved in.
Daniels worked with Toronto Community Housing to build 3,558 units so far, of which about 30 per cent are considered affordable. Almost 2,000 more units are under construction. About half the roughly 2,083 people in social housing have a new home in the development. Others are waiting, have deferred or decided to move out.
Daniels invested its own capital alongside the city in the first two phases, sharing profits generated from condo sales. In the third phase, it bought the land from the city to develop several condo buildings, a seniors residence and a rental building. Toronto Community Housing owns the social and affordable rental units.
Daniels is now up against Tridel Builders Inc. and Capital Developments on the final two phases of the project. Other developers are also expanding further into affordable housing.
“We built social, affordable housing right beside market housing, and we did it because we wanted to demonstrate that people were still going to buy and our land values were not eroded,” he said.
That bet has paid off. Townhouses that sold for $500,000 when the development first began, have gone for as much as $1.5 million. Purchasers can access various government-backed programs to get on the first rung of home-ownership and rents in the social-housing unit are geared to income. But they’re close to $2,000 elsewhere in the development, nearing the downtown average, according to a broker in the area.
The gentrification is creating some tension between tenants who have lived in the community their whole lives and owners of the shiny new condominiums.
“It’s not equal,” said Kendell Campbell, 29, who’s lived in Regent Park since 1993 and now lives in one of the market-rent apartments. He points to the lush green balconies of the condos versus the sparser ones of the social-housing units.
Cohen’s fifth iteration of a musical about the revitalization will address some of that tension.
“We’re learning as we go,” he said. “We’ve been figuring this out day by day.”
Fostering community spirit is as important as delivering the housing, Cohen said. When he came across a group of Bangladeshi women in the neighbourhood who missed gathering to sew he commissioned them to make a massive quilt to hang in the lobby of one of the new condominiums.
“It’s more than just buildings,” said Cohen, choking up as remembered the smiles on the women’s faces the day it was unveiled. “This is about empowerment and every single part of what we are doing there is about creating capacity in the local neighbourhood.”