What’s in Toronto’s Budget for 2023

February 1, 2023

Toronto’s Budget Committee recently wrapped up deliberations over this year’s budget which will now be considered by City Council at a special meeting on February 14th, 2023. Out of $16.16 billion in operating spending and $4.45 billion in capital expenditures budgeted for 2023, about $2 billion has been allocated for housing initiatives.  

The investments come at a time when the housing crisis will persist and likely deepen over the coming year, evidenced in worsening rates of homelessness and housing precarity. In addition, inflation, rising interest rates, a weakening economy and the province’s passage of Bill 23 which restricts the use of development charges, has left the City of Toronto with limited room to maneuver.  

Yet under such constraints, the City’s budget appears to prioritize housing, but only to a limited extent.  

Budget commitments that prioritize housing 

Notable allocations include enhancements to the City’s Eviction Prevention in the Community (EPIC) program along with some increases to housing subsidies to be administered by the Housing Secretariat. Such commitments, anticipated to double the number of potential beneficiaries of a program like EPIC, are a necessary response to the growing precarity and needs of some of the City’s most vulnerable and low-income households, many of whom will likely face more pressures as the economy weakens.  

Momentum also appears to be sustained to implement the recently adopted regulatory framework that would effectively legalize the operation of multi-tenant houses across Toronto. Allocating funds to ensure new staff can enforce the new regulations signals a commitment from the City to protect this rare stock of deeply affordable housing and ensure that living conditions in these homes are safe and adequate for its residents. However, the added cost of compliance may push landlords to consider alternative options such as selling off these buildings or subdividing them into smaller units for higher rents. Financial supports in the form of grants or loans are likely needed to help landlords bring these formerly unregulated units up to Code and prevent the displacement of existing tenants.  

In general, funds to preserve and create more rental homes hold some promise. For example, the City’s recently Multi-Unit Residential (MURA) program can bring some affordable rental homes into the market at a relatively quick pace. At the same time, the allocated portions amount to a marginal increase that falls short of what is needed to have a robust program. Still, an amendment introduced during Budget Committee deliberations to earmark $10 million annually for the program through revenue generated from the newly introduced Vacant Home Tax, is a good way to ensure some financial commitments over the long term. 

Proposed allocations of funds to “review fairness of housing-related funds and other systemic investigations of housing issues” through the Ombudsman’s office is also welcome news. The implication that some functions of a Housing Commissioner may now be realized with these new resources may enable the creation of an accountability mechanism to help the City advance the right to housing in Toronto, a commitment the City made over three years ago in its 10-year housing strategy, HousingTO 2020-2030 Action Plan.

Gaps in the budget

Despite such commitments, the economic uncertainties in the coming year will be a difficult test for the City to meet the needs of Toronto’s residents, particularly those most impacted by housing unaffordability and inadequacy. For example, pressures on the shelter system will likely persist even as some capacity has been added in the short term. Significant increases in funding are likely required to reduce instances of people being turned away from shelters. There is also widespread evidence of individuals taking shelter in public spaces and Toronto’s transit system.  

A significant source of the worries stems from inadequate long-term funding commitments from higher orders of government. For example, $48 million worth of funds expected to be allocated from provincial coffers for supportive housing are yet to be confirmed. Alarmingly, provincial changes introduced through Bill 23 curtail ways in which development charges can be levied and used, leaving the City with a projected loss of $2.3 billion over the next 10 years if the province does not come up with alternative funds to meet this shortfall. If not reimbursed by the province, the City of Toronto would have to reduce financial commitments for its HousingTO 2020-2030 Action Plan by $1.3 billion over the coming years. This, in turn, would significantly hamper the City’s ability to deliver on its goals such as creating 40,000 new affordable rental units by 2030

Moving forward using a rights-based approach

While moving forward, it remains imperative to consistently advocate for more sustained financial support from higher orders of government. The City must also keep exploring and innovating to make better use of its fiscal levers that it has control over. For example, the Vacant Home Tax may offer an important source of new revenue while at the same time, it can bring new rental supply into the market; it ought to be studied carefully this year when it will be implemented for the first time to gauge the extent to which the tax can be increased to fund more affordable housing initiatives. Similarly, more social bonds should be issued to finance new housing projects at a time when an appetite for social investments is deepening and interest rates for alternatives sources of financing are rising. In addition, the City’s real estate portfolio can likely be used more creatively to produce more affordable housing, including deeply affordable housing options. 

Fiscal planning for the next year ought to place a premium on financial innovations that are more effectively tied to the well-being of Toronto’s residents so that everyone has an adequate and affordable place to call home. The success of such efforts is contingent on applying a rights-based approach to housing where the maximum available resources are allocated in a way that prioritizes the needs of those most impacted by the affordable housing crisis. This also means collaborating more proactively with communities to better understand their needs as well as experts in the field to think more creatively about the City’s fiscal options.

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