The Standing Committee on Finance and Economic Affairs is pleased to present its fourth interim report on the Economic and Fiscal Update Act, 2020, and the impact of the COVID-19 crisis on the Ontario economy.

The report presents the Committee’s findings and recommendations following its review of the impact of COVID-19 on Ontario’s municipalities, and construction and building sectors. It reflects testimony received during public hearings held on July 13, 14, and 15, as well as written submissions delivered to the Committee Clerk as of 5:00 p.m. on July 22, 2020.

At the Committee’s request, the Minister of Municipal Affairs and Housing appeared as the first witness on July 13. Following the Minister’s update, the Committee received submissions from dozens of organizations, businesses, and individuals from across the province, representing Ontario’s municipalities, and construction and building sectors.

Witnesses from all sectors expressed appreciation for the government’s response to the COVID-19 pandemic.

In their testimonies, municipalities highlighted unexpected budgetary shortfalls due to the severe impact of COVID-19 on municipal revenue sources as well as a sudden increase in operating costs to maintain public health protocols. Municipalities stressed the need for provincial and federal funding to continue providing everyday services and urged the Province to give municipalities additional revenue generating powers and emergency funding.

The construction and building sector testified that it experienced immediate impacts in the wake of COVID-19, due to construction stoppages, supply chain issues and safety measures. Although the sector has modestly rebounded, witnesses stated that there will be residual impacts as delays in approvals, among other issues, decrease productivity.

This report is an overview of the main issues raised during the Committee’s public hearings. For details of witness submissions, and their responses to questions from Committee Members, readers are referred to the official record of proceedings, as reported in Hansard, and to the written submissions themselves.

Committee recommendations and a list of witnesses appear at the end of the report.

Committee Mandate

Motions adopted unanimously in the House on March 25 and May 12, 2020, established a two-part mandate for the Committee.

On March 25, 2020, when the House passed Bill 188, the Economic and Fiscal Update Act, 2020, it also adopted a motion providing that party leaders and independent Members may file letters with the Speaker, setting out their recommendations for economic and fiscal measures that should be included in the Bill. The motion further provided that when committees of the Legislature resume, the Standing Committee on Finance and Economic Affairs would be authorized to consider the Act, together with any letters filed by leaders and independent Members, and that the Minister of Finance would be the Committee’s first witness when it commenced its review.

The motion passed on May 12, 2020, authorized the Committee to begin consideration of the matters that had been referred to it on March 25. In addition, it empowered the Committee to study the impact of the COVID-19 crisis on specific sectors of the provincial economy, including “measures which will contribute to their recovery.” The sectors identified in the motion are:

• tourism;

• culture and heritage;

• municipalities, construction and building;

• infrastructure;

• small and medium enterprises; and

• other economic sectors selected by the Committee.

The Committee is specifically authorized to release interim reports, as it sees fit. Interim reports are to be presented to the House, and a copy of each report is to be provided to the Chair of Cabinet’s Ontario Jobs and Economic Recovery Committee. Interim reports will not be placed on the Orders and Notices paper for further consideration by the House, and the Government will not be required to table a comprehensive response to them.

A final report will be tabled in the House, and a copy delivered to the Chair of the above-noted Cabinet committee, by October 8, 2020.

The Committee’s mandate is reproduced in full in Appendix A to this report.

Municipalities

Ministry Update

Ontario’s Minister of Municipal Affairs and Housing, the Honourable Steve Clark, presented to the Committee on July 13, 2020. The Minister stressed:

Collaboration with municipalities was key to our response to COVID-19 in the early days and continues to be extremely important today. We’ll keep working with our municipal partners to support local decision-making, strengthen our communities and maintain important local services that both residents and businesses rely on.

Provincial and Federal Funding

The Minister told the Committee that the provincial government had provided $450 million to municipal partners thus far: $350 million for the Social Services Relief Fund and $100 million to municipalities for some of the public health expenditures they have had as a result of the COVID-19 pandemic.

The Minister said that he has joined the Federation of Canadian Municipalities (FCM) in calling on the federal government for emergency funding. The Ontario government’s position was that the Province deserves a per capita share.

The FCM, the Canadian Union of Public Employees (CUPE) and the Association of Municipalities of Ontario wrote a joint letter calling on both the federal and provincial governments to reach a joint agreement.

On July 16, 2020, the federal government announced more than $19 billion to help provinces and territories safely restart their economies over the next six to eight months through the Safe Restart Agreement. The funding will address seven priority areas and includes support for municipalities. This support will help municipalities implement precautions for public spaces and deliver essential services. In addition, there is a dedicated stream of funding for public transit – up to $2 billion will be funded equally between Ontario and the federal government. On July 27, 2020, the Ontario government announced up to $4 billion in one-time assistance to Ontario’s 444 municipalities.

Ministry’s Response

The Minister outlined several steps his Ministry has taken to address the effects of COVID-19 on municipalities:

• in March, worked with all parties to both introduce and pass, with unanimous consent, the Municipal Emergency Act, 2020, which included amendments

• to allow members of councils to meet electronically and be counted for the purposes of quorum during emergencies, which supported the continuity of operations and making timely decisions (over 70% of municipalities opted to meet electronically);

• to support 24-hour delivery of goods like food, medication and household items to ensure that shelves remained stocked; and

• to provide municipalities with the flexibility to redeploy certain staff to critical municipal services, including child care, bylaw enforcement and public health services;

• announced a temporary pandemic pay increase for front-line workers that helped deliver services in places like emergency shelters and supportive housing facilities;

• temporarily suspended certain decision-making timelines under the Planning Act for municipalities and planning boards so that they could focus on local public health needs;

• regularly held many conference calls and Zoom meetings with mayors across the province; and

• established a technical table with the Association of Municipalities of Ontario and the City of Toronto to discuss issues related to COVID-19 and to identify any possible solutions.

Modernization of Municipalities

The Minister told the Committee that the response to COVID-19 has revealed a desire at the municipal level to modernize and provide services online, such as registration services. The Ministry is considering what the Municipal Modernization Fund and the Audit and Accountability Fund will look like in a post-COVID environment. The Minister stated that he thinks there will be an uptake to speed up the development approval and permitting processes, and perhaps even to automate them.

The Ministry is proposing amendments that would allow municipal councils and local boards to meet electronically at any time, not just during emergencies. Municipal councils would also have the choice to allow their members to vote by proxy in certain limited circumstances.

Financial Impacts on Municipalities

The Ministry’s municipal services offices are examining the financial impacts of COVID-19. The Minister referred to amendments to the Development Charges Act, 1997 found in Bill 197, the COVID-19 Economic Recovery Act, 2020, which expands the list of services for which a development charge can be imposed and sets out the relationship between development charges and the community benefits charges that can be imposed by by-law under the Planning Act. The Minister stated that these amendments will ensure that growth pays for growth, and that critical social infrastructure can be paid for through development charges rather than through the property tax base.

Sector Snapshot

Ontario has 444 municipalities, which are responsible for a number of “on the ground” services, including libraries, parks and recreation, fire services, public utilities, waste management, maintenance of local roads, public transit, police services, public health, and social housing. Forty-seven Ontario municipalities have been designated as service managers for the delivery of social assistance, child care, and social housing. Some of them are also responsible for land ambulance and other matters. In many cases, municipalities are responsible for funding the largest share of many of these services.

Ontario municipalities collectively spend more than $64 billion every year on public services, including both operating and capital expenditures. As much as 80% of this funding is directly raised by municipalities from “own-source revenues.” The largest of these is the property tax, a portion of which is set by the municipal government to fund its operations. Additional revenue comes from user fees or non-tax revenue (e.g., parking fines). Combined, provincial and federal government grants and subsidies are the second largest contributor to Ontario’s municipal revenues.

The Province limits how much municipalities can borrow to ensure debt responsibility—municipalities cannot borrow for operating expenditures, only for capital works. A municipal deficit must be carried over into the following year and its repayment must be the first item on the budget agenda.

Prior to the COVID-19 pandemic, Ontario’s municipalities were lobbying the Province for expanded access to revenue tools, and especially for more taxing abilities, in order to establish greater fiscal autonomy and to diversify their revenue sources. Toronto was granted additional revenue powers under the City of Toronto Act, 2006, including the power to levy a land transfer tax, a vehicle registration tax, an alcohol and tobacco tax, an entertainment tax, and a billboard tax.

Impacts

Delivering Essential Services

The COVID-19 pandemic has demonstrated the vital role municipalities play in daily life. The Committee heard from municipalities about the frontline support they have been delivering to their communities during the COVID-19 pandemic:

When you look at municipal essential workers, we’re talking about unsung heroes: transit operators, waste collection, first responders, paramedics.

City of Brampton

Municipalities have played an essential role in the emergency response. We have kept communities safe, provided urgent assistance to the most vulnerable, kept emergency and other essential services running, such as transit and safe drinking water, and taken up the front line in public health, paramedic services, homelessness, shelters, child care and long-term care—but at a substantial cost. Municipal governments in every part of Ontario, rural and urban, large and small, have faced massive increased costs for human services.

Association of Municipalities of Ontario

These services are the foundation of civil society and are needed to maintain public health and societal functioning. During the darkest days of the pandemic, citizens never had to fear for lack of these essential services.

Town of Tecumseh

Municipal councils have been assessing and responding to the needs of their communities in their response to COVID-19. For example, the City of London created the Mayor’s Economic Impact and Recovery Task Force and the Mayor’s Social Impact and Recovery Task Force to obtain feedback and provide support to various local community groups and organizations.

Municipal Budgets

The Committee heard from municipalities across Ontario that COVID-19 has disrupted municipal finances due to losses of revenue and new expenses. While having mitigated their losses where feasible, municipalities have been left with budgetary shortfalls. In many cases, municipalities have used some of their capital reserves to pay for operating expenses resulting from the COVID-19 pandemic.

Many municipalities noted they have limited capabilities to raise funds and an inability to run deficits. The Committee heard that municipalities do not want increased borrowing abilities or deficit financing. Instead, they would like additional revenue powers and support from the provincial and federal governments.

The Association of Municipalities of Ontario (AMO) summarized the options municipalities are facing now as they work on their 2021 budgets if they do not receive adequate funding from the federal and provincial governments:

But without an adequate federal-provincial emergency relief program, we are instead looking at implementing property tax hikes, cutting services, laying off more of our workforce and delaying capital projects.

For example, the Committee heard from Orillia that it is projecting a shortfall of $5.5 million in 2020. Without service cuts, Orillia estimates the city would require an approximate 9% increase in property taxes. The Region of Peel said that it is projecting a $39 million operating deficit for 2020, after taking savings into account, largely due to an increase in operating costs for critical frontline services. The City of Vaughan estimates that the net financial impact of COVID-19 in 2020 and 2021 will be approximately $45 million.

The Municipal Finance Officers’ Association of Ontario told the Committee that a one-size-fits-all approach is not helpful to improve municipal finances. Instead, flexibility should be a guiding principle for assisting municipalities as they seek to maintain their levels of service without burdening them with debt. Several witnesses stated that the COVID-19 pandemic has resulted in deficits for municipalities in the immediate term but also raises important financial questions over the long term since permanent changes to how business is conducted will impact future revenues.

Municipalities expressed their support for the national effort of the Federation of Canadian Municipalities (FCM) to secure at least $10 billion dollars in emergency operating funding for municipalities across the country, to be funded fully by the federal and provincial governments. According to the FCM, this funding would bridge municipalities’ fiscal shortfalls for a six-month period starting in March 2020 and it would be comprised of at least $7.6 billion for direct federation allocations to all municipalities and $2.4 billion for those with transit systems.

According to the AMO, immediate relief funding from both levels of government will shore up the municipal sector, ensuring municipalities can lead the economic recovery locally in their communities with beneficial effects for provincial and national economies.

Revenue Losses

Deferrals, waived fees, and loss of user fees

Municipalities have sustained significant revenue losses as a result of the pandemic. The Committee heard that to assist with short-term liquidity pressures in the community, many municipalities have deferred the payment of property taxes, utilities, and rents, and waived public parking fees, traffic tickets, and penalties and interest on taxes. For example, the City of Mississauga deferred $700 million in property and other taxes. Revenues have declined by $12 million in Guelph and by $2.9 million in Timmins.

Multiple witnesses stated their municipalities have sustained a loss of user fees such as registrations for recreational programs and rent for city facilities. Some of these losses are unrecoverable and the revenue shortfalls are anticipated to have a long-term impact.

Transit

Municipalities with public transit said that fare revenues have decreased significantly or altogether. For example, Waterloo Region reduced transit fares to reflect demand and provided free transit to essential workers. Other municipalities, such as Orillia, Windsor and Mississauga, have been running transit services without collecting fares due to rear-boarding and the need to keep drivers distanced from riders.

In its written submission to the Committee, the City of Toronto noted that the Toronto Transit Commission (TTC)—Ontario’s largest transit operator—has experienced a significant decline in ridership, down by as much as 86% at the height of the pandemic at the end of April but slightly rebounding since then. As of mid-July, ridership and revenues were down by approximately 70%.

There has been an associated decline in TTC revenue of approximately $21 million per week since emergency orders were initiated in mid-March. City of Toronto staff estimate the financial impact on TTC Conventional Service could be up to $699 million at year-end primarily due to ridership revenue continuing to be significantly impacted by COVID-19.

Airports

Certain municipalities that receive income from their local airports, such as Mississauga, Timmins, and Windsor told the Committee they have seen a decline in those revenues due to significantly reduced passenger numbers and airport operations.

For example, the City of Mississauga receives Payment in Lieu of Taxes (PILTs) revenue based on a per passenger count from the Greater Toronto Airports Authority for the Toronto Pearson International Airport. The city receives this income with a 2-year lag, and anticipates an $18 million loss in 2022 and $17 million loss in 2023.

Development-related revenues

Municipalities are also facing reduced revenues connected to development. The Committee heard that Peel region is forecasting a significant shortfall in development charge revenues, estimated to be $600 to $700 million over the next five years, which will require the municipality to take on more debt. Sioux Lookout also told the Committee that its building permit revenues have declined by 87% compared to the same period in 2019. This represents a $76,000 loss in permit revenue.

Infrastructure and Capital Projects

Some municipalities have used funds in their capital reserves that would have been used for capital expenditures, such as infrastructure replacement and growth, towards their COVID-19 response. Several witnesses told the Committee that their municipalities are deciding which infrastructure projects will go forward, be delayed, or canceled. For example, the City of Vaughan has deferred non-critical projects to 2021.

In Sioux Lookout, approximately $75 million dollars in infrastructure projects has been delayed due to COVID-19. The $1.6 billion Watay Power Transmission Line project was also delayed. The project’s anticipated 250-person base camp could positively impact the local food, retail, and service industries.

Given that many infrastructure projects are interrelated, delays of some create a domino effect, impacting others. Peel Region told the Committee that these decisions will impact the ability of municipalities to provide supports for immigration, housing, and population growth and will have long-term consequences. Several municipalities said they have shovel-ready projects that are waiting for funding.

Increased Expenditures Related to the COVID-19 Pandemic

COVID-19’s effect on municipalities has included an increase in certain operating expenditures. The Committee heard that municipalities have had to retrofit municipal facilities, including transit, to allow them to be safe while serving the public. This has included purchasing additional cleaning supplies, sanitizers, and personal protective equipment, and conducting screenings for COVID-19. For example, the City of Guelph has spent $1.3 million on unbudgeted COVID-related costs. Kitchener said that moving some services online has also resulted in additional costs.

Multiple witnesses noted an increase in operating costs for critical frontline services, including public health, long-term care, paramedic services, and homelessness and shelter programs. For example, Waterloo Region rented a hotel to house unsheltered individuals and provided them with 24-hour programming of various health services. Niagara Region is anticipating a funding shortfall of $7 million of incremental costs for the region’s 957 long-term care beds.

Cost Reduction Efforts

Municipalities have made efforts to contain or reduce their costs. The Committee heard that numerous municipalities have let go part-time and seasonal staff and implemented hiring freezes.

Municipalities have reduced discretionary spending, including in areas such as travel, professional development, and non-essential materials and supplies. They have also realized some savings from reduced insurance benefits and utility costs. For example, Windsor realized $3 million in savings on its Green Shield benefits for staff as a result of a significant reduction of claim draws during the height of the pandemic. Many said that despite undertaking cost-saving measures and efficiencies, they are still projecting deficits.

For example, the City of Mississauga has laid off 2,000 temporary workers, instituted a hiring freeze, and cut all discretionary spending. This has resulted in $47 million in savings. However, the city is facing over $60 million in unrecoverable losses in 2020.

Rural and Northern Communities

The COVID-19 pandemic has demonstrated the need for better broadband and cellular connectivity in rural and northern communities. For example, in Ear Falls, broadband connectivity is very poor, which has made remote learning difficult for students. There are concerns that if schools do not physically re-open, many students will be left behind. This issue is also important given that, as pointed out in Renfrew’s presentation, more people are now working from home.

Tecumseh said that the Ontario Community Infrastructure Fund (OCIF), which provides funding for small, rural and northern communities to develop and renew their infrastructure, has been a good source of revenue for these communities.

Indigenous Communities

The Committee heard from the Ontario Aboriginal Housing Services that

there are over 400,000 Indigenous people in Ontario, and 86% live in urban and rural areas. . . Although Indigenous people account for 3% of Ontario’s population, cities indicate that anywhere from 27% to 99% of people experiencing homelessness are Indigenous.

In its submission, Timmins noted that 90% of its homeless population is Indigenous people who have migrated into the city from the coast. The city pays 65% of the District Social Services Administration Board’s budget, which is underfunded to adequately address homelessness and addictions issues. The urgency is anticipated to increase over the course of the COVID-19 pandemic.

Witness Recommendations

Municipalities that made submissions to the Committee put forward similar proposals on how to support municipalities through the pandemic, including increased funding, additional revenue streams and infrastructure investments, as summarized below.

• Emergency funding—Provide immediate emergency operating funding on an equitable basis to offset lost revenues and incremental service costs in order to fund current municipal operations, in accordance with a call by the Federation of Canadian Municipalities for at least $10 billion.

• Recovery plan—Develop a comprehensive recovery plan to address COVID-related impacts for municipalities as they work to gradually reopen the economy.

• Intergovernmental partnerships—Create a longer-term partnership agreement between municipalities and the federal and provincial governments to create sustainable revenue streams for the future.

• Infrastructure—Accelerate both provincial and federal infrastructure programs, including the approval of Investing in Canada Infrastructure Program (ICIP) projects to get infrastructure funding flowing as soon as possible, particularly for shovel-ready projects.

• Transit funding—Increase the funding provided to municipalities through the Provincial Gas Tax Program to offset transit losses and to continue transit operations without fare increases.

• Broadband expansion—Improve upon Ontario’s broadband action plan to ensure that high-speed broadband connectivity is available to everyone and explore the option of making broadband access an essential service and lobby the federal government for better access.

• Revenue tools—Engage municipalities in a discussion to explore new municipal revenue sources and tools to address fiscal imbalances of local communities.

• Municipal services—Invest in municipal services such as transportation and transit, affordable housing, child care, water and wastewater, flooding and stormwater management, energy and conservation, and others, which will get Ontarians back to work.

• Regulatory review—Review legislation and regulations, and eliminate administrative requirements to ensure municipalities are not unduly burdened.

• Housing—Explore opportunities to make home ownership more affordable (e.g., suspending the Land Transfer Tax).

• Supply chains—Use local labour and local supply chains efficiently.

The Construction and Building Industries

Ministry Update

Ministry’s Response

As noted earlier, Ontario’s Minister of Municipal Affairs and Housing, the Honourable Steve Clark, presented to the Committee on July 13, 2020. The Minister outlined steps the government has taken to address the effects of COVID-19 on the construction and building industries.

• The Ministry of Labour released guidance documents to help employers better understand their responsibilities and what is needed to prevent the spread of COVID-19, including with respect to on-site sanitation, tracking and monitoring of workers, and the importance of practicing social distancing on the job site.

• In April, the Ministry of Municipal Affairs and Housing temporarily limited municipal noise bylaws to extend construction hours to allow for safer, staggered shifts for construction workers for projects and services related to health care.

• An emergency order made it possible to build urgently needed temporary health and shelter facilities across the province.

• The Minister made changes to the Building Code to ensure that local building officials could keep reviewing building permits and conducting inspections so construction of new hospitals and housing projects could continue.

• In May, restrictions were eased on essential construction to allow more people to return to work.

• Changes permitted below-grade, multi-unit residential construction projects to begin, such as apartments and condominiums, and existing above-grade projects to continue.

• As the conditions improved and based on the advice of the Chief Medical Officer of Health, the government allowed all construction activities.

Building Code

The Minister made remarks about Bill 197, the COVID-19 Economic Recovery Act, 2020, which proposed changes to the Building Code Act, 1992. The Minister stated this bill, if passed (it subsequently passed and received Royal Assent on July 21, 2020), will

• enable the future creation of an administrative authority to help deliver faster and better services;

• make it easier to make changes to the Building Code when responding to urgent public safety matters; and

• achieve cross-country harmonization and timely adoption of construction codes as committed to under the Canadian Free Trade Agreement.

Minister’s Zoning Orders and Greenbelt Protection

The Committee heard that the Ministry is also proposing to enhance the existing minister’s zoning order authority to reduce approval delays on key projects that local communities need like those that will support the province’s economic recovery and leverage its transit investments. The Minister stressed that the government’s commitment to protecting the Greenbelt has not changed and that it will not consider any requests for development in the Greenbelt.

Housing

The Minister said that housing is an important determinant of health and that the Ministry has provided a total of $350 million in social service relief funding to housing partners thus far.

In March, the government suspended residential evictions and announced $200 million in initial social service relief funding. Of that amount, $148 million was given to service managers and Indigenous program administrators to strengthen community programs, including their housing and their homelessness systems. This funding has been used to find ways for people to self-isolate, such as using hotels and motels, hiring extra staff for homeless shelters, bringing in protective equipment, and short-term rental assistance.

The Minister also announced that the government is doubling its investment for housing and homelessness supports under the Social Services Relief Fund with an additional $150 million. The Minister told the Committee that the additional funds are critical because service managers have said that the initial investment is helping to save lives and this funding can also be used to help create longer term, innovative and more sustainable solutions by building on some of the ideas that are already out there.

Sector Snapshot

Ontario’s construction and building industries comprise a major economic sector in Ontario. Statistics Canada estimates that 563,000 Ontarians worked in the sector in March, 2020, with 166,000 working in the closely related real estate, rental and leasing sector in 2019. Many of these jobs are concentrated in the Greater Toronto and Hamilton Area. In its testimony to the Committee, the Building Industry and Land Development Association (BILD) estimated that construction in the GTHA alone comprised 361,000 on and offsite jobs, contributing approximately $22 billion annually in wages.

Witnesses noted the particular importance of the housing industry within the larger construction sector. The Ontario Real Estate Association (OREA) estimates that the housing industry generated approximately $107 billion in economic activity in 2019.

The sector is broad, ranging beyond the trades directly engaged in construction activities. Other subsectors within or closely related to the construction sector include building material producers and distributors, trucking, and professional services such as real estate, finance, planning and engineering.

Impacts

The Committee heard that COVID-19 has had severe impacts on the construction industry due to delays, supply chain issues, and limits on the numbers of workers onsite, among other challenges. Some witnesses, such as the Residential Construction Council of Ontario (RESCON), noted that the sector managed to weather the immediate effects of the pandemic by quickly implementing measures to ensure job site safety. However, the Committee heard that despite a modest rebound in construction activity since the lockdown began, the pandemic will likely have knock-on effects in the months ahead, as delays in approvals and distancing measures will decrease the numbers of completed projects.

There is also uncertainty about whether scheduled projects will proceed, and the long-term impact of an economic slowdown on land development in Ontario. Some witnesses noted the impact of the 2008-2009 economic crisis on the housing supply, as economic uncertainty put downward pressure on the number of housing starts in the province. Some have reported that the industry did not fully recover from that previous crisis until early this year, just prior to the current lockdown.

The Committee heard that the commercial real estate sector is coping with uncertainty and additional costs as more people work from home. In addition, commercial operators have new requirements for office settings, such as extra cleaning, elevator management and other upgrades. The Real Property Association of Canada (REALPAC) testified that hotels, and restaurant and retail tenancies are especially precarious due to travel restrictions, social distancing and increased online shopping.

Many presenters, while offering recommendations for assistance to the construction industry, expressed gratitude for the government’s early actions that allowed them to continue working, albeit at a reduced rate.

Construction Activity Slowdown

The initial impact of COVID-19 on the construction industry was a slowdown of activity between March and mid-May, as many construction sites, with some limited exceptions, were required to close. The Committee heard that there has been a modest rebound since that time, and many jobsites were able to put measures into place to ensure the safety of workers.

Despite the rebound, there have been overall decreases in economic activity when compared to last year. For instance, RESCON estimates that the residential construction industry is operating at between 75 and 95% of its normal capacity now, although this is an improvement from a low of 40 to 50% immediately after the lockdown began. Concrete Ontario noted that many of its members are back to near-normal production levels, but have experienced an overall decrease of about 20% in the amount of concrete produced in the province as a result of the lockdown.

Witnesses expressed concern about the potential long-term impacts of months of reduced activity, particularly in Ontario’s shortened construction season. The London and District Construction Association (LDCA) told the Committee that the industry is “cash-flow efficient,” meaning that it operates with slim margins. As such, slowdowns can limit the profitability of development, leading to less investment. In addition, construction financing is often stretched over long periods of time due to holdbacks and other mechanisms, meaning that the slowdown may reduce builders’ ability to stay profitable over the long term.

Cash has to flow very efficiently for our members not to be harmed. And in . . . our sector of construction, it is generally a lot of cash flow going out, and you wait 30, 60, 90, 120 days to get paid; all the while, you are consuming your bank credit availability.

LDCA

Witnesses testified that a prolonged economic slowdown could hinder new development and projects, if consumer confidence is diminished.

Supply Chain Issues

The construction sector relies on a complex global supply chain for its critical building materials. A recurring theme in the hearings was how supply chain disruptions caused delays that still continue to hamper projects, even after many restrictions have been lifted. One reason for the disruptions is that many materials and finished goods used in construction come from the United States or overseas, and travel bans and other restrictions have slowed their import. The Ontario Home Builders’ Association (OHBA) testified that further supply chain issues may be expected in the fall, when current stockpiles of foreign-made supplies are exhausted. The OHBA specifically noted assembled goods such as furnace, window, door and lock supplies as being prone to disruption.

This issue was noted by other witnesses. For instance, the Heating, Refrigeration and Air Conditioning Institute of Canada said that most of the equipment used in that industry is made abroad, and that the Canadian trade is largely restricted to distribution and installation, rather than manufacturing.

Witnesses noted that the pre-pandemic shortage of truck drivers has been further exacerbated by the pandemic, driving up costs and lengthening delivery times in some instances. Walker Aggregates testified that while the Canadian Emergency Response Benefit (CERB) was a welcome relief early in the lockdown, it may have encouraged workers in the supply chain to stay home, adding to costs and delays.

Safety Measures

Many witnesses told the Committee that the sector had taken strict measures to prevent the spread of COVID-19, based on Ministry of Labour guidelines. Measures included:

• staggered shift times;

• sanitization regimens;

• making personal protective equipment (PPE) available to all employees;

• contact tracing; and

• striking health and safety committees.

However, the Committee heard that these measures, while helpful in keeping projects moving, added unanticipated costs.

Many witnesses expressed appreciation for the government’s temporary extension of construction hours, noting that it helped to mitigate the lengthened project times and to practice distancing.

I think we successfully steered our way through that in construction, and that was in large part through the collaborative effort of industry, unions, employers and government.

Labourers’ International Union of North America

Delays

Many of the impacts described above have resulted in project delays. The Committee heard that most residential projects have been delayed, with 32% of Greater Toronto Area (GTA) projects in the planning phase estimated to be delayed by six months or more. BILD quoted a study by the Altus Group, which estimated that residential construction delays could result in the loss of over 9,000 housing units over the next two years, with the delayed occupancy of over 8,000 units by the end of 2021.

The Committee heard concerns over delays or cancellation of public infrastructure projects. For instance, the Labourers’ International Union of North America (LiUNA), noted the number of large transit infrastructure projects in the planning phase that have been delayed due to the pandemic.

The recent suspension of approvals timelines under the Planning Act was also cited as a cause for delays. The NHBA was concerned that the suspension would lead to increased costs, noting in particular the potential for increased development charges if delays push project completions into the next calendar year (when development charges typically increase).

Common Concerns and Recommendations for Recovery

A consistent refrain from witnesses was the need for a clear recovery plan that would leverage construction, particularly in homebuilding and infrastructure projects, to drive economic activity and support jobs. The Committee heard about sector-specific actions that could facilitate a recovery. These include investing in infrastructure, reviews of the regulatory and tax framework, and incentives for building or renovating. A common theme throughout the recommendations is the need to remove impediments to construction and development, to expedite economic recovery.

Construction has a track record as the most reliable and the fastest engine for economic growth and can act as the foundation for economic stimulus. It can drive the post-pandemic development and is vital to stimulating medium- and long-term economic growth.

Cement Association of Canada

Leveraging Infrastructure Spending

Many witnesses noted the potential for leveraging infrastructure spending to boost the economy. The Committee heard that infrastructure projects could create jobs and spinoff economic activity, while building public assets. Witnesses emphasized the importance of existing infrastructure spending programs, because they already have funding and an inventory of approved projects.

Another theme was that the Province should strengthen its partnership with the federal government to build infrastructure, and to accelerate the funding commitments already made under the Investing in Canada Infrastructure Plan.

The public, we believe, doesn’t want to tolerate further delay in developing our infrastructure, particularly in transit.

LiUNA

Witnesses stressed the importance of advancing “shovel-ready” projects to expedite recovery. For instance, the Building Industry and Land Development Association (BILD) asked that approvals be expedited for projects for which the federal government has committed funding. The Committee heard that infrastructure investments are also required to prepare land for residential development, especially outside of traditional growth centres. For instance, the Quinte Home Builders’ Association (QHBA) told the Committee that the Quinte region expects new pressures from migrating GTA residents, especially as companies allow more employees to work remotely.

The Durham Region Home Builders’ Association urged the government to prioritize four announced GO Transit stations in Durham Region. The stations could encourage residential construction activity in the region, which would provide more housing options for residents.

The Cement Association of Canada noted that infrastructure investments should also include “state-of-good-repair” activities and life cycle cost analysis. This is consistent with the testimony of municipal witnesses, who cited the challenges of maintaining existing assets.

Witness Recommendations

• Infrastructure projects—Proceed with infrastructure to drive economic recovery while providing jobs and building public assets. Focus on “shovel-ready” projects.

• Maintenance—Invest in maintaining existing infrastructure in a “state-of-good-repair.”

Regulations

The Committee heard about the challenges of navigating the province’s regulatory framework in order to bring housing and other developments to market. Witnesses noted the length of time that is required to secure approvals from municipal and provincial authorities, particularly for housing development. For instance, BILD told the Committee that housing projects can take over ten years from the approvals process through to completion. OREA noted that reducing red tape could improve housing affordability, and could be a “low-cost solution” for governments seeking to attract development.

Specifically, witnesses were concerned with the planning approvals process, which can add costs and delays to projects. The Committee heard that municipal zoning by-laws should be updated to reflect where growth is intended to occur, such as along major arteries, rather than requiring time-consuming zoning by-law amendments on a case-by-case basis.

Digital modernization was another theme, particularly in how the pandemic has accelerated the adoption of digital tools. For instance, REALPAC suggested digital tools could be used to streamline regulatory processes, such as for virtual inspections. The Ontario Building Officials Association (OBOA) estimated that 70% of all municipalities will have adopted online application submission options for various approvals by 2022. Further, the OBOA suggested that the Province focus on standardizing how information is transferred between provincial, municipal and other regulatory bodies.

If you would have asked me in January or February where this whole electronic platform was going, my answer would have been different than what it is today. . . But now COVID-19 has really forced us to make those changes.

OBOA

Some witnesses pointed to opportunities in harmonizing the Ontario Building Code with the National Building Code to increase certainty and familiarity. The OBOA suggested that the Ontario Building Code could be made more user-friendly to increase public trust and understanding.

The National Elevator and Escalator Association (NEEA) told the Committee that Ontario does not currently have standards for the minimum number of elevators required in a building. The witness noted that this will be more important in a post-pandemic world, where social distancing may require extra elevator capacity. The NEEA pointed out that International Standards Organization (ISO) standards for elevator capacity have been adopted in many jurisdictions, and suggested that they could be directly inserted into the Building Code.

Witness Recommendations

• Red tape reduction—Reduce red tape to bring housing and other developments to market faster. This could reduce costs for developers and homebuyers, while freeing up capital for other projects.

• Planning approvals—Streamline the planning approvals process. Require that zoning be updated to reflect where growth is anticipated in official plans, and to allow for greater density where appropriate.

• Building Code harmonization—Harmonize the Ontario Building Code with the National Building Code to improve consistency and familiarity. Consider including elevator traffic standards in the building code, similar to ISO standards.

• Digital modernization—Digitize more processes, including applications, approvals and inspections. Standardize digital information so that it can be more easily shared between approvals authorities.

Taxes, Fees and Charges

Another common theme was the role of taxes and other fees and charges in incenting or discouraging economic activity. The Committee heard that approximately 25% of a new home’s cost results from taxes and other related fees, including development charges, land transfer taxes, HST and community benefits.

The Committee heard that the Ontario Land Transfer Tax could be suspended temporarily to boost consumer activity. Some witnesses suggested putting caps on planning related fees, or freezing development charges (which are charged on a per-unit basis to help pay for increased municipal services). The NHBA suggested that development charges be indexed annually after a temporary freeze.

That’s why we’re recommending that the [Committee] look at a short-term land transfer tax holiday. . . It could inject some badly needed inventory, and . . . act as a moderating influence on those increases in prices.

OREA

Witnesses also told the Committee that the threshold for the HST rebate on new home construction should be increased to $600,000 to reflect the costs of new homes and make them more affordable. The threshold is currently set at $400,000. The Durham Region Home Builders’ Association suggested that this could make new homes competitive with resale homes, which are not subject to HST.

Witness Recommendations

• Tax review—Review Ontario’s taxes to better encourage development and investment.

• Ontario Land Transfer Tax—Temporarily suspend the OLTT to encourage activity in the housing market and encourage more listings.

• HST rebate—Increase the threshold to $600,000 for eligibility for an HST rebate on a new home purchase to better reflect current housing prices, encourage activity in the new home market, and make new homes competitive with resale homes.

• Planning related fees—Put caps on planning related fees, such as development charges, to encourage development. Index fees to inflation for greater cost certainty.

Housing

Housing helped make Canada’s economic revival following the recession of 2009, and we can do it again.

OREA

The Committee heard from many witnesses about the importance of housing, both as a public health matter, and as an economic driver. The importance of access to affordable and safe housing was a common theme, particularly during a pandemic that required people to remain at home. Witnesses shared the Minister’s view that housing is a determinant of health, and recommended that the Province dedicate funding to supportive and affordable housing.

Another housing-related theme was the potential for the residential construction industry to drive economic recovery. Several witnesses noted the multiplier effect of housing investments, which can result in increased economic activity and jobs. For instance, Indwell estimated that each apartment unit creates one full year of employment. BILD noted that investments in housing, including through tax incentives, return dollars to the public coffers in the form of taxes generated by economic activity.

The Committee heard about the need to increase the province’s housing supply in order to ensure affordability. For example, the Federation of Rental Housing Providers of Ontario (FRPO) estimated that 200,000 more rental units than are currently planned need to be constructed to meet demand. Witnesses recommended that the government consider policies such as allowing greater density on existing properties, or, as described above, removing other regulatory impediments to development. The Co-operative Housing Federation of Canada suggested that the government take an “affordable housing first” approach when selling off surplus land.

Indigenous Housing

Ontario Aboriginal Housing Services (OAHS) told the Committee that the homeless and people living in congregate housing settings are more likely to contract COVID-19. The Committee heard that one in five Indigenous Ontarians do not have access to affordable housing. OAHS estimated that it costs approximately $100,000 annually per person to deal with homelessness through the shelter system, hospitalization or incarceration, and told the Committee that the money could be more effectively spent on partnering with community organizations to provide appropriate housing. The witness testified that these kinds of investments have multiplier effects that drive economic activity.

Witness Recommendations

• Housing supply—Consider policies that will boost the province’s housing supply in order to make housing more affordable. These can include regulatory reform and tax incentives.

• Surplus lands—Release government surplus lands for affordable residential development.

• Affordable housing—Maintain and grow Ontario’s affordable housing stock.

• Community partnerships—Partner with community organizations to deliver affordable and supportive housing.

Domestic Building Supply Industry

The Committee heard that supply chain issues suggest a need for a stronger domestic building supply industry. For instance, Ontario has an opportunity to produce value-added wood products such as mass timber components to offset delays, and provide an economic boost for resource-rich regions like Northern Ontario. Some witnesses suggested that governments adopt local purchasing policies. However, the Association of Municipalities of Ontario noted that “buy local” policies may be limited due to restrictions in international trade agreements.

We absolutely need to do our best to secure the supply chain. . . we should be doing what we can to make sure that we have what we need.

Quinte Home Builders Association

Witness Recommendations

• Domestic supply chain—Encourage the development of domestic supply chains for building materials. This could boost economic activity in Northern Ontario and other regions that have natural resources required for building, such as timber. A domestic building industry could also provide some protection from disruptions in the global supply chain.

Home Renovation Tax Credit

Many witnesses suggested the potential for a home renovation tax credit to boost the renovation sector. A similar federal program had been initiated following the 2008-2009 economic crisis, and was pointed to as a successful model. The Committee heard that a home renovation tax credit could be tailored for specific policy outcomes, such as energy performance improvements, aging in place remodelling for seniors, or COVID-related upgrades, while supporting jobs.

The Committee heard that this type of credit could reduce the illegitimate underground renovation economy, which evades taxes and does not have health and safety oversight. By requiring homeowners to submit receipts in order to qualify, the NHBA suggested that a credit could put “more cash into the provincial coffers in the long run” because legitimate contractors would be paying tax on their revenues from the work. Statistics Canada had calculated that the federal program took $800 million out of an estimated $2 billion underground renovation economy, while generating $4.3 billion in economic activity. The OHBA noted that, according to a study by the Altus Group, every dollar returned to a consumer through a tax credit generates between $6 and $7 in economic activity.

Witness Recommendations

• Home renovation tax credit—Encourage economic activity by creating a home renovation tax credit. The credit could be applied to energy performance improvements, aging in place renovations, or COVID-related upgrades. Consider making a tax credit permanent.

Surety Bonds

Municipalities commonly require developers to provide a letter of credit to ensure that certain work is completed on a development, such as roads, sewers or other infrastructure. The Committee heard that letters of credit reduce developers’ capacity to make further investments that could support jobs and other economic activity. The NHBA estimated that letters of credit account for $750 million in frozen capital province-wide. As an alternative, witnesses suggested that the Province require municipalities to accept surety bonds instead of letters of credit. Surety bonds are contracts that bind the contractor and municipality to a third party guarantor, who, on behalf of the contractor, provides a financial guarantee that the work will be completed. The Committee heard that surety bonds could help developers retain their liquidity and continue accessing credit for other projects, without additional costs to government.

So if that working capital could be opened up, it will create jobs, create more housing, create more affordable housing and housing affordability. That’s a big, big issue that does not cost the Province, the municipality or the federal government one dime.

NHBA

Witness Recommendations

• Surety bonds—Require municipalities to accept surety bonds in place of letters of credit, in order to free up capital for other projects.

Addressing the Trades Shortage

The Committee heard that the pandemic may provide opportunities for retraining in the skilled trades. The shortage of tradespeople in Ontario is a perennial issue, and witnesses felt that the construction sector had the potential to absorb former tourism and hospitality workers who have been laid off due to COVID-19. For instance, the NHBA noted that the Niagara region, which is heavily reliant on tourism, has been especially hard hit by COVID-19, and it may present an opportunity to address the shortage. The Committee heard that retraining and local recruitment could form part of the tender process for large infrastructure projects, such as was done for Toronto’s Eglinton Crosstown LRT.

Witness Recommendations

• Retraining—Provide opportunities for workers whose industries have been affected by the pandemic, particularly in the hospitality and tourism sectors, to retrain in the skilled trades. Encourage participation by underrepresented groups, like women and Indigenous people.

• Recruitment—Encourage the use of local labour and local supply chains for local infrastructure projects, where possible, through the request for proposal (RFP) process.

• Apprenticeships—Allow apprentices in the skilled trades to work for more than one company.

Witness Recommendations

The recommendations made by witnesses from the building and construction sectors are summarized below.