An aerial view of a future Scarborough rental home development project in Toronto on Wednesday.Sammy Kogan/The Globe and Mail
The taxpayer-backed Building Ontario Fund is investing $178-million on a stalled residential project in Toronto’s east end, its second large investment in housing in the province this year.
Called Scarborough Junction, the project is near a commuter train station and on about 26 acres of land. It has been planned for multiple apartment building towers with a total of 7,655 housing units.
With the investment, Building Ontario Fund (BOF) is now partners with the project’s developers, Republic Developments and Harlo Capital. The developers had put part of the Scarborough Junction up for sale about a year ago.
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The Ontario government said the $178-million of equity advances a project that was previously stalled.
“Scarborough Junction shows the role Building Ontario Fund can play in getting housing built when market conditions make it difficult to move projects forward,” the fund’s chief executive officer, Michael Fedchyshyn, said in a news release.
The investment will kickstart the project’s first phase of development of 1,700 new rental homes, of which 340 units will be affordable and leased at below-market rents.
The partnership is a 50/50 split between the government and the developers and BOF will have decision-making and governance rights, according to the fund’s spokesperson Julia Sakas.
The Scarborough Junction project is near a commuter train station and on about 26 acres of land.Sammy Kogan/The Globe and Mail
Construction is expected to start next year. The apartment buildings are expected to be completed around the end of 2030 and fully occupied by 2033, according to Ms. Sakas. After that time and if the market conditions are favourable, BOF intends to divest its stake in the completed buildings. BOF “retains flexibility to participate or exit from all future phases” of the development, she said.
The Scarborough Junction project is BOF’s second investment in affordable housing and its second investment that will help the beleaguered homebuilding sector.
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In March, BOF said that it was providing $300-million to real estate investor High Art Capital to buy some of the unsold newly built condo inventory in the Toronto region and turn them into rental units.
Currently, there are thousands of newly built condo units that are sitting empty because individual investors, who used to account for the vast majority of new condo sales, are no longer interested in buying them. People who want to live in them can find cheaper units on the resale market.
High Art is expected to buy them at a discount, turn them into rentals and rent a portion of them at below-market rates. High Art plans to sell the units after a period of at least five years, though the affordable rental units are expected to remain affordable.
Construction is expected to start next year, with the apartment buildings expected to be completed around the end of 2030 and fully occupied by 2033.Sammy Kogan/The Globe and Mail
Carl Gomez, chief economist with real estate investor Centurion Asset Management, called BOF a lender of last resort or a liquidity lifeline.
“A fund like this can be used to support things that are having problems with funding,” he said.
BOF was formed in 2024 to invest with private investors in infrastructure deemed critical for the province.
The Ontario and federal governments have also introduced other measures to backstop the new-home industry. They are providing an HST rebate to purchasers of new homes in the province and funding to reduce hefty development charges that cities impose on developers to help build out infrastructure to new homes.