If you're finding it challenging to navigate the housing market in Toronto, you're certainly not alone.
Toronto is currently facing a severe housing crisis marked by a chronic shortage of affordable housing, escalating home prices, and an increasing gap between housing supply and population growth. In this article, we’ll break down the main factors contributing to the crisis and look at potential solutions on the horizon.
Join me as we delve into the top five contributing factors, shedding light on the complexities of Toronto's housing landscape and exploring potential solutions to address this pressing issue.
Quick Summary
- Toronto's population is rapidly increasing, with the city experiencing the fastest population growth in Canada and the United States.
- More flexibility in house prices and a comprehensive review of the housing strategy by the city council are needed to restore balance.
- According to RBC Economics Research, the lack of affordable housing in Toronto is at its worst. The average share of household income needed to cover ownership costs is 66.1%.
- The GTA requires over 50,000 new units per year to meet demand, but only 40,000 new units are being supplied, creating a shortage of 10,000 units.
1. Low Supply Of New Homes
Toronto’s new housing supply has not kept pace with demand, with the Greater Toronto Area (GTA) facing a significant shortage of new developments. The number of development applications has fallen from 2,482 in 2021 to only 1,225 in 2023, representing a decrease of over 50%.
When the condition of temporary housing is of a poor standard, the wait for social housing seems like an eternity. So, there is definitely room for improvement from the city council when it comes to the local housing strategy.
Comparison of the number of new development applications in the GTA from 2021 to 2023:
Year | Number of Applications |
---|---|
2021 | 2,482 |
2022 | 2,187 |
2023 | 1,225 |
In addition, the GTA requires over 50,000 new units annually to meet growing demand, but only around 40,000 new units have been completed each year, resulting in an annual shortfall of 10,000 units. This shortfall compounds over time, putting significant pressure on the existing housing market and creating a supply deficit.
2. Affordability Remains at a Crisis Level
Affordability is one of the most critical issues for Toronto residents.
In high-cost areas, the average household allocates about 66.1% of their income to cover homeownership costs, a figure well above the recommended 30% for housing affordability.
As property values increase, renters and homeowners alike are feeling the financial strain, with many seeing rent increases of up to $1,000 per month.
Finding a rental property in today's market is challenging. Nevertheless, for many individuals, renting is the sole path to progress in Toronto.
The average rent for a home in Toronto is $2,385 per month. According to Glassdoor the average salary in Toronto is $63,000. Given the average rent would take up almost 50 per cent of the average income, it's clear that there's a definite lack of affordable housing in Toronto.
Yet, despite this, the city has one of the lowest vacancy rates at 0.5%. Tenants are willing to do almost anything to secure real estate where they don't have to pay the rent in advance - or answer multiple personality questions. In addition, there is an affordable housing lottery. Over 4,000 people recently turned up for an apartment viewing that had just 75 units.
3. Growth Of Population
The population of Toronto is increasing every year [1]. The housing supply in the city is already not enough to cater to the number of people in need of a property. It's especially true when considering the number of young adults looking to start living on their own.
A report by Ryerson University's Centre for Urban Research and Land Development claimed that the city of Toronto had the fastest-rising population in Canada and the states. The difference was huge, with 77,000 more residents living in Toronto in July 2018 compared with the same time 12 months previously.
As a result, Toronto is the fastest-growing central city. Toronto is a market that is a magnet for young and mobile talent. Despite this, the construction of new and affordable buildings is down by 24%.
4. Prices Continue To Soar High
With high demand and limited supply, Toronto’s housing prices continue to rise, impacting both the rental and purchasing markets. Homebuyers are now faced with escalating property prices and rising interest rates, which have created barriers to homeownership for many.
This sustained increase in prices is deterring potential buyers and contributing to a competitive and high-priced rental market, where tenants face steep rent hikes and limited options.
You can learn more about the price increase here.
5. A Decrease In Rental Units
Toronto’s rental vacancy rate is one of the lowest in Canada, at around 0.5%.
This low vacancy rate has created a highly competitive rental market, pushing up rent prices and contributing to an increase in homelessness and precarious housing conditions.
Those unable to secure stable housing may face housing insecurity or be forced to seek shelter solutions that are less stable or more temporary.
A Proposed Solution To The Crisis
To address the housing crisis, experts emphasize the need for government intervention. Immediate actions being considered include:
- Accelerating Development Approvals: Streamlining and reducing approval times for new developments, which currently average 20 months, could alleviate some of the supply shortages. High municipal fees and lengthy delays add $43,000 to $90,000 to the cost of each new home, pushing prices up and creating barriers for developers.
- Reducing Municipal Fees: Lowering municipal fees on new developments can make housing projects more viable, ultimately passing savings on to future homeowners or tenants.
On a national level, the Canadian government has introduced the National Housing Strategy (NHS), pledging $55 billion over 10 years to increase the availability of affordable housing. This initiative includes financing programs for affordable housing projects and policy measures to support housing accessibility.
What's Next for Toronto's Housing Market?
Toronto’s housing crisis is complex and multifaceted, with no single solution. The situation underscores the need for collaboration among government entities, developers, and community organizations. As the population continues to grow, the demand for housing will only intensify. Without substantial intervention, the affordability crisis and housing shortages are likely to worsen.
To keep up with future demand, the GTA must not only increase its annual housing output but also ensure that a portion of new developments are affordable. Ongoing efforts to address the affordability crisis and expand affordable housing supply will be essential to stabilizing Toronto’s housing market and supporting its diverse population.
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References:
- https://www.fin.gov.on.ca/en/economy/demographics/projections/