Recently, the Toronto housing crisis has been pathetic. Not only it is expensive, but it is also tedious and soul-crushing. Residents find it too difficult to find a place that isn’t terrible. As the current trend is, the problem could get much worse. The home prices in the Greater Toronto Area continued to recede.
There have been measures taken to cool one of the hottest markets in North America. Builders are doing that extra bit to get people to purchase. Builders who are trying to sell pricier homes have had a greater fear when it comes to finding a buyer. But what is the reason behind the Toronto housing crisis? Explore it in detail.
1. Low Supply of Homes
The report which was authorized by the Canadian Urban Institute, City of Toronto and Canadian Centre of Economic Analysis confirmed that the supply of low rental homes in Toronto is fairly less. There is a waiting time for social housing, which is at five to seven years. Especially when the condition of temporary housing is quite unlivable, the wait seems like an eternity.
2. Affordability Remains at a Crisis Level
As per the RBC Economics Research, the affordable housing situation is at its worst crisis. RCB Economics Research has been keeping a track on the price of owning a house at market value throughout Canada.
The report of 2019 stated that owning a house for many people in Toronto is difficult despite the cooling of the Toronto housing market. A measure of 66.1% of Toronto faces difficulty due to affordable housing issues.
Due to some effective cooling measures taken by the government, the home prices did see a dip near the end of 2018. This fall was after multiple years of a continuous high throughout Toronto. The dip was mainly due to stricter federal mortgage lending guidelines as well as the Fair Housing Plan of Ontario. This is majorly for detached homes in Toronto.
The average rents for Toronto homes are at $2385 per month. The city has one of the lowest vacancy rates at 0.5%. Tenants are willing to do almost anything to secure a roof where they don’t have to pay the rent in advance or answer multiple personality questions. There is an affordable housing lottery that saw over 4000 entrants come for apartment viewing for just 75 units.
Multiple people are now living on the streets or shelters or simply couch-surfing from one person’s home to another. People are suggesting that this is mainly due to income being just above the poverty line. In a market that is priced out, it is becoming more and more difficult for people to afford the houses that are currently being built.
3. Growth of Population
Even though the city is quite big, the population of Toronto is increasing every year. (1) Pretty soon, the housing solutions and supply will not be enough to cater to everyone’s needs.
Another report by Ryerson University’s Centre for Urban Research and Land Development claimed that the city of Toronto was the fastest rising in Canada and the states. Moreover, the difference was huge. Around July 2018, the reports claimed that the population of Toronto had 77,000 more residents compared to July 2017.
Compared to other municipalities, this was more than three times making Toronto the fastest growing central city. Toronto is a market that is a magnet for young and mobile talent. In a year between Q1 2018 to Q1 2019. The housing starts fell by more than 28%. This was as per the report from the Canada Mortgage and Housing Corporation (CMHC). In Toronto, the new and affordable buildings are down by 24%.
Home prices have been on a drastic high, which was mainly due to the steady demand and lack of affordable houses in the region of Greater Toronto Area. This meant that only the buyers who had quite a high income were able to afford houses in Toronto.
Reports have claimed that people will start to double and even triple up on housing. This would make most of the houses multi-generational.
4. Prices Continue to Soar High
The experts of the real estate market say that the provincial measures had an impact on the Toronto real estate market and cooled it down a little. Being one of the most happening housing markets of North America, cooling it down was a little essential to ensure stability in the longer run.
There was a price hike observed in the pricing of the condos about a couple of years back, which resulted in an immediate effect on the Toronto real estate market. In 2017, when the government of the region levied a tax of 15% on foreign buyers, the drop was more significant. But, this, in turn, helped in stabilizing the market.
Another factor for the deterioration in housing activities was a result of the psychology of people in Toronto. There can a state when the potential homebuyers and investors waited on the sidelines to observe the market conditions, waiting for them to evolve sooner.
Since 2017, the Toronto housing crisis has witnessed quite a lot of improvements, and the market is stabilized and has listings of housing supply that are way better and attractive for the homebuyers in Toronto.
You can learn more about the price increase here.
5. Decrease in Rental Units
In 2018, all over the Greater Toronto Area, there was a vacancy rate of 1.2% and the average rent was at $1359 per month. Some of the Human Rights Code was violated as well, and this stopped people from purchasing apartments that they were able to get their hands on.
An Analysis of the Toronto Housing Market was published in January 2019. It claimed that especially the middle-income residents of Toronto were being priced out due to the expensive market were prices were soaring high.
There was quite a significant fall in new rental units that were under development. The trend was that investors would rent out their condos. Over the last few years, there has been a trend where about 100,000 units were completed for residents. However, only 5,500 units were built for middle-income residents. Developers have come into the business where money making is their priority and not on providing affordable housing.
Toronto Housing Crisis: Proposed Solution
Doug Ford, the premier of Ontario, believes that the housing shortages in Toronto can be curbed with smart decisions. The ministry had
started taking efforts over a couple of years back by adding around 10,000 housing options immediately. This effort was to bring the supply of houses a little closer to the demand. (2)
The mortgage stress tests were also observed to have created a strong effect on the housing conditions in Toronto. As per the stats that were analyzed in the year 2018, GTA requires over 50,000 newer units per year to match up with the housing demand. However, only 40,000 units were actually being supplied.
The ministry of Canada believes that infrastructural delays in building and fixing sewers, highways, etc. also impacted the supply side of the Toronto housing market. If stalled sewers can be fixed and maintained timely, more focus can be given to meet the rising housing demand of Toronto.
The issue in our view for the sharp rise in prices and the affordability issue fundamentally is the supply side not being able to adjust quickly enough to demand. – Robert Hogue, Senior economist at RBC Capital Markets
What’s Next for Toronto’s Housing Market?
Observing past trends as well as the growth and development in Toronto’s housing market, the crisis has already improved a little over a period. However, there is still a lot more to be looked into. And, the undeniable, affordability crisis is a major issue that needs to be tackled. There are plenty of housing options available for higher prices which aren’t affordable for all, and thus, there is a shortage in the supply of affordable options for the public.
It is also believed that the public needs to get housing options at viable pricing as it is a part of Human Rights. The market is constantly on the go and is coming up with newer opportunities and solutions to meet Toronto’s housing demands. The market will stabilize more in the coming years.
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1. Ontario Ministry of Finance, Ontario Population Projections Update, 2017–2041, retrieved from https://www.fin.gov.on.ca/en/economy/demographics/projections/
2. Chris Fournier, Bloomberg News, Doug Ford’s fix for Toronto housing crisis is easy: Build more homes, retrieved from https://www.bnnbloomberg.ca/ford-s-fix-for-toronto-housing-crisis-is-easy-build-more-homes-1.1204897