Making Toronto Real Estate More Affordable

Written By: Jim Adair
Thursday, January 29, 2015

A lot of people who live in the Greater Toronto Area GTA have made big money from their real estate investments during the last decade. Resale prices have doubled since 2002, with an average increase of six per cent per year. Dozens of new condominium buildings were constructed in recent years and its estimated that as much as one-quarter of Torontos job creation during the last 10 years is a result of the housing boom.

But a report by Derek Burleton and Diana Petramala at TD Economics says the boom is creating serious housing affordability problems "for a growing share of middle->

Detached and semi-detached home prices have soared on the resale market, with demand far outstripping demand. In the new home market in 2014, the gap between low-rise and high-rise housing reached a record-setting 251,337.

The building industry says the reason for soaring prices is easy to pinpoint: the Ontario governments land-use policies.

"The desire to curb sprawl and encourage intensification has lead to the continued condominium boomspiking home prices and a widening price gap between low-rise and high-rise housing product," says George Carras, president of Realnet Canada.

"Constrained land supply and outdated land-use policies have exponentially increased the cost of property and new homes," says Brian Tuckey, president and CEO of the Building Industry and Land Development Association. "The cost of a new home in the GTA has doubled in the last decade."

Tuckey says his organization "has long advocated for the need to build new infrastructure to accommodate growth, as well as the importance of developing a fair and reasonable infrastructure-funding strategy -- one that doesnt ask new home buyers to pay more for things that will be used by generations of residents to come."

But Jennifer Keesmaat, chief planner of the City of Toronto, says, "The cost of building a new house has not increased more rapidly in Toronto than in other major Canadian cities, despite the existence of one of the worlds largest greenbelts. In fact, I would argue that greenbelts and other measures to restrict the outward growth of Canadian cities are essential and fiscally responsible policy tools, since they result in higher densities that make more efficient use of infrastructure investments."

Both sides of the argument offer recent studies to back their claims. Wendell Coxs study for the Frontier Centre for Public Policy concludes that "urban containment policy leads to a lower standard of living and greater poverty by increasing housing costs >

A 2013 report by RBC and the Pembina Institute counters, "There is no evidence that provincial land-use policies, including the Greenbelt Plan and the Growth Plan for the Greater Golden Horseshoe, restrict housing development and contribute to rising home prices."

It also says there is no shortage of land in the GTA and that "based on municipal projections, 81 per cent of the land available for development will still be unused in 2031." However, it adds that there is a "limited supply of land to build single-family homes in established, location-efficient neighbourhoods where people want to live."

Burleton and Petramala, authors of the TD Economics report, say that "while increased density has been a laudable goal in recent years, it can reasonably be argued that the pendulum has swung too far in favour of condo units that are typically tailored for shorter-term living. It raises the question of how the GTA will accommodate the future changing housing needs of both the echo generation who will begin families as well as the growing population of seniors."

They say housing policies "appear to be falling well short in achieving a balance between affordability, environmental protection and smart land-use decisions." They advocate policies that will bring down the cost of housing and speed up delivery; property tax systems that dont favour single-detached homes over multi-unit properties; a review of development fees; and "greater regional co-ordination and synergies" across the three levels of government, not-for-profits, private developers and the investment community.

The authors say that rising real estate prices have encouraged public and private institutions to hoard land that could be developed. They say some countries have tax exemptions for land used for development and impose an idle tax on land that is held. "There are also opportunities to supply public lands at below market price for the construction of affordable housing."

All sides in the debate agree that government needs to find a way to build more public transit and improve existing systems.

Meanwhile, Toronto housing was ranked the 10th least affordable major market in the world in the 11th Annual Demographia International Housing Affordability Survey, ranking it ahead of New York, Miami, Singapore and Tokyo.

Copyright© 2024 Realty Times®. All Rights Reserved