Less mobility, fewer housing options available to people in various income brackets

CBC News

A decade-long housing boom that brought considerable economic benefits to the GTA belies a number of problems in the marketplace, including less affordability for more people, according to a TD Economics report released Monday.

While about one quarter of the city’s new jobs created over the past ten years can be credited to the housing boom, certain dynamics have resulted in less affordability for a growing number of people and a drastic decrease in the diversity of housing options.

Comment: That is a stretch. What jobs are “connected” to housing? Realtors, mortgage brokers, construction workers? Sure. Someone working at IKEA selling furniture to someone who just bought a new condo? Not so much.

Construction of condo units has skyrocketed while other forms of housing has remained stagnant, presenting a potentially serious economic quagmire when the boom inevitably ends since condos are generally considered lower quality housing stock than, for example, semi-detached homes.

Comment: But the boom will not “inevitably end”, there is no reason for that to happen. Who considers condos lower quality? That is a HUGE assumption you are making. To many people, a condo downtown is much more desirable than a 20-year-old house in Ajax or Brampton. Condos are skyrocketing exactly because more people want them over new houses in the 905.

“A healthy economy should have a good degree of mobility and a good degree of housing choices,” said deputy chief economist and vice-president at TD Bank Derek Burleton in an interview with CBC’s Metro Morning on Monday.

Comment: And we do! From renting basement apartments to apartment buildings to privately-owned condos. You can buy small condos for $250,000 downtown, larger ones for the same price in Etobicoke, to larger ones downtown for $400,000-1,000,000 and up. You can buy fixer-upper houses for under $400,000 in non-trendy areas, up to $600-800,000 for decent homes in popular areas. Up to $1,000,000 and more for bigger and better homes and neighbourhoods. Go to the 905 and you have options ranging from $300,000 townhouses up to $900,000 4,000sf houses with big lots. From $600/month basement studio rentals up to $2,000,000 mansions – Toronto has an incredible array of housing options.

“What we’ve seen in the past ten years is this affordability challenge has spread to the middle class and even to other, higher income levels,” says Burleton.

Few options for home buyers

More young people, including those with children, are buying condos in the GTA. Their ability to eventually move into a larger property, however, is impeded by soaring costs for units other than small downtown units and a lack of reasonably-priced alternatives.

Comment: All properties are rising in price. Condos rose 5.4% in December, condos are also rising in value. Maybe not as much as low-rise, but they do go up.

“The leap into home ownership is becoming more difficult, and those that have purchased condos as starter homes will face limited flexibility in moving up given rising housing costs,” the report reads.

The shift towards housing “typically tailored for shorter-term living,” said the report, is mainly because condos are more attractive to investors in terms of returns and risk, and because a host of government regulations prevents many developers from pursuing other options.

Comment: None of that is really true. It is just opinion.

The trend towards condo construction is striking. According the report, “condominiums accounted for over 40% of all new homes built in the late 1990s, while more recently the share of condos under construction has jumped to 80%, half of which are being built in the downtown core.”

Comment: Yes, because of a fundamental shift in housing preferences. People don’t want suburban homes as much as they used to. They want convenience and proximity. Plus condos are more affordable.

The lack of affordable options for residents looking to buy townhouses or detached homes is pushing more people to the rental market, which is also seeing soaring costs. Nearly half of household income for earners in the bottom 40% goes towards rent, the report found.

Comment: What about the upper 60%? Sounds like they cherry-picked a segment to make their point more exaggerated. Why not the bottom 50%? Why 40%? Spin at its best, my friends.

Renters taking a hit, too

The only reasonable option available for many residents is renting a condominium. Over the past ten years, nearly all of the region’s new rental supply has been supplied by condos, the report said, and about 40% of condos currently being built will be used as rental units.

Comment: Or rent a unit in a house, or a basement apartment, or a unit in an apartment building. There are many, many options out there for renters. But yes, almost all of the new rental units are being provided by privately-owned condos. And there is NO WAY that 40% of new units are meant for rentals. That is a completely baseless assumption, a number they simply pulled out of thin air. The truth is, no one knows. The most accurate measurement is from the CMHC, which actually made an attempt to find out the numbers. They say that 4.3% of downtown condos are owned by foreign investors. Assume the same number of local owners – with both sets buying to rent out – and you get a figure of 8.6%. That is FAR LESS than 40%. And has some basis in reality and actual fact.

While a lack of low-income rental units remains a striking problem, “a greater share of the rental market is likely to be driven by medium-to-higher earning households,” the report said.

Comment: Again, it is supply and demand. With a vacancy rate under 2%, there is a very strong demand for available rental units. It is this constant pressure and high demand that keeps pushing rents up. If demand slacked and supply increased, we might see rents ease. But not in the current situation. It is not good for low-income groups, but it is the way the market works, unfortunately. Try renting in NYC… that is MUCH worse.

Among other recommendations that include easing regulations on landlords looking to rent property, Burleton said the GTA’s staggering lack of regional transit is exasperating the problems.

“Transit is key … Transit system helps to direct residents to where land costs might be a little bit cheaper, for example. It’s not so much about building along corridors as it is about building more transit corridors.”

If these problems aren’t addressed by governments and private developers in coming years, the consequences will be significant.

“The concern is quality of life … if we don’t start to address these needs then we’re not going to be able to sustain the quality of life and standard of living that we have,” said Burleton.

Comment: Amen, I totally agree.

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Contact Laurin Jeffrey for more information – 416-388-1960

Laurin Jeffrey is a Toronto real estate agent with Century 21 Regal Realty.
He did not write these articles, he just reproduces them here for people who
are interested in Toronto real estate. He does not work for any builders.
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