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Deteriorating affordability is impacting Greater Toronto Area (GTA) renters and homeowners alike and the region’s transit systems are proving to be woefully inadequate in accommodating the ongoing population explosions in both the 905 region and city core.
These were two key points made in TD Economics’ new report on the effects of the long-lasting housing boom in the GTA.
The housing boom, which the report noted has lasted more than 10 years, has had a massive positive impact on the GTA job market. According to the report, one-quarter of job creation in the city over the past 10 years has been a result of direct and indirect effects of the housing boom.
“[T]here are two sides to every coin,” wrote the report’s authors, TD economists Derek Burleton and Diana Petramala.
“The strength has concealed some growing challenges that have been percolating under the surface.”
Beyond deteriorating affordability and transit infrastructure that has not kept pace with population growth, Petramala and Burleton identified shrinking diversity of housing stock available to GTA homeowners and renters as a major problem facing the region.
The two economists argue that incentives for residential developers to focus on building condo towers and reduce unit sizes has resulted in large price spikes for townhouses and single-detached homes throughout the GTA.
Indeed, according to the latest Toronto Real Estate Board figures, the average sale price of a detached homes in the City of Toronto was $934,039 while condos in the city sold for an average of $387,612.
“While increased densification has been a laudable goal of the provincial and municipal governments in recent years, it can reasonably be argued that the pendulum has swung too far in favour of units that are typically tailored for shorter-term living,” wrote Petramala and Burleton.
The report also comes down hard on transit investment made in recent years, calling progress to construct a regional transportation system for the 21st century “slow.”
While many organizations monitoring the GTA housing market have predicted sales and price growth will moderate through 2015 and 2016, those who expect a calmer market to relieve affordability issues may be disappointed.
Petramala and Burleton wrote that relief will be “modest at best,” pointing to continued strong household formation moderating any anticipated price cool down, an influx of 60,000 condo units further shrinking housing diversity and an ongoing tightening in the rental market as renting becomes a more popular option for Torontonians.
That being said, the report made several recommendations to policymakers on ways to alleviate the issues facing the GTA housing market. Here are a few of the highlights below:
- Look for more opportunities to strengthen and better align housing policies. Curb unnecessary costs imposed on developers and shorten the building permit approvals. “More efforts should be made to tie building permit approvals based on demographic need,” said the report.
- Ease rent regulations and look to other cities, particularly New York, while considering other models.
- Unlock cheaper land throughout the GTA. Take better advantage of infill development opportunities and speed up process of selling surplus land when it is unlocked.
- “An underdeveloped transit system has become one of the most pressing issues facing the GTA economy,” the report said. The Ontario government must focus on building up existing transit corridors and creating new transit corridors.
- Low-income housing needs must be addressed “either through incentives to increase the supply of lower-cost housing or through targeted income support.” Government subsidies are required and Petramala and Burleton hope to see the federal government assume a larger role in the space.