Is the GTA Lacking Affordability and Diversity in Housing?

A recent TD Economics report on housing in the GTA has outlined a number of challenges that need to be overcome in order for the region to remain viable economically, socially and environmentally secure.

In many aspects, the report is in keeping with the recent election platforms that touched on the need for housing affordability and diversity, and transportation improvements. It points out that the housing boom has been going on in the region for about a decade as more people follow employment and decide to live closer to their jobs rather than commute from where housing is cheaper.

This has created a kind of two-tiered region, which is really what the past two municipal elections have pointed out in the way the population voted and how the outcome was viewed by the different camps.

The report touches on deteriorating affordability, noting that the rental market has always been hardest hit by inflationary forces that often grow faster than the income of those who need affordable housing. It says that renting costs have traditionally accounted for roughly 50% of income; however, the report also points out that higher incomes are also now being touched by lack of affordability as home and land prices rise and government restrictions slow down the rate of new developments.

And those new developments are taking the shape of downtown multi-residential units that are decreasing in size or single detached homes in the suburbs, which the report says flies in the face of the push for densification. The diminishing size of condominiums and their rising prices have increased the demand for townhouses and detached homes, which is pushing residents out of the downtown core that desperately needs to attract them.

And as residents push outwards from where their jobs are, it also highlights deficiencies in the transportation system — public transit doesn’t effectively accommodate the commutes of people outside the city core and road infrastructure can’t handle the volume of traffic — and policies are exacerbating the problems, rather than alleviating them.

For example, the report points out that new high-rise developments in the City of Toronto are required to allot a certain square footage for parking; yet, many of the new condominium developments are on or near the existing public transportation network and are inhabited by people who don’t own vehicles. In other words, it is not cost-effective to mandate setting aside space that is rarely (if ever) used.

And there are the construction policies that slow down the rate of development due to a lengthy, onerous process for approval that sometimes requires input from various government departments. Other regulations on developments make it easier to construct single-occupancy properties over multi-unit buildings, and some jurisdictions actually make it costlier to build one-bedroom units over those with more bedrooms.

The report puts forth several calls to action, including governments at all three levels working more closely together to create an environment where development is sped up, costs are brought down and the economics of building a variety of housing types to suit the varying needs of the city’s residents are strived toward and realized.

It calls on the different levels of government to work together to move residents around better, either through upgraded public transportation or improved road infrastructure so that lands outside the city core, which are less costly to build on, can be developed in a matter of ways to take all housing needs into account.

Perhaps the biggest conclusion the report came to, however, was the need for the GTA to start governing like a regional municipality to collaboratively address the present issues of deteriorating affordability, diversity of housing and a weak transportation system.

The TD Economics report was prepared by Derek Burleton, VP & Deputy Chief Economist, and Economist Diana Petramala.