Will Toronto remain unfazed by the new mortgage rules?

The new stress-testing mortgage rules mean Canadians need higher incomes to purchase homes. According to a video produced by Huffington Post, your household income needs to be approximately $144,946 to afford an average priced home in the GTA ($755,755), which is 24.93% higher than before. According to Statistics Canada, the average median income for a household in Toronto is just over $75,000.

In Vancouver, where an average income of $121,080 was required pre-changes, a house priced at $864,566 will now require an income of $154,003, up 27.19%. The news is similar, if not quite as alarming in scope, in less crazy markets: in Edmonton, for a home worth $373,926, the household needs to bring in $74,477, a 24.35% jump over the previous $59,892.

All that said, the rules haven’t done much so far to slow the market. In November, the city’s average home price was up 22.7% over the year prior, with single detached up the most, 32.3% to $1.35 million. In the 905, homes jumped 25.5% and are nearing the $1 million mark.

Soaring prices have sent many a first-time buyer to the condo market, but if you’re one of them, you’re going to want to act fast. Condo prices in Toronto jumped 13.5% to $471,256 in November, which puts it just within reach of a household with an average income of $75,000, and that’s with $50,000 down. (The average condo in the 905 was up 18.9% over last November, to $374,792.)

It’s a pretty sharp disconnect for millennials, two-thirds of whom, in a Bank of Montreal survey released last spring, said they expected to buy a home in the GTA.

In last week’s column, I mused about pursuing less obvious homeownership options, but some are still bound and determined to own in the GTA. So what’s a would-be buyer to do? Or rather, what’s a would-be buyer without rich parents and an income double the median to do?

The Toronto Real Estate Board (TREB) and Building Industry and Land Development Association (BILD) (among many others) put the blame for soaring prices more on a lack of supply than an increase in demand. The combination of density requirements and development restrictions is conspiring, they say, to make it nearly impossible to keep up with demand.

That means that instead of anticipating a day when prices come down (which current homeowners obviously don’t want anyway), the answer is on the other side of the equation — free up more land for development. Once supply at least begins to address demand, prices will regulate themselves a little more reasonably. As individuals, we need to do our research, get informed, and demand transparency from our elected officials.

In October, a brouhaha ensued when the government included Ontario Place lands in Bill 27, the Burden Reduction Act, and then said they had no intention of selling them. The omnibus bill would allow disposal of “land, buildings and structures, or any interest in land, buildings and structures, by sale, lease or otherwise.” The former tourist attraction had seen visitors plummet in recent years from a high of 3 million annually to about a 10th of that when it was shut down in 2012.

A report the same year, headed by John Tory, said it needed a mix of condos and businesses to stay afloat, but Premier Wynne promised in the last election that condos were not in its future. When questioned in October, even Liberal MPP Eleanor McMahon said she couldn’t explain why Ontario Place was in the bill if there were no plans to sell it. If the Liberals are on the up and up and there are no plans to sell the land, the bill would still allow a future government to do so. (You can find out about plans for crown land on the Ontario.ca website’s crown land use policy atlas.)

Zoning bylaws in general aren’t keeping up with demand that can be addressed through densification. North York, for example, is still governed by bylaws that were developed in the 1950s that allow for the development of only single-family detached homes. More than half the city is in fact zoned for single-family detached homes, according to BILD. Remember that the population of Toronto in 1950 was just over one million. Those out-of-date bylaws also lengthen the approval process, which costs builders money, which is passed on to buyers. A study by the Ontario Association of Architects found that every month of delay on a project costs a buyer $2,375.

Municipalities are required to review their official plans every five years and update their zoning bylaws no later than three years after a revision, says BILD. To help deliver the development we need, this needs to be enforced.  

Community opposition is another major hurdle to updated zoning bylaws. While we may all think Ontario Place is groovy and that high-rises don’t look as pretty as front lawns, the fact is that if we don’t free up more land for development, many of us will continue to be priced out of the market.

A NIMBY attitude is a privilege of the super-rich — the rest of us need real solutions. We can’t in one breath say we want to own a home in the GTA and in the next object to development. And if you’re lucky enough to already own one, have some empathy. To paraphrase an old trope, if you walk on other people on the way up the property ladder, you may find yourself meeting them again on the way down.