As Canada’s population grows, the price for housing continues to increase in the country’s major urban centres.
According to the Ministry Of Finance, in Ontario alone the population is projected to grow by 30.1 per cent over the next 26 years with the GTA the fastest growing region in the province. Population there is expected to increase by more than 2.8 million, reaching nearly 9.5 million by 2041.
With more people moving to cities home prices are expected to increase. In addition to population growth the rise in prices is being amplified by a lack of supply. Just what is causing this dearth is a hotly debated issue.
Some people have pointed to foreign investors swooping in to buy up all the real estate, a theory which has led to the implementation of a foreign buyers tax in Vancouver. British Columbia’s Liberal Party brought in the tax in an attempt to cool the market, but it’s largely too soon to tell whether there has been an impact on home affordability. Officials in Toronto are watching closely, but others believe the problem stems from elsewhere.
Toronto Sign
“People want to come to Toronto and the number of people has increased, but the number of potential housing has not increased at the same rate,” says Richard Silver, Sotheby’s International Realty.
I think what happens is that Toronto is fairly fixed in its ability to grow in size because of the moraine at the top and the lake at the bottom. But I think it has more to do with the fact that there is land and there’s potential for land but there’s a lot of government restrictions on it.
Writing for the Globe and Mail, Brian Lee Crowley, managing director, and Sean Speer, Munk senior fellow at the Macdonald-Laurier Institute, point to past and present governmental policies for causing the dwindling housing supply:
Present policies such as green belts and land reserves, exclusionary zoning and obstructive building and construction regulations are directly or indirectly designed to manage the housing supply – including the types of homes that are constructed. One can debate the utility of these ‘urban containment strategies,’ but it’s not debatable that they’re making homeownership more difficult, rather than easier.
They point to research done by Harvard economist Edward Glaeser, which “has shown that restrictive land-use regulations are a major impediment to housing supply and in turn drive up prices.”
It’s a sentiment that Silver echoes, pointing out certain “sacred cows” like schools and churches that seem to defy development.
They were complaining today about Don Bosco School in Etobicoke having 90 people in the school where it used to have a thousand. So why have you got a school sitting there with 90 people, can’t that 90 be moved into another school and that property be developed on?
Dundas Square
In their article, Crowley and Speer argue that the federal government should use spending programs to encourage provinces and municipalities to liberalize reforms to restrictive zoning and housing regulations. But for young buyers it may be a matter of shifting expectations. As Silver points out, Toronto is Canada’s Manhattan, a city where the idea of homeownership is distant at best.
It’s a matter of expectations. Is the Canadian dream to own or is the Canadian dream to live in a country that has a lot of freedom and stuff like that? Is it imperative that we assume that everyone just has to own a house? Is that the Canadian dream or can the Canadian dream be renting?
The numbers support this. These days, as Crowley and Speer point out, median households need to dedicate 71.7 per cent of their pretax earnings to own a single-family detached house in Toronto. In Vancouver the number is even higher.
So if foreign buyers aren’t the root cause of the hot housing market, what is the purpose of a foreign buyer’s tax? Silver believes the endeavour is concerning.
I don’t like what it says. We’ve always been the home of foreign buyers and we’ve always been the place where people want to come to and I think it’s a bit of a slap in the face for anybody who wants to move here.
He believes a tax on properties left vacant would be more useful. These are buildings that remain unoccupied but still draw on services. Regardless of how expensive housing gets, he says foreign buyers are something Canadians need to get used to.
China has three times the population or four times the population of Canada and the United States, they have the ability to travel, and to move outside of China and so they’re doing it. So are we going to be receptive and welcoming the way we have been for groups from England and Europe and other parts, or are we going to close our doors because it’s someone from China?
Silver finds this discriminating:
It’s very disappointing to me. My family is pretty diverse and I’ve always been about diversity. I fought for it for years and the fact that we’re trying to segment one group, even though we’re not saying it’s one group, is disappointing to me.
