You’ve likely re-evaluated your housing situation at least once during the COVID-19 pandemic, and no wonder; the lockdowns and social distancing mandates across the GTA and Canada-wide meant that people were home more than usual. Because of the hyper-focus on housing, it’s more apparent than ever that we need more available housing supply – to the point where Canada’s major political parties all address it in their platforms in the current 2021 Federal Election .
But, what’s the best way to create that supply? TRREB Chief Market Analyst Jason Mercer sat down with TRREB President Kevin Crigger to discuss three challenges on a recent episode of the Ready to Real Estate Podcast .
Challenge #1: Coordination between levels of government
Developing housing, from proposals and permits to breaking ground and construction, is usually a five-year process. Unfortunately, most Canadian electoral terms are shorter than this time frame, and we see a lot of short-term solutions to addressing supply issues as a result. We’re fortunate that the current federal candidates are tuned into the need for increased housing supply, and all the parties have policy objectives aimed towards making that happen. What’s especially needed is a coordinated effort between all three levels of government – incentivizing municipal governments to cut down on red tape and speed things along.
Challenge #2: Barriers to building missing middle housing
In a previous episode of Ready to Real Estate , Jason spoke with Toronto City Councillor Brad Bradford about pilot initiatives to encourage the development of missing middle housing. During their conversation, it was revealed that almost the same hoops must be jumped through for a 50-unit condo as a fourplex – so developers are much more likely to build the former.
Kevin backs this up with a personal anecdote: he was working on a rental property, hoping to convert a single-family home into three separate suites. The significant approval costs for the third suite were such that it would take much too long to recoup that investment – and the third suite, by extension, wasn’t built. If we don’t ease approval costs, we lose out on units of housing that would have otherwise benefitted both the homeowner and prospective tenants.
Challenge #3: Real estate as a revenue tool
Approval costs for redevelopment are one form of city revenue derived from real estate. Another is the land transfer tax. Toronto buyers pay two land transfer taxes – municipal and provincial – making it hard to convince people to right-size and get into housing that best meets their needs. In other cities, the natural progression for downsizing is from a family home, to a smaller home, and eventually to a condo. Each move means an equity loss through the land transfer taxes, causing a trend in the GTA to hold onto the family home for much longer, even if the residents are empty nesters. This trend is corroborated through the growth of empty bedrooms in Toronto as shown in studies conducted by both the city and TRREB. Empty bedrooms are a useful statistic in gauging how many families are in the right size house for their needs – too many empty bedrooms, and there’s a missing link in the housing supply chain.
It’s critical that the GTA, and Canada as a whole, address the housing supply issue – if we’re seeing a supply crisis domestically during the COVID-19 pandemic, imagine what might come when immigration resumes. Looking at the challenges above is a great way to start, as is listening to the full episode for Kevin’s and Jason’s proposed solutions.