It’s no secret that Toronto has a housing supply and demand problem that has caused prices to surge. As the country’s top finance and tech hub bustling with top entertainment and cultural shops and restaurants, it’s no surprise that Toronto is a popular place to live. The only problem is that buyers have far fewer homes to choose from as properties get snatched up as soon as they enter the market. But what has caused this Toronto housing shortage? Here are several factors that contributed to the housing crisis in the city today.
The 2006 Growth Plan
One of the reasons why Toronto currently has a housing shortage is because of the ambitious Growth Plan the province put in place in 2006. This plan pushed for more multi-family housing units in designated urban zones and cracked down on growth in protected areas and on heritage sites. This resulted in less detached homes being built and favoured more condo development projects downtown. This eventually resulted in a demand crisis as families struggled to find homes to suit their needs and developers couldn’t find land to build more property.
Toronto is one of the biggest multi-cultural cities in the world. It welcomes hundreds of thousands of immigrants every single year with open arms. However, many of these new Canadians prefer to remain in the city where established communities of their nationality exist, instead of moving to areas outside. While it is 100% reasonable to want to live in a neighbourhood of your culture and religion, there is only so much space, and new developments are rare in heritage districts like Greektown. This also contributes to the strain placed on housing as new citizens look to occupy homes in the city.
With interest rates remaining low, it has been easy for people to obtain a low rate mortgage to purchase a home. This has allowed more people to be able to afford to buy a home in Toronto who otherwise would have had to look elsewhere.
Another factor that has contributed to the Toronto housing shortage is foreign investment. Chinese and American capital has consistently flowed into the city, creating further supply issues. To curb foreign spending, the government put in place strict lending rules and a Foreign Buyer’s tax. However, this has not done much to reverse the effects as wealthy business developers from overseas are still investing heavily in real estate in Toronto and the GTA.
According to a survey conducted by the Fraser Institute in 2016, Toronto is the country’s most highly regulated city. It found that the city has the highest compliance costs, and double the approval times of other major centers. High regulations do not make the home buying process easier and may prevent families from obtaining a home they were after.
It’s expensive to develop land in Toronto. This is a problem, especially when new condo prices are influenced by land prices and government fees. If land costs continue to rise and building materials continue to remain under pressure due to tariffs, then fewer condos will be built and many developments will be cancelled.
If you’ve found a home or condo to move into, be sure to hire a lawyer to help you navigate through the entire process. At Accord Law, our expert real estate law team will ensure that all your rights are protected, especially if you purchase a pre-build. Contact us today!