The struggle to make Toronto real estate affordable

Brokers and urban planners debate how a home vacancy tax and other efforts to make housing affordable will play out in 2021

2020 has been a very fascinating year when it comes to Toronto real estate. Our housing market reacted in unexpected ways to a global pandemic that hit the economy hard.

Just when you think Toronto house prices couldn’t get any higher, they keep getting higher. There are so many condo units sitting vacant and more being built. All the while, the need for affordable housing gets more urgent.

Time will tell if the vacancy tax the City of Toronto plans to introduce will shake things up in a positive way, and whether immigration will resume, fuelling a post-pandemic housing rush.

One thing is for certain: Demand for housing remains high, but the city needs a greater diversity of housing options while taking environmental concerns into account.

To discuss these issues, we gathered a panel of Toronto real estate experts: two brokers, Odeen Eccleston from WE Realty and Meray Mansour from RE/MAX Hallmark, and two urban planners, Paul Demczak from Batory and Cheryll Case from CP Planning.

Our experts discuss what’s in store for Toronto real estate in 2021, what types of housing should be built and where, and the urban planning and affordability challenges ahead. Watch the whole conversation in the video or read condensed and edited excerpts below.

NOW: The Toronto real estate market seemed to ignore the pandemic as the prices kept going up this year. But at this point, the condo market especially is at this weird standstill. There’s too much supply, not enough demand. We’re seeing an overwhelming amount of listings but the prices are slipping just a little, as if they don’t want to admit that they should be going down.

Meray Mansour: A lot of these condos were purchased by foreign investors. They’re just kind of sitting there. I guess these foreign investors don’t need to sell them. They’re riding the wave of the pandemic. I think that the vacancy tax is going to help that a lot and also increase the supply in the homes as well.

Cheryll Case: We’re dealing with a really complicated system. People invest in land for personal value: a home for their family and/or investing for their future well being. Once you met those two goals, it becomes an ego issue. Your family needs are met. You have enough money for your savings, for a safe and comfortable retirement. Maintaining your house value, not renting at lower or not selling it for longer, becomes an ego thing. And that is actually quite destructive.

Paul Demczak: I want to maybe dial it back. We have this hierarchy of planning. In the late-90s, early-2000s, we were building on average upwards of 30,000 detached units annually. And then around 2005 or 2006, the province introduced a bunch of legislation, including what’s known today as the Ontario Greenbelt. What that basically said is “stop building out and build up.” That number of detached housing units has significantly gone down ever since that that time in 2005 to the point where we’re building way less than 10,000 units annually detached. Right now we’re hovering around five thousand units annually this time of year. And then the condos are trying to make up some of the shortfall in terms of the lack of supply. In my humble opinion, we need to build a lot more. And ideally we’re building more of a mix of housing.

Odeen Eccleston: When things get back to normal, whenever that may be, we’re expecting hundreds of thousands of people and they’re going to need places to stay. They’re going to have to make some revisions to that Greenbelt section to allow developers to essentially build.

NOW: Cheryll, does being able to build more on the Greenbelt jive with environmental development?

CC: No, not at all. The Greenbelt is such a precious space for environmental reasons. Planning is a complex thing. We have to think about the social, the economic and the environmental. From the environmental standpoint, we do so much damage to our planet. So if you develop in the Greenbelt, for example, you’d be you’d be furthering that damage by requiring more travel time between place and work. You’d be doing more damage also because a lot of the neighbourhoods in our cities are designed extremely poorly. If you’re living in a neighbourhood where you have to drive to the grocery store, that’s a neighbourhood that needs more density. You need to be able to have a grocery store within walking distance.

“The amount of work that goes into a seven-unit affordable housing project is the same as a 300-unit condo.”

Urban planner Paul Demczak on the zoning process

PD: We need much more supply. How do you do that within the confines of what is allowed to be developed? How do you actually get more supply where land is limited? It’s challenging to go through the zoning process. For example, I’m working on a more affordable housing site. I think we’re doing seven units on that project. To be candid, the amount of work that goes into a seven-unit affordable housing project is the same as a 300-unit condo. It’s an extremely convoluted process. It’s become more convoluted I would suggest since 2005, in some ways that are good and in other ways that’s challenging for issues like this.

CC: The process is intense. One of my project partners that I work with, they were wanting to build affordable housing in Little Jamaica, which we know is a neighbourhood that is at risk of gentrification. And we were looking at options to redevelop these properties that we have under our ownership. The zoning process and the zoning policy said that you can only build a townhouse.

In some areas, maybe you can build it as affordable. But for this specific case, those townhouses would have to be sold for $1.2 million if built. So not affordable and not what we want.

OE: That’s a great example. Somebody can have the most altruistic and benevolent aspirations to do affordable housing, such as that property owner. Our company was trying to work with him in order to materialize that dream. But the sheer cost of doing business, as you explained, Cheryll, it makes it extremely difficult just to to call them affordable.


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8 responses to “The struggle to make Toronto real estate affordable”

  1. Stop asking important questions about urban planning to developers and real estate agents – there is a keen moral hazard here. They are hugely conflicted in this debate. The notion we would challenge the green belt is preposterous, it is one of the smartest decisions made in toronto/GTA history. Building ‘UP’ is still the answer, just force developers to build reasonable sized units (800-1500 sq feet vs 450-700 which are not livable spaces for real people/families), and force them to ear mark 7-12% of them as affordable (rent controlled or sold to deserving families at discount to market). Let’s be clear, condo development in toronto, at today’s prices will still be hugely profitable for these developers. This is not that difficult a problem to solve conceptually – the hard part is finding politicians and policy makers with courage and competence to execute effectively.

    • Replay to I totally agree with this comment. The Greenbelt should not be up for discussion and the fact that the city has allowed development of buildings that are stacks of unlivable 500sq condo is probably one of the main reasons Toronto is having these issues. I’d also add that the province and federal government should help spread the new comers into other jurisdictions. Canada is vast and while there are many jobs and services in Toronto it is not the only place to find prosperity and those who need affordable housing would find greater financial well being in smaller cities and towns

    • Exactly, the builders and anyone looking to profit from the development of the Greenbelt is all for it of course. Pretty sad when the part of the article that makes some of the most sense is coming from the comments section.

  2. No tax on vacant house is not fair for permanent resident in canada. Who go to work and pain on canadian taxes .and pay rent for foreign people investors who is getting advantage on the vacant house taxes.

  3. Asking Real Estate professionals how to fix a broken housing system is like asking my drug dealer if I should go to rehab or not. It’s a conflict of interest and they’re only going to give answers that don’t threaten their careers – careers which are at the root of problem to begin with. Do better NOW.

  4. The supply side is NOT the main issue. It is reactionary and not looking at the root causes with extraordinary DEMAND. Money laundering, foreign investment, and immigration qualifications through investment in real estate are huge contibutors.
    Asia will not allow the purchase of real estate by foreignors. They understand the long term negative implications. The last decade is a perfect storm of unprecented circumstances. Never before has there been a new wave of international millionaires looking to get their money out of their countries, which have political and economic instabilities, to more stable democratic nations like Canada.
    The billions of dollars funneled both legally and illegally into the Canadian real estate market ripples throughout all regions as people take their huge profits and buy, and invest out of the main centres. There are many ways to launder funds and also avoid the detection of foreign investment. The detection and proof of it is numerous and documented but for political purposes our governments have chosen to ignore it at great long term peril to the average Canadian for unsustainable short run economic gain.
    The U.S. has implemented a law requiring all corporations/ shell numbered companies to publish the names and source of owners and funds invested to track. Vancouver uncovered billions of laundered funds into their Real Estate market. Foreignors buy undetected through citizens and students that do not show up as foreign purchasers. Cash is easily laundered in Canada as pointed out by the international community and most notably after 911 by the U.S. and little has been done to stop it.
    Laundering, foreign investment, and immigration policies are the reason and we simply must stop these factors now. Vacancy and foreign buyer tax are only a small part of the solution.

    Russell Hutchings B.Comm./ C.S.C.

  5. Might not be popular but why do we need to make housing “affordable”? Housing is an absolute basic right no matter what and I fully support that. However, “affordable” housing in prime locations in Toronto is not a right. Housing is truly only unaffordable when the list of things people want is what everyone else wants, access to subways/transit, top schools, safe neighbourhood/ low crime, granite countertops, hardwood floors, top quality tiles, amenities like great restaurants, gyms, etc. And on goes the list. The fact is, some people are more lucky or smarter or harder working or made better choices than others in life, why should everyone end up in the same place?

    Having worked with developers in the past, I’ve seen the surveys they’ve done with their buyers and by and large, most people don’t want to live in the same building or area as those needing “affordable housing”. That’s very elitist I know but the truth from surveys in Toronto and area.
    At the end, all of it comes down to money and numbers. A lot of newer buildings in Toronto have 3 and 4 bedroom layouts. Ask developers or the sale agents and they will probably tell you, those are usually the hardest units to sell and there’s just not a market for them. Why? Large size means most expensive units (closer to $1 million and higher) combined with highest condo fees (around $900-1200) and you’ve got a very expensive combo that most people can’t afford or choose to live elsewhere.

  6. Why can’t the government step in and build affordable housing/condos for low income groups as families…fairly decent size and long term monthly a cosmopolitan community and everyone is happy….is it too much to ask….

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