Urban Consulting Practice

1 Urban Consulting Practice EXECUTIVE SUMMARY The housing crisis in Toronto is influenced by several interrelated factors, including affordability and population growth. The population growth without a proportionate growth in the construction of new houses results in higher demand than supply, impacting the pricing of houses. The crisis is also impacted by the high land cost, city planning, and bubble housing.

Bubble housing is a recurrent problem in Toronto because of the high demand for houses and speculative pricing that drives prices to unaffordable levels for the low economic classes. The Toronto city council's planning is another factor that has affected housing prices by limiting the availability of affordable land to developers. Zoning of the city has put obstacles to developing homes, making construction work expensive.

Buy this excellently written paper or order a fresh one from ace-myhomework.com

2 Urban Consulting Practice Housing is vital in supporting a given population's social and economic welfare. Toronto city is home to 2,731,571 people, according to the 2016 census report. According to the same report, the Metro areas are estimated to have 6,417,526 people (Canada population, 2022).

Housing challenge has become an endemic problem in the urban areas, contributed to by numerous factors. Each city has its unique factors that contribute to the housing crisis. The report presents factors impacting housing in the Greater Toronto Area. The area covers the City of Toronto and the regional municipalities of Durham, York, Peel, and Halton.

3 Figure 1. Great Toronto Area. s

4

source: https://www.mapsof.net/toronto-oh/greater-toronto-area-map The housing crisis in the Greater Toronto Area is attributed to several factors, which this report will highlight.

The causes of the Toronto Housing Crisis include Affordability The cost of houses in the Greater Toronto Area is high, leading to the affordability problem. The price of owning or renting a house is extremely high, forcing low-income earners to spend more than 30% of their earnings on rent (CBC, 2021). Those who cannot afford the rent are forced to look for houses on the outskirt of the area. According to a 2019 report on housing in Toronto, owning a decent house is more difficult for most people living in the city. A household

5 needs about 66.1% of its income to finance housing, which poses a great challenge to lowincome earners. The government's efforts to lower the cost of housing have not offered a permanent solution but rather a temporary one (Harvey, 1978). In the last two years, the price of houses has increased by 450%, underlining the rapid growth of the costs. The economy of the city has not grown at the same rate, creating a gap that underlines the problem with affordability.

Figure 2: Price of houses

The rapid rise in the price of a house in Toronto is a threat to the industry's stability. The above figure shows that house prices rose by 68 percent between January 2020 and February 2022. This drastic rise is synonymous with the unaffordability of houses to low-income earners.

Population Growth The continued influx of people into Toronto from other parts of the country and the world has increased housing demand. The population grows each year, but the available houses are insufficient for the existing population (Canada population (2022). This leads to an increase in

6 rent and price for purchasing a house to the detriment of low-income earners. According to a report by Ryerson University's Centre for Urban Research and Land Development on the housing situation in Toronto, the city has the fastest growing population in Canada, which increases pressure on housing. The study showed that the population of Toronto increased by 77,000 within a year in 2017- 2018 (Canada population, 2022). The population growth is linked to the availability of opportunities for business and employment in Toronto, which makes the city attractive to young people from other parts of the country. According to the Canadian Urban Institute (2022) housing problem in Toronto will persist because the population is set to continue growing each year, leading to almost double its size by 2041.

Figure 3

7 The above chart show stead Toronto’s population growth. The city is the largest in Canada, attracting investment and job seekers from other parts of the world. As a major city, Toronto is subject to continuous population growth due to the flow of population from other parts of the country and the world (Lyall, 2021). This adds to the local births, augmenting pressure on existing infrastructure, housing included. In 2021, the population of Toronto stood at 2,794,356, accounting for 7.6% of Canada's total population. The 2016 census showed 2,731,571 people living in Toronto, implying that the city’s population has increased (Canada population, 2022).

Low Supply Of New Residential Homes The low rate of construction of new residential houses has led to a low supply of houses.

As a result, the demand for houses outweighs the supply, increasing prices and the housing crisis (Van Doorn, 2020). Social and community houses have not been constructed for about seven years, underling the decline in house supply (Altstedter, 2022). The growth of the population requires an equal growth rate in the supply of houses to meet the housing needs for housing.

However, there has been a low rate of construction of residential houses in Toronto in the recent past. According to the Toronto Regional Real Estate Board report, about 121,000 homes were sold in Toronto in 2021, a 28% rise from 2020 sales( Altstedter, 2022). The sale coincided with a low supply of houses to meet the demand. Consequently, the price of houses in Toronto will continue to skyrocket. The low supply is also affected by the increased number of aging houses (Towers, 2022). As houses age, they become unattractive to buyers and occupations.

Figure 4.

8

Source: https://precondo.ca/toronto-real-estate-prices/

Housing bubble The circulation of money within an economy is an issue that is affected by prevailing fiscal policies. Toronto has suffered a rapid increase in the prices of houses due to high demand and speculation. The Bank of Canada has not increased its prime rate, allowing banks to issue low-interest-rate loans (Aalbers & Christophers, 2014). In the Toronto housing market, the high demand is linked to low-interest rates of mortgages individuals can access from banks. The low interest makes loans attractive and affordable, driving more people to buy houses even when they would not have bought them.

Figure 5:

9

In 2021, the Swiss bank UBS warned about housing bubbles in Canada after a sharp rise in house prices. On average, prices went up by 14% (CBC, 2021). The Canadian Real Estate Association revealed this growth, citing overvaluing houses in Toronto and other cities in Canada. Speculation about the lucrativeness of house investment has also contributed to more people buying houses with expectations to recoup more. Overvaluing is caused by speculative pricing, where people are lured into believing that the house is more valuable than its actual value. The psychological sense that one can make a lot of money from housing drives the market crazy, with investors pumping more money into the sector. As a rush for houses grows, people later realize that there is not much to get from their investments as early anticipated. At this time, the bubble burst, leading to an unstable housing industry.

10 The national and global financial crisis is also a factor linked to the housing bubble in Toronto. Canada suffered a fiscal crisis in 2008 due to the effects of the housing bubble on the economy (Walks, 2014). Unaffordable houses lead to challenges in selling houses, which means that investors cannot recoup their investment and pay loans. In the long run, they default on their debts, hurting the economy further. The housing bubble affects the low-income earners, who cannot afford highly-priced houses because of their economic status. The growth in house prices should be proportionate to economic growth to make houses affordable (Canadian Urban Institute, 2022). However, this is not the case during the housing bubble. Prices of houses grow exponentially, making it hard for the lower and even middle economic class to buy a house. As the problem grows, many people are forced to relocate to areas with cheap houses or even become homeless. It is imperative to note that the covid-19 pandemic impacted the housing sector in Toronto. During the first wave, construction works were stopped as part of the containment measures. As a result, the marketing of houses in Toronto and Canada has been on the rise. According to Canadian Real Estate Association, Home Price Index (HPI) went by a record 3.5% in February 2022 (Canadian Real Estate Association, 2022).

11

The sharp rise in HPI indicates that the marketing of houses is high as demands grow.

CMHC (2020) established that prices of houses had increased by 13% in 2019, setting the stage for further increases in subsequent years. The average home price in early 2022 was $816,720, a 20.6% increase in its rating at the same time last year (Canadian Real Estate Association, 2022).

The housing bubble is still a real problem for the cost of housing in Toronto and Canada.

Politics The political ecology is also a factor that has impacted housing in Toronto, causing house shortages and soaring prices. The city government and national government were to construct more houses to cool the rising house prices. The construction of more houses helps address demand issues, outweighing supply, which is a major factor in bubble housing and skyrocketing prices (Gordon, 2020). However, for about 5-7 years, the government did not roll out a new

12 housing project as expected, contributing to a severe house shortage in Toronto (Aalbers & Christophers, 2014). The construction of new houses has also been affected by resistance to redeveloping areas occupied by low-income earners (August 2016). The fear that redevelopment would lead to higher housing prices among the low-income earner is a challenge that underscores the diversity of the population and its interests in housing. In essence, politics affects the allocation of resources on various projects through policies.

Urban planning does not operate in a vacuum, underlining the place of local politics on how Toronto is organized in terms of housing. In 2021, the Toronto council approved an inclusionary zoning policy, which will compel developers to set aside 10 percent of units for affordable housing when constructing condominiums closer to transit stations (Lyall, 2021). The policy is meant to address the affordability of houses in Toronto. The percentage will rise to 22% in 2030 as part of the government’s efforts to guarantee affordable housing (Lyall, 2021). The new development implies that developers should be aware of government policies that impact housing to avoid violating set rules and regulations.

The government policy can also influence Toronto's pricing, demand, and supply of houses. According to Lyall (2021), the decision by the Toronto council to ask developers to set aside 10% of units constructed for new transit stations for low cost would drive the price of houses up. The demand for high-cost houses would increase because of the scarcity created by allocating a significant percentage of new units to low-cost (Canadian Urban Institute, 2022).

Government controls affect the forces of supply and demand by dictating how developers supply houses at different prices.

Liberalization of the housing industry has led to developers constructing majorly highcost units at the expense of low-cost housing units. The supply of houses in Toronto is also

13 linked to the availability of low-income earners (CBC, 2021). The construction of high-cost houses does not consider the diversity of the population in terms of earnings. By constructing low-cost houses to cater for the lower economic class, the city would ease the housing crisis.

Public Interest Housing in cities is impacted by public interests, which are represented in government policies. Governments exist to preside over the interests of their constituent (Friedmann, 1987).

The demand for low-cost houses for low-income earners in Toronto is a factor that informed the Toronto Council’s decision to impose a 10% for affordable housing of new units that will be put up in areas around transit stations, starting in the year 2022 (Lyall, 2021). City planners must factor in the public needs in planning the city to ensure that all groups are accommodated.

Although Toronto is the largest city in Canada, attracting the affluent, it also has a population of low-class members (Canadian Urban Institute, 2022). This group cannot afford highly-priced condominiums, hence the need to put up affordable houses for them. It is imperative to note that the low-income earner plays a crucial role in Toronto's economy.

Cost of land Buying land for constructing houses in Toronto comes at a highly inflated cost, which impacts the prices of houses. According to Lyall (2021), the cost of land is a factor that the government has not addressed in its call for affordable housing in Toronto. If developers do not find affordable land, they will not construct houses, leading to a house supply shortage. On this premise, the government cannot determine the pricing of houses or what number of affordable units to put up without affecting the industry.

City planning

14 The planning of Toronto includes zoning restrictions that determine how each area can be developed. The developers are barred from constructing mid-rise buildings, semi-detached homes, townhouses, and multiplex buildings in neighborhoods. The neighborhoods only allow single-family homes, which cannot accommodate the huge population that requires houses.

Single-family homes are also unaffordable for low-income earners (Lyall, 2021). Developers who want to put up high-rise or mid-rise buildings in areas zoned as single-family homes must apply for site-specific rezoning. The process comes at a cost and delays the construction of new houses as developers follow the lengthy process involved in rezoning. In addition, zoning limits the availability of cheap land to construct houses in Toronto. In this respect, developers should be aware of how various areas are zoned to develop houses.

15

The above figure shows how Toronto has distributed zoning of residential areas.

Developers are restricted by zoning rules on how and where to put up housing units. In essence,

16 housing affordability is affected by the city's zoning by limiting access to land for the development of housing units in various areas.

Conclusion The housing crisis in Greater Toronto Areas is caused by many factors, including low supply than demand, population growth, cost of land, public interest and politics, bubble housing, affordability, and city planning. The low supply of houses results in increased demand and later prohibitive costs, making houses unaffordable to a significant percentage of the population. City planning affects the availability of land and construction of houses in areas zoned as sing-family houses or mid-rise. Finally, the government policy influences planning and barriers developers deal with before putting up housing units in Toronto. Therefore, the housing crisis in Toronto is a product of interrelated factors that have affected the cost, demand, and supply of houses.

Recommendations The government should consider reviewing zoning to allow developers easier access to land for housing construction of mid-rise buildings and multiplex buildings in neighborhoods.

The city cannot expand its space area but rather make maximum use of the available land.

The city council should consider a waiver for density limits to allow developers to put up high-rise houses in areas where they are restricted. This will allow for maximum utilization of available spaces, helping resolve the housing problem.

The housing problem can be eased by removing the number of barriers to the development of new houses in Toronto. The process and charges involved can be reduced to incentivize the construction of new houses. Many barriers to housing slow down the rate of construction of new houses, hence the need to remove these bottlenecks.

17 The construction of more new residential houses is needed to cool the skyrocketing housing cost in Toronto. The government should consider collaborating with private partners to control thousands of new houses.

18 References Aalbers, M., & Christophers, B (2014). Centring housing in political economy. Housing, Theory, and Society, 31(4), 373-394.

Altstedter, A. (2022). Only 3,200 homes are left on Toronto's market after record year.

Bloomberg. https://www.bloomberg.com/news/articles/2022-01-06/only-3-200-homesare-left-on-toronto-s-market-after-record-year.

August, M. (2016). It is all about power and you have none: The marginalization of tenant resistance to mixed-income social housing redevelopment in Toronto, Canada. Cities, 57, pp. 25-32.

Canada population (2022). Toronto Population 2021/2022. canadapopulation.org. https://canadapopulation.org/toronto-population/.

Canadian Real Estate Association. (2022). National Statistics. Creastats.crea.ca. https://creastats.crea.ca/en-CA/.

Canadian Urban Institute. (2022). Toronto housing market analysis: From insight to action.

Canurb.org. https://canurb.org/publications/toronto-housing-market-analysis-frominsight-to-action/.

CBC. (2021). Toronto and Vancouver are in housing bubbles, Swiss Bank warns | CBC News.

CBC. https://www.cbc.ca/news/business/ubs-housing-bubble-2021-1.6209369.

CMHC (2020). The Sanctuary of a Home: annual report 2020. https://assets.cmhc-schl.gc.ca/sites/cmhc/about-cmhc/corporate-reporting/annual-report/ 2020/cmhc-annual-report-2020-en.pdf.

Ferreri, M., & Sanyal, R. (2018). Platform economies and urban planning: Airbnb and regulated deregulation in London. Urban Studies, 55(15), 3353-336.

19 Friedmann, J. (1987). Planning in the Public Domain: From Knowledge to Action. Princeton University Press.

Gordon, J. (2020). Solving puzzles in the Canadian housing market: foreign ownership and decoupling in Toronto and Vancouver. Housing Studies, 1-24.

Harvey, D. (1978). The urban process under capitalism: A framework for analysis. International Journal of Urban and Regional Research, 22, 101-131.

Lyall, R. (2021). New Toronto policy will only raise the price of new housing.

Canadianrealestatemagazine.ca. https://www.canadianrealestatemagazine.ca/news/newtoronto-policy-will-only-raise-price-of-new-housing-334924.aspx.

Towers, U. (2022). Urban Land Institute report urges Toronto to improve its aging housing towers. Canadian Architect. https://www.canadianarchitect.com/urban-land-institutereport-urges-toronto-to-improve-its-aging-public-housing/.

Van Doorn, N. (2020). A new institution on the block: On platform urbanism and Airbnb. New Media & Society, 22(10), 1808-1826. doi:10.1177/1461444819884377 Walks, A. (2014). Canada’s housing bubble story: Mortgage Securitization, the State and the Global Financial Crisis, 38(1), 256-284.