In Ontario, the government of Ontario Premier Doug Ford’s strategy for addressing the crisis of housing affordability was to effectively rely on the market (i.e. private developers) to determine and meet housing needs.
That strategy has now ended in a colossal market and policy failure. The most obvious evidence of these failures is a massive overbuild of high-rise condominium units, largely aimed as ‘investors’ rather than people actually looking for places to live. It is estimated that there are now over 20,000 units in the GTA with no buyers, and of limited utility as housing due to their small size – all amounting to a potential write-off of more than $10 billion.
Beyond the financial losses, there has been substantial collateral damage associated with the province’s housing strategy. In urban areas these have been defined by the loss of existing affordable rental housing, displaced by now half-empty condo towers, and hyper- intensive development patterns with little or no new supportive infrastructure of all types. The defining feature of new high-rise development projects in midtown Toronto, for example, are the ubiquitous signs from Toronto District and the Toronto Catholic School Boards indicating that, with no new schools planned or under development, there will be no room in local schools for new residents’ children.
Outside of the urban GTA, protections for natural heritage, endangered species, and waterways and flood control have all been weakened in the name of facilitating housing development.
In thinking about where the region has ended up on housing and urban development, there are some key points to keep in mind as we consider the path forward.
A return to a frenzied housing market is not a desirable outcome.
Despite the wishes of some in the real estate and development sectors, a recreation of the frenzy of speculation that came to define the region’s housing market over the past decade would not help address the region’s housing needs. That environment produced a cycle of near hyperinflation in the housing sector, while doing nothing to address housing affordability.
Key factor conditions in the GTA housing market have been fundamentally altered.
A long period of low interest rates, dating back to the financial crisis of 2008, in combination high population growth, principally driven by historically high immigration rates, were the key drivers of the rapid increases in housing prices in the region.
That period is now over. Higher Interests rates, adopted in response to post-pandemic inflation, and federal and provincial limits on non-resident buyers, have largely driven speculative 'investors' out of the market. At the same time, Canada’s immigration policies are being substantially revised in the post-pandemic period.
There are now projections of population stabilization or even negative growth rather than continuing rapid expansion. The situation will required substantial revisions to the projections of population growth underpinning the province's actions. The province had already been criticized as greatly exaggerating actual housing needs to justify its aggressive policies and of being insensitive to the needs of specific types of households.
In the result, the GTA housing market is now in what can be rightly called a correction, with housing prices falling, particularly in the middle and upper segments of the market.
Truly affordable housing remains a major challenge.
Despite these developments, major gaps in meeting housing needs remain, particularly around low-income, and especially rental, housing. The protections for existing affordable rental housing remain weak. The conversion of rental housing into financial assets by large pools of private capital (ie. financialization) as been associated with patterns of dramatic rent increases to displace existing tenants, and outright replacements of affordable rental housing by new developments.
Private capital is unlikely to respond to the needs of this market segment given the narrow margins, and complexities of building and operating rental housing relative to condominiums. Substantial governmental interventions will be needed, both to protect existing affordable rental housing, and to support non-market housing development by cooperatives and non-profit housing providers.
Failed policies continue to have legacy impacts.
Much of what the Ford government in Ontario did under the guise of providing housing was actually unrelated to meeting housing needs. Land supply, for example, a major focus of the province’s actions, was never identified as a significant barrier to providing housing. That point was recognized by the province’s own developer-friendly housing task force, given the amounts of land already designed for urban development in the region.
The implication of that conclusion is that province’s actions around the GTHA Greenbelt, Conservation Authorities, natural heritage conservation, endangered species, wetlands, waterways, floodplains and hazard lands never really had anything to do with housing supply. Rather they responded to long-standing development industry complaints about barriers to the development of lands that were rightly off-limits. These policies have created major problems of their own in terms of managing impacts of changing climate, the conservation of biological diversity, and the integrity of waterways and drinking water source waters. They need to be revised to address these problems.
In urban areas, the province’s 'no rules/no planning' approach to development, particularly in relation to areas it has designated as 'transit oriented communities or ‘major transit station areas' has created perverse legacies of its own. The province’s approach encouraged hyper-tall (e.g. 60+ story) zoning demands from landowners for densely packed, overwhelmingly residential buildings, that are now unlikely to ever be built in light of a fundamentally altered market environment.
These behaviours are continuing on the part of developers, seeking approvals for high rise projects under rules that no longer make sense in terms of housing needs or the market. The result continues to drive land values upwards, making more appropriately scaled and designed development impossible.
The province’s development rules in urban areas need to be re-aligned with reality of the market. They also need to address the litany of problems associated with the super-intensive development they encouraged, particularly in terms infrastructure shortfalls of types, and the creation of functional and livable urban spaces.
The GTA’s housing market has been fundamentally altered from where it stood a few years ago. Planning policies and rules need to catch up with that reality of we are, to provide the basis for the development of affordable and sustainable communities in the region.