Canada- With unprecedented real estate prices rising, Toronto, Canada’s largest city, is facing a worsening housing crisis that has had heavy repercussions on the lives of its residents, and its effects have extended to nearby urban centres.
This crisis has many aspects, the most prominent of which is a historic rise in house prices and rental values, in addition to a severe shortage of low-cost homes, a situation that intensifies the real estate crisis that the country is experiencing in general.
This situation threatens the image of the “Canadian dream,” with data from the non-profit Angus Reid Institute indicating that 3 in 10 Canadians are considering leaving their provinces due to the inability to afford housing.
skyrocketing
A report published on the real estate website Zoocasa cited figures indicating the huge shift in home prices in Toronto over the past five years – based on data from the Canadian Real Estate Association – as the increase reached 42.8%, as the standard home price jumped from 746,500 Canadian dollars (about 543 thousand US dollars) in 2019 to 1,065,800 Canadian dollars (about 776 thousand US dollars) in 2024.
The rental market was no better, with the National Rent Report issued in mid-2023 by two prominent real estate firms in Canada stating that while the average rents in the country rose by 20% between 2021 and 2023, Toronto saw a 41% increase, the second highest rate in the country at that time.
This increase is described by some reports as “astonishing,” as the average rent for a one-bedroom apartment was $1,600 in 2013, and jumped to $2,503 in 2022.
During the same period, the average rental price for all unit types (from single-family apartments to three-bedroom apartments) rose from $1,894 to $2,984, an increase of more than $1,000 over a decade.
Newcomer’s Dilemma
Some expert reports indicate that housing prices remained relatively affordable from 1970 to the mid-2000s, when housing affordability deteriorated further.
This sharp development is due to a set of intertwined factors, most notably the steady increase in the population of Toronto with the increasing waves of new arrivals to the country. Data from the Canadian Ministry of Immigration confirms that most members of this segment tend to settle in urban areas.
In this context, the Greater Toronto Area alone received up to 35% of new arrivals, as its population increased by about 880,000 between 2013 and 2022 to reach 7.2 million, and is expected to exceed 8.3 million in 2031.
Coronavirus hits real estate market
Another irony of Toronto’s growing influx of newcomers is what experts say is a severe labor shortage in the construction sector, which is hampering efforts to expand the housing market and help ease the current housing crisis.
As workers retire faster than they can be replaced, this challenge has been exacerbated by the COVID-19 pandemic, with some construction workers changing careers or retiring prematurely. Canada needs more than 500,000 additional construction workers to build all the housing it needs through 2030.
The 2023 Housing Affordability Demographics report notes that during the pandemic, there has been a significant shift toward remote work, which has increased rental demand and exacerbated housing costs, with demand for housing rising faster than developers and builders can easily supply.
The flexibility provided by remote work has also led many city residents to move out of the city to nearby urban centres to escape the high cost of living, which in turn has increased demand in those areas and raised property values there as well.
Investment ghoul
Another aspect indicated by a study issued by the Toronto Metropolitan University in Canada is related to the major role played by foreign investment in increasing the complexity of the crisis, as foreign investors, by purchasing real estate in Toronto, ensure a stable investment with high returns, which attracts more investors and increases housing prices as a result of increased demand and decreased supply.
While the rise in housing prices has prompted individuals and large companies to rush into the real estate market and increase profits by fueling competition and raising the rents of homes that people need, regardless of the increasing pressures that this imposes on residents and the negative effects of this on their lives.
Effects of rising prices
The continuous increase in prices has made obtaining a suitable home at a reasonable price a dream beyond the reach of middle- and low-income people, and waiting lists for government-subsidized housing have extended to 12 years for a one-bedroom apartment and 14 for a two-bedroom apartment.
This development has in turn led to an increase in homelessness in the city, straining shelters and increasing the number of people living in tents in public places. Last spring, Toronto saw twice as many encampments as it did at the same time last year, while an average of 178 people were turned away from the city’s shelters each day due to a lack of vacancies, according to the Toronto Star.
A study by the Toronto Regional Real Estate Board of more than 7 million Greater Toronto Area residents shows that comparing affordable housing to non-affordable housing, 29% of residents and 23% of non-affordable residents spend between 30% and more than 50% of their income on housing costs, significantly impacting their well-being and leaving them vulnerable to financial insecurity, stress and the inability to afford basic needs.
While some observers warn that rising housing costs could push many people out of the city, leading to the loss of workers in vital sectors that are badly needed, such as the medical field.
Government promises and steps
The housing crisis has escalated and become a dominant part of the country’s political debate, with the opposition Conservative Party pointing the finger at the Liberal government’s policies for creating this dilemma, while many observers point to this crisis as a major factor behind the decline in the popularity of the ruling Liberal Party.
In the face of this complex scene, the Canadian government headed by Justin Trudeau and the Ontario government took many measures to confront the main factors causing the crisis, as the government promised to:
- $15 billion allocated to the construction-lease loan program.
- Amending the rules to facilitate work on construction projects, which may lead to an increase in supply in the market.
- Increase spending on training and increase skilled immigration.
- Encouraging more advanced methods of building houses in an effort to overcome the time factor and increase the speed of completion.
- Launched a $1.5 billion cooperative development program to revitalize the cooperative housing sector, and promised to create a fund aimed at providing $1 billion in loans and $470 million in grants to help nonprofits buy and preserve existing low-cost housing instead of selling it on the open market.
- Extending the foreign buyer ban until January 1, 2027, and launching consultations on potentially restricting “very large corporate investors” from purchasing existing single-family homes across Canada.
- In addition to other measures related to accelerating the process of obtaining building approvals and banking and credit facilities to enable Canadian families to save for the purchase of their first property.
Whether these measures are merely election promises or serious steps towards a solution, Toronto’s housing crisis remains a complex and multi-dimensional issue. Despite the introduction of many initiatives, the gap between housing demand and available supply remains large, requiring comprehensive and sustainable efforts to ensure that the city’s residents obtain decent housing at an affordable cost.
