This following article is from REM magazine….
New research from Statistics Canada points to a painful, but unavoidable truth. Canada wants lower home prices and higher immigration, but we can’t have both, at least not without significant changes.
What kind of changes? Well, we desperately need changes to zoning in our biggest cities to accommodate new arrivals, especially in Vancouver and Toronto.
1.45 million new homebuyers by 2025
These changes are desperately needed because Canada will be home to hundreds of thousands of new Asian home buyers by 2025, as part of a total of 1.45 million new immigrants, according to StatsCan statistics.
Wherever they come from, new permanent residents in Canada will have one need in common: housing.
Many new residents will seek to purchase a home. The new foreign buyer ban won’t prohibit this because it makes an explicit exception for permanent residents.
That is why 2020 research found a direct link between Chinese and Indian immigration and increases in house prices. This research, “The impact of immigration on housing prices in Australia” by Morteza Moallemi and Daniel Melser, was published in Papers in Regional Science.
While the paper dealt with the Australian market, that country is in the same situation as Canada regarding affordability and housing supply.
Canada has all the preconditions for high unaffordability
The past 20 years of history have taught us that Canada has all the preconditions it needs for property prices to soar out of reach of the typical buyer, even without a single foreign buyer or new permanent resident.
Our stringent zoning rules and cheap financing pushed household debt levels higher and higher, year after year, ultimately making Canada one of the most unaffordable places in the world.
In January 2023, CREA reported the average national average home price was $612,000— 10 times the median household income after taxes.
We saw the biggest price boom during the pandemic — even though immigration, population growth, and foreign buying plummeted.
Yes, prices have fallen since the pandemic boom, but have they fallen enough for markets to accommodate nearly 1.5 million new residents?
I would argue not.
All levels of government must take drastic action to create new housing on a large scale. And we must tackle once and for all the fact that our big cities offer too few opportunities for medium or high-density housing.
The land of empty houses
Increasingly, Canada is becoming known as the land of empty houses. That’s what you might conclude from the comments Paul Smetanin, chief executive officer of the Canadian Centre for Economic Analysis, made to the Globe and Mail.
Smetanin found that an area of Toronto covering about 58 per cent of the region’s land mass has lost 478,000 people since 2001.
The culprit isn’t foreign buyers who leave their homes empty. The problem is that empty nesters are “over-housed,” as Smetanin puts it, in houses much too big for their needs. Smetanin points to two million spare bedrooms in the Toronto area and five million in the Golden Horseshoe region.
Empty nesters are not the villains in this story. Zoning policies that limit two-thirds of the city’s residential land to only one household per structure are to blame.
These problems aren’t limited to Toronto. Vancouver, too, is struggling to shift to a balanced growth development pattern that produces a variety of housing styles for people in all price ranges.
What can be done?
Zoning is one way to fix the housing shortage and affordability crisis.
In a July 2020 report, the Toronto Regional Real Estate Board found that municipal zoning restrictions have left that city devoid of a variety of housing. Instead, most urban areas consist of low-density single-family homes.
The report suggested addressing the missing middle by enabling mid-rise and medium-density homes in those areas. “Allowing secondary units in all Toronto neighbourhoods could result in the rapid addition of 300,000 to 400,000 units,” the report found.
Some have proposed even more dramatic changes to land use than simply changing the zoning of areas already used for housing. Two University of British Columbia professors believe things have gotten so bad that Vancouver must convert $20 billion worth of city-owned land, including golf courses, into affordable housing and nature parks.
Toronto and Vancouver need to develop new approaches, whatever the specific policies. Instead of depopulation, these new policies must bring more housing and residents to our cities.
By fixing the zoning policies, we can create more affordable housing, vibrant neighbourhoods, and healthier communities.