Inside the crisis facing Canada’s dysfunctional housing market

From any angle you look at it, Canada’s housing market is badly broken.

The promise of home ownership, long the ultimate expression that one had secured a spot in the Canadian middle class, has faded away, not just in the usual suspect cities for real estate exuberance – Toronto and Vancouver – but in towns and communities across the country.

Parents fear their children will never own a home, and that anxiety is justified. With ownership costs as a percentage of median household incomes at the highest level since at least the 1980s for the average home, a recent study by Royal Bank of Canada estimated that of the 1.9 million new households expected to be formed by 2030, more than half will not be able to buy a home.

Meanwhile, people shut out of home ownership face staggering rent hikes of roughly 9 per cent a year, as of Statistics Canada’s latest inflation reading, and as high as 15.7 per cent a year in Alberta. That doesn’t begin to measure the stress of finding shelter amid near-zero vacancy rates as Canada’s population continues to mushroom.

It’s no surprise then that the housing market is shaping up to be the political battleground of the next federal election. Nor that politicians everywhere have desperately found a renewed interest in trying to solve Canada’s housing crisis with a massive, multifronted push to build more homes, even if those efforts face obstacles at every turn, from rising construction costs to dwindling access to capital to zoning restrictions.

The problems can seem staggering, but they are the product of a multitude of accumulated decisions and events, many of which were frustratingly avoidable – an ill-conceived policy blunder here, an incomprehensible planning decision there.

It’s how, for instance, the University of Guelph finds itself at the centre of the latest student-housing debacle after admitting far more first-year students than its residences can accommodate.

And it’s why civic advocates are decrying outdated zoning rules in Vancouver that will see an aging apartment building replaced with high-priced detached homes.

Those and other examples explored here show that despite the many efforts and policy pledges aimed at bringing sanity back to Canada’s housing market, absurdities abound that reflect deeper, more intractable problems.

Solutions exist, but as each of these scenes from Canada’s housing crisis shows, none are easy or quick, meaning relief is likely a long way off.

Families squeezed out

Sometimes a single data point can put an exclamation on a trend: Between the past two censuses, little Peterborough, Ont., with a population of less than 150,000, created more three-bedroom-plus homes – by count and by rate of growth – than the gigantic metropolis of Toronto.

Peterborough was far from alone in outpacing Toronto in terms of creating family-style homes, according to a chart based off census data tweeted out by Mike Moffatt, an economist and head of the PLACE Centre at the University of Ottawa’s Smart Prosperity Institute. Fourteen Ontario municipalities created more family-style homes than Toronto – including the 905 regions of Durham, Peel, York and Halton that are near the city – but Peterborough is 140 kilometres from downtown Toronto, making it far-flung to become the latest bedroom community.

“We’ve seen this development pattern before,” Mr. Moffatt said. “This is sprawl on steroids: We’re not able to create family-sized housing, so people are having to move really far afield.”

According to census data, from 2016 to 2021, Toronto grew its stock of three-bedrooms-plus homes by 0.6 per cent, adding just 2,585 such homes. Peterborough created just 4,005 net new dwellings (less than 10 per cent of the 47,960 of all home types Toronto built in the same period), but 2,990 had three bedrooms or more, growing its stock by 7.7 per cent.

The fastest growing category of Toronto homes have zero bedrooms: Bachelor units grew by 28 per cent, jumping from 22,355 to 28,765.

“Basically, the only housing getting created in Toronto tends to be high-rise: 30, 40, 50 storeys,” Mr. Moffat said. It’s hard to put in units with three-plus bedrooms in those types of buildings.

A mix of high land costs, restrictive zoning, using investors as preconstruction funders and high development charges pushes builders away from creating family-style units, according to Mr. Moffatt.

Local real estate agents in Peterborough such as Ken Pipher who have helped people move there say that it’s not just Toronto families who are looking for more affordable options. “I had a young couple with young kids who sold a townhouse in Oakville and they moved into the Cleavers’ house from Leave It to Beaver. Whenever I see them in town they say ‘This is the best thing we’ve ever done,’ ” he said.

“We call that the musical chairs effect: Places like Oshawa and Whitby used to be affordable, and some of the kids who grew up there have to move further out,” Mr. Moffatt said.

Affordability is relative to what your income or savings are, but according to the Canadian Real Estate Association’s Home Price Index, the single-family home benchmark price in Peterborough now sits at $691,900, while in Toronto the single-family home benchmark is almost double that at $1.35-million.

Screen and stage actor Damir Andrei made the move in 2021, selling the Riverdale semi-detached he’d had for 30 years and buying (mortgage free) an $850,000 four-bedroom side-split in Peterborough on a half-acre of land, with enough left over to put in a new swimming pool and retire. His son lives in the basement bedroom and he and his wife are a five-minute drive to everything in town.

“We were having conversations about monetizing the [Riverdale] home,” he said. “You can compare it to if you own a Picasso and you enjoy it on a daily basis… Is it really wise to have 90 per cent of your wealth tied up in a single painting?”

Mr. Andrei, 69, feels fortunate that he was able to buy in Toronto when prices were lower and sell when they were so high. His old house in Riverdale was purchased by a dentist, and there are fewer artists and educators like himself and his wife able to afford the old neighbourhood.

“It’s ridiculous, I know people in Toronto people who work and have terrific professional jobs, a mid-size condo, two kids, and cannot afford to buy a house,” he said. “Even with help, they can’t do the numbers.”

More family-sized units could come in the form of fourplexes, by taking larger lots with a single-family home and subdividing them, or replacing strips of homes with mid-rise apartments, Mr. Moffatt said.

To clear the way for that, zoning and council processes need to change so that buildings of those types don’t require years of study and council meetings the way a high-rise buildings do. It would also help if cities in the Greater Toronto Area stopped disproportionately taxing family-sized units through development charges: Toronto currently levies a fee of $75,491 per multiplex unit that has two bedrooms or more, and just $37,870 if it’s a one-bedroom or bachelor.

– Shane Dingman

Nimbyism run amok

Vancouver has been a Canadian leader in eye-popping housing fiascos for at least three decades, as this city experienced early the system fractures and tensions now seen across the country.

There is the major 1950s social-housing complex in central Vancouver that was sold and torn down in the first decade of the 2000s, with a promise that the Little Mountain site would become like Toronto’s renewed Regent Park. But it still has not seen the replacement housing built that the developer promised.

Dozens of private and public housing proposals in the region have been killed off by various councils over the years because one resident group or another went to war against them. Years-long delays with others that were eventually approved are part of what became a constant slowdown of housing production as the region has grown steadily.

Then there’s the seven buildings promised way back in 2018 by then-mayor Gregor Robertson that were supposed to be a new model of affordable housing on city land. Six years later, only one has been completed.

So, the fate of the small eight-unit apartment complex on the city’s Kitsilano Point, surrounded by some of the city’s best beaches and parks, can seem minor in comparison to the hundreds of missing homes elsewhere.

But to many housing advocates, it epitomizes the underlying whole-system failure in the city. Because that modest complex is about to be torn down and replaced – in a city that just finished setting a target of 83,000 new homes needed to keep up with demand – by three single-family houses. The homes will range in size from 3,200 to 3,900 square feet.

Vancouver city staff approved the development permit last year and the property sold for $12.8-million this month – all cash, no conditions, according to the listing agency, Goodman Commercial Inc. The new single-family homes, if and when built, would likely go for $10-million apiece.

That 1972 building was constructed at the end of a growth boom in Vancouver, when the city manager of the day, Gerald Sutton-Brown, encouraged development of denser housing in many areas. The West End was transformed into a mix of older homes and point towers because of him. And several taller apartment buildings, as well as lower-rise ones, were approved in various parts of the city.

But that ended in 1972, when a reform council was elected and, in keeping with a trend sweeping the continent, instituted systems of housing approval that gave residents near a project much more power to oppose what they saw as neighbourhood-wrecking, profit-seeking developers. That council rezoned the city to prohibit high-rises in most areas.

So the apartment building on 1000 Cypress St. became a non-conforming use. For an owner looking to redevelop, the easiest option – the one not requiring an expensive and time-consuming rezoning – was to build the single-family homes that are allowed outright.

“It’s an example of the dynamic across the city. Housing processes used to be designed to make sure housing got built,” says Peter Waldkirch, a vocal member of Abundant Housing Vancouver. “But in the 1970s, after a lot of the city was downzoned, it became very discretionary and everything required a lengthy rezoning.”

Even in places where small apartments had been allowed, they became non-conforming uses such as 1000 Cypress.

Mr. Waldkirch and others point with frustration to the way city zoning policies still, in this era when everyone is trying to encourage more housing production, manage to limit it. The latest example: Vancouver had developed a policy a few years ago that was meant to encourage the construction of small apartment buildings on streets next to arterial roads – a welcome change from the practice of always jamming apartments onto busy streets and reserving the quieter streets for single or duplex homes only.

But the rules for small apartment buildings are so onerous that almost none have been proposed. Instead, builders who want to try something slightly more dense are opting for multiplexes. The city’s latest policy allows up to six homes on a residential lot. That’s more than a duplex but less than a small apartment building might provide. One more time, a case where city rules somehow manage to encourage less housing instead of more.

– Frances Bula

A failure to plan

Officials at the University of Guelph discovered an uncomfortable new equation earlier this month: If you aggressively expand enrolment without boosting housing, the result is hundreds of panicked students and furious parents.

Since early June, the school has scrambled to deal with a local housing crisis of its own making. That’s when the university revealed it had accepted roughly 1,300 more first-year students planning to live in its on-campus residences than it had space to accommodate.

Those students without residence spots – there were still 1,283 as of Thursday – now face the prospect of fighting for accommodation off campus in this mid-sized city northeast of Kitchener, Ont.

Ottawa resident Sharon Pearson has watched as her daughter Reece, a recent high school grad, has had her first-year university plans upended by the waitlist.

After getting accepted to five universities, Reece opted for the bachelor of science program from Guelph because it offered courses that would help her pursue a career in forensic pathology.

“We were assured that as potential newcomers to Guelph there would be residence space, only to find out we’re on the waiting list,” said Ms. Pearson, who said the offers from the other universities have now expired.

Fortunately, her daughter is relatively near the top of the list at No. 48, but Reece has fallen into the 50s at times. “We haven’t heard a damn thing from the university while she’s sliding up and down this waitlist,” Ms. Pearson said.

Now the pair are looking for room rentals off campus, joining hundreds of other students responding to online accommodation ads with rents per room often in the range of $900 to $1,300 a month. One Guelph property manager, John McMullen of JMC Property Management, said room rates five years ago were about $500.

“It’s crazy, I’m a single parent trying to put my child through this, and I don’t know that I can afford the prices we’re seeing,” Ms. Pearson said.

The university blames the waitlist debacle on a combination of stalled provincial funding, planning shortfalls and poor communication on its part.

The school planned to “aggressively” grow its enrolment this fall to make up for rising expenses, since the Ontario government has frozen tuition and funding since 2019, said Gwen Chapman, the university’s provost and academic vice-president.

Problems arose when a higher-than-expected share of students who were sent acceptance letters confirmed their attendance, with a surge in acceptances coming late in the process.

She said students were never guaranteed residence this year, unlike in some years past, but “we were indicating we felt we would be able to house students. We’ve learned we need to improve how we communicate about housing.”

The university has begun retrofitting rooms to accommodate more students, and said it’s expanding other services to absorb the larger first-year influx such as off-campus meal plans, more parking and new classes.

Guelph is a microcosm of a more widespread planning failure that has reverberated across the economy. Many universities, colleges and private schools have in recent years sought to plug gaps in their budgets by jacking up enrolment, particularly among international students who pay as much as five times more in tuition than domestic students do.

In the case of Guelph, international students account for a relatively small share of first-year enrolment – 300 compared with 7,000 domestic students. But the practice across Canada has led to an unexpected surge in Canada’s non-permanent-resident population, and put intense pressure on local housing markets.

In January, the federal government announced it is capping the number of international study visas it issues over the next two years, but barring an increase in provincial funding, schools will continue to look for ways to boost enrolment numbers to meet rising costs.

What they need to do is match that with more investment in student housing on or off campus, something Ms. Chapman hints is coming at Guelph. “We’re ramping up those plans and we expect we’ll have more details to communicate in the fall.”

– Jason Kirby

The vacancy void

Seven years ago, the apartment vacancy rate in Red Deer, Alta., was north of 13 per cent. Last fall, it was 0.8 per cent.

The small city of roughly 110,000 people, located smack dab between Calgary and Edmonton, is a prime example of how the rental crisis has spread beyond urban centres, leaving fewer pockets of affordability across the country. In places as varied as Trois-Rivières in Quebec and Campbell River, B.C., vacancy rates have tumbled below 1 per cent, which is pushing up rents at historic rates.

Things are changing abruptly in Alberta. The province’s population grew by 4.4 per cent last year – the largest increase since 1981. It’s not only immigrants contributing to new demand for housing, but hordes of people arriving from other provinces in search of affordable housing. Ironically, this search for cheaper digs is making life more expensive in Alberta.

As measured by the Consumer Price Index, rents in Alberta have jumped nearly 16 per cent over the past year – the most among the provinces.

“It’s a market,” said David Dale-Johnson, the Stan Melton Chair in Real Estate at the University of Alberta’s business school. “If you have a dramatic jump in demand, prices are going to increase.”

Finding a place in Red Deer was an ordeal for Kris LeBlanc. The 24-year-old searched for suitable housing for eight or nine months last year while living with his parents.

“I was constantly looking for new places, messaging all around, even to the smaller towns surrounding,” said Mr. LeBlanc, a heavy duty mechanic.

It wasn’t until he shared his frustrations on Facebook that a landlord contacted him, which led to his current rental. He splits a house with two roommates and his share of the rent is $1,125 a month – what he considers a steal in the market.

“It’s a hidden gem. I love it,” he said. However, if the landlord sold the place, “I would be terrified.”

Tenants in Alberta face another threat: the potential for hefty rent hikes. Unlike many provinces, Alberta does not have rent-control guidelines that cap annual increases. With such few vacancies today, landlords have tremendous power to jack up rates.

Alberta still enjoys an affordability advantage over many places. In May, the average listed rent for a two-bedroom unit in Calgary was $2,140 a month – a far cry from nearly $3,300 in Toronto and more than $3,600 in Vancouver, according to a report from Rentals.ca.

To alleviate the crisis, the rental market could use a lot more units, housing experts say. The federal government has brought in several policies to boost construction, including the removal of the GST on new builds of rental housing. Still, these are not overnight solutions, given lengthy timelines for development. Renters will continue to feel the squeeze.

– Matt Lundy

Land isn’t the problem

Signs of absurdity in Toronto’s housing market abound, but few are quite as visible as the actual sign that until a few years ago hung in the window of an abandoned two-storey commercial building at the city’s Bloor-Dundas intersection: “Fabulous suites starting from $199,900.”

If that price tag seems like it’s from another epoch of Toronto real estate – the average condo price today is nearly $725,000 – it is. For 16 years, the building at 1540 Bloor St. W. has sat vacant, its outside painted the mottled brown and beige of giraffe skin to promote a long-abandoned Giraffe Condominiums project, even as the area around it underwent rapid development and the problem of Toronto’s housing shortage grew more acute.

The building’s twisting dead-end path reflects several frustrating aspects of Toronto’s residential development process.

Toronto builder TAS originally bought the property in 2007 for $6-million with a plan for a 27-storey, 275-unit condo tower, which the city rejected as too large. The project went to the Ontario Municipal Board (OMB), which sided with Toronto. “We didn’t do a good job of bringing the stakeholders along,” said Mazyar Mortazavi, chief executive of TAS, who noted the company learned its lesson and no project it has worked on since has gone to the OMB.

After another developer bought the property and then sat on it for several years, the site, along with neighbouring parcels of land, was sold for $35-million in 2018 to a partnership between Hazelview Investments and Trinity Development Group. It took another four years to get the land rezoned for a 27-storey, 354-unit mixed-use tower. By then interest rates had sapped the condo market and last year the property was listed for sale, yet again.

Gord Perks, the Toronto city councillor who has long represented the area and opposed the original condominium plan, insisted the problem isn’t with Toronto’s approval process. Instead, he takes aim at the latest developers for not moving forward with the tower.

Either way, the giraffe building is just one of scores of stalled residential construction projects in Toronto.

“We’re in the midst of a housing crisis when there’s need for additional supply of housing, and you have these sites spread right across the city sitting empty,” said Matti Siemiatycki, a professor of geography and planning at the University of Toronto. “It clearly highlights that property is the starting point for development, but the problem is everything else that comes after that.”

Toronto is making progress on speeding up its approval process, though developer groups argue far more needs to be done to reduce bottlenecks if Canada is to meet its homebuilding goals.

Meanwhile, Ontario has looked at allowing municipalities to enact “use it or lose it” rules meant to spur construction on certain types of approved residential projects.

If such rules came into play, “you could see more motivated applicants who really expect to go forward with projects and that would free up space in the approval queue,” said Prof. Siemiatycki, though he warned it could also disincentivize developers from submitting even promising proposals. “That could ultimately be another risk,” he said.

As for the sale of the giraffe, so far there are no takers. “We are currently evaluating multiple strategies that will add value to this site, help address the demand for more housing and support the community’s needs,” said Michael Tsourounis, managing partner and head of real estate at Hazelview, in a statement.

– Jason Kirby