City Profile: Housing Crisis in the City of Toronto
The housing market crisis in Toronto has been making headlines and garnering public attention since 2003 and continues to be a serious current issue in the city today. With the increasing need for affordable housing and rental units, building new affordable housing is a priority on the political agendas of Mayor John Tory and the local municipal government. In the last five years, developers have made over 80,000 new condominium units compared to 4,500 new rental units (City of Toronto, 2019). When it comes to affordable housing in Toronto, there are many interests at play and the real estate bubble has since become a complex issue to tackle. Over the years, many contributing factors have made this issue worse and it is projected to get much worse in the future. Some of these factors include the low supply of homes for sale, the affordability of homes, money launderers, the growing population of Toronto and the low supply of rental units (Scrinko, 2019). The City of Toronto started the Housing Now Initiative in 2018 to tackle this issue and build more homes. They also provide legal resources and subsidizing housing information under the Housing and Shelter division on their website. But despite these efforts, 2019 was still the toughest year for renters with a low rental vacancy rate of 1.1 (CMHC, 2018). To understand this issue in further depth, it is important to look at the key interests, ideas and institutions. This essay will specifically look at the difficulties renters are experiencing in the Housing Crisis and possible solutions like social housing to address the issue and create more affordable housing for low-income populations, families, young adults, homeless people and vulnerable populations in the City of Toronto.
Firstly, it is important to address the issues renters are facing in the current hot real estate market. Renters play a significant role in the housing market and are a key interest in the crisis. In the city of Toronto, many of the housing units for rent are condominium units. In 2018, 47% of Toronto households were renters and 65% of renters lived in apartments with 5 or more stories (CityNews, 2018). In a hot market, where the average rent for a 1-bedroom apartment can go up to $2300, it can be discouraging to shell out that amount for rent instead of paying for home ownership (O’Neil, 2019). However, home ownership is not an option for many residents in Toronto. For the homeless and those living in shelters, there are little to no options to leave the system. Low-income families, with incomes less than $30,000, are faced with high prices of rent that are unaffordable and median-income families are being priced out on properties that are being sold above asking price (Edwards, 2019). Currently, there is one “affordable” unit for every four low income household in Toronto’s private rental market (Affordable Housing Office, 2018). Housing options offered by the City of Toronto such as Toronto Community Housing and Co-operative Housing often have long waiting lists and slow turnover, meaning that when there is a vacancy, it is filled up quickly. There are currently more than 90,000 households on the affordable housing wait list. The shortage of rental units is discouraging to many renters and makes it increasingly difficult for renters to find affordable housing.
Secondly, Toronto’s majority of new rental supply is condominiums. But the reliance on the condominium rental market is unstable. Rental contracts can be terminated if the unit is required for use by the owner. Additionally, it can also be reverted to ownership, removing the unit from the rental market altogether (Affordable Housing Office, 2019). Renting condominium apartments might be convenient and desirable, however in the long term it is expensive and unreliable and will continue to contribute to the shortage of rental units.
Consequently, businesses such as Airbnb and Tripping.com are further contributing to this problem by offering a platform to share private homes and apartments nightly or short-term rentals to customers. Rentals especially downtown Toronto can earn owners more profit per night than monthly rentals. Furthermore, visitors and tourists looking for short-term rentals often use Airbnb to find a place to stay in the city that is more affordable than hotels and motels. These businesses compete with the hospitality industry and further contribute to the shortage of rental units by offering short-term and nightly stays.
It is quite evident that Toronto’s Housing Crisis requires strong and effective action if it is to remain viable for Toronto’s growing population in the future. It is projected that between 2016 and 2031, an average annual growth of 41,000 will result in a growth of 1.03 million people, with a total population of 3.56 million people (Affordable Housing Office, 2018). Toronto will continue to attract international immigrants and young and mobile talent. This will further increase demand and contribute to the issue of already low supply of homes and rental units. If the market does not change to be favourable for renters, the city will lose residents to more affordable markets. Toronto has lost more than 30,000 people to more affordable housing markets between the years 2016-2018 (McGrath & Paikin, 2019). The renters are the most vulnerable in this crisis, and with a growing population and demand, the number of renters is only going to increase.
Renters have no advantage in this real estate market, so it is necessary to address who is taking advantage of the housing crisis. It is almost unfair that criminals and companies evading taxes are the ones who benefit the most from this housing crisis, all while hardly being affected by the rising prices. Many expensive properties are being bought anonymously as opaque, cash purchases with funds of unknown origin for investment. Some of these properties sit vacant, further contributing to the shortage of rental units (Ross, 2019). More than 28.4 billion dollars worth of housing in the Greater Toronto Area (GTA) has been bought by privately owned corporations and unregulated private lenders (Transparency Canada, 2019). Toronto’s House market is attractive to money launderers because the property is of high value and offers many opportunities to launder dirty money through constructions and renovation. House prices are also susceptible to over-valuation and under-valuation, both of which are beneficial to money launders because it creates a vulnerability to tax evasion and fraud. Criminal proceeds can be disguised as rental income and can be used to launder money as well. Anonymity is also great benefit to money launderers because it lets them hide in plain sight and makes it especially difficult for law enforcement to track and investigate. Furthermore, money laundering inflates the house prices more by pushing the marginal price of a property higher (Lochead & Dhanraj, 2019). One possible policy solution to reduce money laundering and tax evasion is to push transparent ownership of property with land title authorities and information made available to the public (Transparency Canada, 2019). Additionally, money laundering laws can enable enforcement to detect criminal activity and impose criminal sanctions for offences. Beneficial ownership transparency and strict laws are important to fight money launderers and tax evaders in the current real estate market.
What action is the City of Toronto taking to remedy the Housing Crisis?
Immediately after his re-election, Mayor John Tory started a Housing Now Initiative in 2018 with a plan to build 10,000 new affordable rental units in Toronto (City of Toronto, 2019). The City of Toronto will be implementing this initiative through divisions such as the Affordable Housing Office, City Planning, CreateTO, Shelter, Support and Housing Administration and City Legal. This initiative will be implemented by turning 11 city-owned properties into 10,0000 new residential units, with 2/3 of residential units meant for rental housing. From 10,000 units, 1/3 will be affordable below market rent at 80 percent of the market rent. Of those, only 10 per cent will be affordable at 40 percent of market rent. Which means in total, only 3 percent of the units would be considered affordable for the low-income population of Toronto. Another third will be units offered at market rent and the remaining one third will be sold as condo units (Edwards, 2019). The Housing Now Initiative is a step in the right direction, however it will hardly make a difference in the fact that there is still a low number of affordable units available for rent.
What can be done to remedy the housing crisis in Toronto?
Now that the housing market has cooled down a bit and growth is expected to be modest, the supply of homes is still a major issue. There are a few ways to address this problem, but in this essay, I will focus on how to increase the housing supply and build more rental units. The Housing Now Initiative is doing the right thing by repurposing city land and constructing new affordable housing. It is possible to create more units by repurposing parking lots, recreation centres and older Toronto infrastructure. The City of Toronto owns a large amount of land, with more than 8,000 properties in its real estate portfolio (CreateTO, 2018). CreateTO was established to manage Toronto’s property portfolio to develop city buildings and lands for municipal purposes. Since January 2018, CreateTO has working closely with the Housing Now Initiative to manage the 11 properties to be used in the project. The downfall for these projects carried out by the City of Toronto is that it can take time to complete and even upon completion, all 10,000 units will not be available as affordable units. The shortage of rental units will remain.
The most effective solution would be to have The City of Toronto offer financial incentives and city land at little or no cost to non-profit, co-operative and not-for-profit developers such as Woodgreen, St. Clare’s and New Commons Developments. Non-profit housing providers are not prioritizing profits, but instead look to meet the variety of needs of vulnerable populations, low-income families and homeless people. Any “profit” made from the development is actually considered a “surplus” and is reinvested into the building (Rizvic, 2018). Non-profit development is a long-term solution and will meet the social needs of the lower-income population. However, the issue remains that these units are not being built in time. The expected units built per year are falling short because of the city’s planning and approval process are causing delays in the development. Currently, Open Door Affordable Housing Program that started in 2016 by the City of Toronto, provides capital funding and fees, property tax relief, fast-tracking planning approvals and surplus public land to developers (City of Toronto, 2019). In exchange, the city ensures a portion of units are at or below the city’s market rent and are controlled for 25 years, so the rent cannot increase if tenant moves out. The City of Toronto should use the Open-Door Affordable Housing Program to prioritize non-profit, co-operative and not-for-profit developers over private developers who are focused on making a profit. This will motivate non-profit and non-for-profit developers to build more units faster and meet the needs of the population who are in desperate need of affordable housing.
An example of social housing that has provided affordable housing to homeless, hard to house individuals and families since 1998 is the charitable, not-for-profit organization St. Clare’s. St. Clare’s has built more than 400 units for mixed-income housing in different areas of Toronto. St. Clare’s offers subsidized housing for 75% tenants who pay reduced rent according to their income, and average or below market rent for unsubsidized tenants, with no limit on the length of tenancy. Providing housing that is based on incomes, rent-geared-to-income, is one way to manage rent and keep housing affordable for tenants. St. Claire’s receives no government funding, only grants from government programs like Open Door and funding from partnerships. While St. Clare’s has developed many affordable housing properties, St. Clare’s still faces long processes in development, close to three to four years, to secure, fund and develop a site.
It is greatly recommended that considering the current practices in place by the City of Toronto, further action should be taken to strengthen non-profit housing organizations and aid them in developing social and affordable housing in the long term. Short-term deadlines like one to four years is not practical to build rental units that will scale to the demand of renters. The City of Toronto can look to what the City of Vancouver is doing to bring more affordable housing to families, young adults, homeless and vulnerable populations. The City of Vancouver has developed a 10-year strategy called “Housing Vancouver (2018-2027) to ensure the right types of homes are being built while streamlining city processes to develop housing faster. They have set in place new housing targets such as 12,000 social, supportive and non-profit, co-op homes built in the next 10 years, with 65% of all new housing for renters. Their goal is to have 72,000 new homes across Vancouver by 2027. This initiative looks at creating a sustainable, long-term action plan with a timeline that will support a diverse population and further contribute to developing stronger communities. The Housing Vancouver website has a timeline to show their progress with their strategy. This is effective in keeping the public up-to-date with the plan and shows the initiatives being taken by the City of Vancouver. The City of Toronto can look to the Housing Vancouver Strategy to develop their own policy which will work to benefit renters in the current Housing Crisis, and in the long-term.
In conclusion, the current housing crisis is making it increasingly difficult for low-income populations, families, the homeless and vulnerable populations to find affordable housing in the City of Toronto. Renters are faced with high rental market prices, with some 1-bedroom units going for $2,300. The City of Toronto has implemented a Housing Now Initiative to bring 10,000 new units to the City of Toronto by developing 11 city-owned properties. But upon further analysis, only 2/3 of these units will be affordable and the other 1/3 will be sold on the real estate market. These municipal initiatives to build more rental units are simply not meeting the needs and demands of low-income populations. An effective solution for this would be to provide grants to non-profit, not-for-profit and co-operative developers such as St. Clare’s and New Common Development. Profit generated from these developments would be re-invested back into the development and be sustainable in the long-term. Co-operative, non-profit and non-for-profit rental units would be affordable and meet the needs for low-income populations, homeless, and vulnerable populations in the long-term. However, rental unit developers are constantly faced with city delays that result in the projects taking longer to complete. In order to remedy this issue, the City of Toronto can look at the “Housing Vancouver” strategy by the City of Vancouver, to create a long-term solution that can bring many new homes to the city. In doing so, the City of Toronto can work towards bringing the right homes, such as social housing and affordable rental units, to meet the social needs of the city’s diverse population following a specific timeline. There are solutions for the Housing Crisis in Toronto, but for them to be effective, the City of Toronto should work to meet the demand of renters in a reasonable timeline, or else the issue will continue to get worse and it will become increasingly difficult to remedy the issue. It is time that the city looks towards sustainable solutions like social housing and co-operative housing, instead of trying to profit from this crisis affecting most of the Toronto’s population.
