No mistake about it. Housing is unaffordable worldwide. The COVID-19 pandemic exacerbated housing inequities. Demand for affordable housing continues to increase, putting pressure on municipalities outside of major metropolitan centres to provide housing. Vacancy rates in existing purpose built rental units will eventually creep back up making construction of new units paramount. The housing market bubble is about to burst and there maybe evidence to support this.
The housing market downturn in Canada maybe happening as we speak. The Canadian Mortgage and Housing Corporation (CMHC) announced last week that the national housing market sector moved from moderate to high vulnerability during the second quarter with major municipalities of Toronto, Ottawa and Montréal shouldering all the risk. In fact, recently a home in North York dropped nearly $500,000 from its original asking price from a year ago.
Here are also some startling projections from the demand side in Ontario taken from a recent report from the Smart Prosperity Institute:
- Of the 910,000 net new households formed over the next ten years, primarily made up of couples planning on having children, we project that 195,000 will live in high-rise apartments (of five storeys or more), while 715,000 will live in all other forms of housing.
- 1.475 million new households, with a head of household currently under the age of 55, will be formed over the next ten years. Of these, approximately 225,000 will live in high-rise apartments, with the rest living in other forms of housing.
- Of the 225,000 new young households that will live in high-rise apartment units, only 30,000 units will be freed up by the generational turnover of those currently over the age of 55.
- Generational turnover of other forms of housing will house roughly 45% of the new young families that will live in forms of housing other than high-rise apartments. The rest will come from new home construction.
- Differences between levels of generational turnover are substantial. In some communities, generational turnover can provide an adequate supply of housing for the next generation. In other communities, it only scratches the surface. (Source: Smart Prosperity Institute, p. IV, October 2021)
While there has been "some" progress with Canada's National Housing Strategy, clearly the housing bubble is about to burst. More changes are going to be necessary from policy and regulatory perspectives in order for this collision to be avoided. It will be telling if this a blip or a sign of things to come.
One such solution in addressing housing affordability is eliminating or modifying single family residential zoning to build missing middle housing. Single family residential zones only allow for, as you would guess, detached or semi-detached homes within neighbourhoods. While municipalities have become flexible to include granny flats or coach houses on the same property, this is a band-aid solution to address the supply issue.
Protection of single family residential neighbourhoods has racial and classist undertones to them. These are barriers to providing rental housing as well as home ownership. In the United States, single-family zones have been associated with redlining and covenants that exclude racialized and marginalized people, which then become barriers to providing rental housing as well as home ownership. While in Canada, NIMBYs that are behind protection of the neighbourhoods through ratepayers associations is evidence on why zoning changes are difficult to come by.
In risk-averse compliant Canada, there finally seems to be a general consensus among housing advocates that this should happen sooner rather than later. For instance, the Ontario Real Estate Association (OREA) recently posted an statement about fixing the affordability crisis through upzoning.
OREA is encouraging the Province to use the Planning Act to implement as-of-right zoning in Ontario’s highest-demand urban neighbourhoods. This change would allow the seamless and legal development of gentle density, including duplexes, triplexes, and fourplexes, next door to existing density and close to subway and transit stations without unnecessary and lengthy case-by-case approvals.Source: OREA, September 29, 2021
Oregon was the first state to ban single family zoning. Minneapolis was the first city to eliminate single-family zoning in 2020. Portland followed their lead too. California recently passed several bills to address the housing crisis including State Bill 9 (SB 9), which gives homeowners the ability to build multifamily residential on their own properties.
There will be detractors to this policy proposal. For example, in response to the passing of SB9, The Terner Center for Housing Innovation indicated that the legislation could be relevant for 1 in 20 single family home parcels. The law was watered down slightly to instill protections for existing renters and those in heritage districts. Parcels of land in major urban centres are already expensive in California. This is no different in the Greater Toronto Area and Metro Vancouver for example. So developers may not have the incentive to build in the end.
The province must take swift action to modify land use policies within the Planning Act. While there is evidence that building housing of all types by eliminating single family zones- especially in major transit station areas (MTSAs)- is necessary. The ultimate purpose is to build affordable housing equitably and without prejudice. Of course there must be financial levers in place, a matter of federal monetary policy, as a starting point to help make this happen. Collaboration with municipal planning agencies, land developers, and other stakeholders/rights holders will be critical in making eliminating single family zoning a success, and potentially making housing affordable.