There’s a question looming over every homebuyer, seller and real estate watcher in the GTA: what’s behind the housing affordability crunch?
The Canadian Home Builders’ Association (CHBA) did an in-depth analysis of key factors behind current housing market conditions. The research report, The Housing Supply Deficit – Not Enough Homes for Families with Young Children, identifies a significant – and growing – disconnect between housing demand and what home builders are able to supply, in light of planning and zoning patterns and a lack of available serviced land.
The report also comes with a warning: if current trends continue, Canada will see a shortfall of 300,000 family-oriented homes in the next 10 years.
According to CHBA’s data, demographic factors are driving demand for lowrise houses suited to young, first-time home-buying families, as Canada experiences a “baby boomlet.” Simultaneously, aging Baby Boomers and older Canadians are not downsizing from their detached homes in the numbers predicted, preferring to age-in-place. Quite the opposite, many are trading up to larger single-family units, creating a more-pronounced short-fall of lowrise homes.
“There has been a lot of commentary around what’s driving house prices in markets like Vancouver and the GTA. Much of this overlooks the fundamental factors of supply and demand, and the increasing number of young families trying to achieve home ownership,” according to CHBA CEO Kevin Lee.
“CHBA’s research shows that current patterns of urban development fail to address the needs of young families looking for a place to call ‘home.’ There is a distinct lack of higher-density, ground-oriented homes they can afford, such as townhomes, stacked towns and similar housing formats. This is the ‘missing middle’ in our largest and fastest-growing communities,” Lee adds.
The effects of the lowrise shortfall are further amplified by supply constraints, including lack of infrastructure and developable land, development restrictions, NIMBYism, and municipal policies favouring highrise development.
Canada has seen a 27-per-cent drop in the construction of lowrise homes since 2007. The fastest-growing markets are experiencing a much more dramatic. In the GTA for example, inventory of lowrise homes dropped 89 per cent in the last decade, and sits at historic lows. There is a particular shortage of higher-density, lowrise attached homes offering access to transit, which increasingly represent the “missing middle” of urban housing stock.
“In markets experiencing strong economic growth and in-migration, these supply factors are a big part of what is fueling rapid price appreciation within the ground-oriented housing segment. While some observers look for other explanations, and there are indeed other contributors, the ‘law’ of supply and demand remains pervasive,” Lee adds.
“What we are seeing is the Millennial generation really struggle to find a place to live and raise their families in our largest cities, and this has worrying longer-term implications for them, these communities, and the economy at large.
“Although there has been a lot of focus on trying to dampen prices, a big part of the solution is enabling a housing supply response. We’re not talking about ‘sprawl’ here, just about building smarter communities, including infill projects and transit-oriented development, that young families find welcoming and manageable with young children.”