The Ontario real estate market has been on fire since the short-lived downturn in the early days of the coronavirus pandemic. From detached homes in Toronto and Ottawa, to waterfront cabins in cottage country, sales activity and price appreciation have been through the roof for the last 20 months. This activity has contributed to a notable supply crunch for homebuyers, particularly in North America’s fourth-largest city.
During the federal election campaign, there was a lot of talk about taxes, restrictions, bans and public investment. But industry observers believe that a lot more could be done to support an increase in supply, such as collaboration between the three levels of government and incentives for more residential construction in this country.
One real estate group recommends that cutting red tape and updating local laws could help alleviate the tight housing market in the City of Toronto, something that could bolster supply. Could this be another solution to the housing affordability crisis, at least in the province of Ontario?
Pressure to Update Zoning Laws in Ontario Real Estate Market
The Ontario Real Estate Association (OREA) proposed a suggestion to address Toronto’s affordability problems. The “archaic” and “exclusionary” zoning laws, OREA notes, need to be redrafted because they prohibit the city’s neighbourhoods from converting single-family properties into multi-unit residential properties, such as a townhome, duplex, triplex or fourplex.
By maintaining these types of zoning laws, Queen’s Park is enabling plenty of NIMBYism (not in my backyard), an attitude that weighs on residential development, increases home costs and leads to project delays.
“In too many Ontario cities, it defies common sense that you can take a bungalow and turn it into a monster four-storey home for one wealthy family, but you cannot build affordable townhomes for multiple families without red tape, runaround and exorbitant costs,” said OREA Chief Executive Officer Tim Hudak in a statement. “Exclusionary zoning policies are at the heart of Ontario’s housing affordability crisis in high-growth areas and it’s time the province steps in to modernize these archaic laws.”
Hudak, who previously ran for Premier of Ontario as leader of the Progressive Conservatives a decade ago, contends that the space between Lake Ontario and the Greenbelt needs to be utilized more strategically to allow for an abundance of housing options for Canadians.
“High home prices are evidence enough that there are not enough homes to accommodate growing families across the province,” Hudak added. “But archaic rules and regulations are holding up new developments and exacerbating the problem – keeping the Canadian dream of home ownership out of reach for millennials and young families.”
He purported that the provincial government could build on the “More Homes, More Choice Act, 2019” that tackles the root problems associated with affordable housing development.
According to a recent OREA study, conducted by market research firm Abacus Data, close to 70 per cent of Ontarians stated that housing affordability should be the top priority for the province. The poll also revealed that more than three-quarters (78 per cent) of Ontario residents endorse minimum zoning requirements in urban centres to foster higher rtes of home construction.
Should Ontario Look to New Zealand?
Many real estate industry observers are looking to New Zealand for a potential solution to shrinking housing stocks. The New Zealand government, as part of a bipartisan approach to tackle the nation’s affordability crisis, will now allow the country to construct up to three homes per lot in jurisdictions that previously restricted lots to one or two homes.
The plan to dismantle “overly restrictive planning rules” is not a mandate to develop existing homes. However, homeowners and developers will be given the freedom to erect more residential options on their lands without going to battle against municipal planning regulations.
That said, a recent PricewaterhouseCoopers (PwC) report projected that the new measures could add up to 105,500 new units of housing by the end of the decade.
“National supports this policy because it focuses on supply. Rather than making life harder for property owners, this policy tells them that you have the right to build,” National Party Leader Judith Collins told reporters at a news conference.
Could this be the tool to help cool skyrocketing valuations in the Canadian real estate market? Whatever the case, the consensus is that something that is desperately needed amid current market conditions that are shutting out hopeful homebuyers from coast to coast.
Could Price Growth Hit a Ceiling in the Ontario Housing Market?
Many Canadians do not think real estate price growth will accelerate forever. A new third-quarter Bank of Canada (BoC) Survey of Consumer Expectations reveals that the consumer home price forecast declined to 5.3 per cent, from 5.7 per cent in the second quarter. While their expectations are above pre-2021 estimates, they have ostensibly peaked and fallen below a record high. Here is a little insight into consumers within the biggest provinces in the Canadian real estate market: Ontario and Quebec buyers cut their home price growth expectations, and British Columbians anticipate massive home price growth.
This comes after Statistics Canada reported that the New House Price Index growth slowed in September for the first time since 2019. So, is there light at the end of the tunnel for homebuyers? Should this price growth continue on a slower trajectory, and if provincial zoning laws help stimulate greater supply, 2022 could look hopeful for the sidelined buyers who have been shut out of many Ontario housing markets since the early days of the pandemic.