Toronto will continue to have runaway Real Estate prices due to shortsighted and short-term policy thinking. And all in the name of ” affordability.” City Councils’ recent passage of “inclusionary zoning” is a prime example.
The definition of insanity is doing the same thing over and over again and expecting a different result. Over the last two decades, affordability in Toronto’s housing prices has been a hot-button topic for politicians at all levels of Government. You would be hard-pressed to find a real estate market with more policy interventions with the stated intent of “affordability.” Yet, most of these policies have had the opposite effect, only ensuring that prices will continue to rise long term.
In the most basic terms, prices in Toronto have continued to grow because supply cannot and has not been able to keep with demand causing a continual upward pressure on pricing that never seems to dissipate. The sustained failure in all levels of Government to create intelligent policies and incentives to open supply (instead of constricting) is the primary culprit for the affordability issues the Toronto Real Estate market is experiencing. However, it’s easy and politically expedient for politicians to point fingers. Despite all the fingerpointing, runaway real estate prices are not the result of immigration, foreign buyers, or greedy developers. You cannot tax or regulate your way into affordability without thinking through the long-term consequences of such decisions. However, most politicians are too shortsighted or value their self-interest over the long-term well-being of the constituents they represent.
In the name of housing affordability, the almost unanimous recent passage in the city hall of the inclusionary zoning bill is a prime example of a shortsighted policy aimed at scoring political points rather than addressing the underlying issues affecting affordability here in Toronto. The new legislation, effective Fall 2022, will compel developers when building in proximity to transit stations to make 5-10% of the units affordable. This allocation will increase in 2030 to 8-22%. In spirit, this policy has had a positive effect in other jurisdictions; however, in its current form, this legislation may have the opposite intended effect of curtailing much need affordable coming online.
In other municipalities, the Government has partnered with developers to help offset the cost of building affordable housing by increasing density to allow for more units or offsetting development charges to help disperse some costs. Toronto has chosen to go with straight legislation in its infinite wisdom, and the city is not willing to offer developers any concessions. Pure insanity, in my opinion. Essentially this will amount to a new tax on new homes to be incorporated into market prices. Let’s consider this for a minute!
