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Toronto's new land transfer tax has led to people opting to stay in their home.

Mark Blinch/wires

Homeowners in Canada’s six largest cities moved less frequently in 2016 than in 2006, with Toronto showing the biggest decline in mobility because of a slowdown in new home construction.

In a report released on Monday, the Centre for Urban Research and Land Development at Ryerson University looked at the proportion of residents who had moved homes in the five-year period prior to 2006 and 2016. The report used census data, which was most recently available for 2016.

The proportion of Toronto-region residents who already owned a home and had moved in the prior five years fell 19.9 per cent from 38.2 per cent in 2006 to 30.6 per cent in 2016, while the percentage of renters who had moved in the prior five years dropped 6.1 per cent from 63.9 per cent in 2006 to 60 per cent in 2016.

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Report authors John Clinkard and Frank Clayton said the factor that mostly closely correlated with Toronto’s falling rate of mobility was the declining growth in housing supply, which trumped other factors such as price increases and affordability.

While affordability is a factor in a decision to move, Dr. Clayton said, the primary correlation is the declining rate of new construction of ground-level homes such as detached and semi-detached houses. The drop reduced the supply of homes available for existing homeowners to move up to a larger property at the same time that Toronto’s population also climbed sharply, which spurred price increases, he said.

“More people can afford lower-cost housing if other people move up to more expensive homes,” he said in an interview. “If that chain of transactions breaks down, that means there is even less affordable housing for people to buy because people stay put or they renovate.”

He said the City of Toronto’s introduction of a new land transfer tax in 2008 also created more incentives for people to stay in their houses by increasing sales costs. And with more people opting to stay and renovate, many homes became more expensive when they eventually were put on the market, making them less affordable for a first-time buyer.

A drop in population mobility is a concern because it means people are not able to move to the most efficient property for their needs, which could impact labour growth and “the efficient allocation of resources across the economy,” the report said. Dr. Clayton said the slowing availability of housing for new first-time buyers is one of the most concerning impacts.

He said 22,115 single-family detached houses were started in the Toronto region in 2002, but new development policies and slowing approval processes led to declining housing starts, which fell to between 8,000 and 9,000 for detached houses during most years over the past decade. The best year for detached starts in the past decade was 2016, when 11,884 new homes were launched, Dr. Clayton said.

“The Toronto region is growing at 100,000 people a year and we need 40,000 or 45,000 new housing units every year," he said. “Yet the number of single-detached houses out there for move-up buyers – and most new single-detached houses are bought by move-up buyers – was half the units.”

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The report argues that housing starts and not increasing prices is the primary factor in declining mobility because Vancouver did not see the largest drop in the proportion of people moving homes, even though it recorded the largest price increases during the period. Calgary had the lowest increase in prices but had the second-highest drop in mobility.

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