Robin Wiebe is a senior economist at the Conference Board of Canada.
Housing markets have always mirrored social trends in Canada. The automobile, for example, helped fuel suburban growth in the mid-20th century. A home-ownership tsunami brought on by baby boomers led to a decline in the construction of new rental units in the 1990s. And in the past 20 years, the housing story has been about the growth of our cities, at the cost of small towns and rural communities.
At the turn of the previous century, 67 per cent of Canadians lived in rural areas; at the start of this century, in 2001, that number had fallen to 20 per cent. The allure of cities was undeniable and, prompted by improvements in agricultural productivity, the rise of mass transportation and automobiles, and lower-density residential construction, people were moving to them in droves.
But now, eight months into the global pandemic, COVID-19 – and all of its attendant effects on how we live our lives – has upended that narrative. Fuelled by health concerns and changes to workplace norms, the pandemic has slashed demand for apartments and condominiums in Canada’s largest cities. Evidence is emerging that the 20th-century migratory flow appears to be reversing, and in a hurry. If the trends continue, our urban geography will look a lot different in the near future – a reversal that will pose significant challenges for governments and policy makers moving forward.
According to data from real estate consultancy Urbanation, the number of condominiums listed for sale in downtown Toronto at the end of September was up an astounding 215 per cent from the same month in 2019 – a new record. In the third quarter of this year, the Toronto Regional Real Estate Board found that the average price to rent a one-bedroom apartment condominium in Toronto was down 11 per cent from where it was at the same time last year. Canadians are abandoning downtown apartments and condos at an alarming rate and fleeing cities for suburban and rural communities, in what has become a mad dash for more privacy, bigger square-footage and less density.
This reversal of norms has been accelerated by the fact that housing costs are generally lower outside of major city centres. In outlying areas, people can get more space for less money, and the more rural the setting, the lower the price. The Canadian Real Estate Association reports that a detached house in Hamilton costs an average of $750,000, compared with more than $1-million in downtown Toronto. In British Columbia’s Fraser Valley, which includes Abbotsford, the cost of a single-family home drops below $1-million, about a third less than the average price of $1.5-million in Vancouver.
Whether this exodus from our major cities lasts depends on several factors. Will online remote work arrangements become permanent? Statistics Canada reported in September that 4.2 million people continue to work from home, more than twice the 1.9 million who did so before the pandemic. Both companies and employees seem to be adapting relatively well to this new dynamic. Employees benefit from improved flexibility, reduced commuting times and the ability to work from anywhere they choose. Meanwhile, major companies and organizations in Canada such as Shopify, OpenText, and, indeed, the Conference Board of Canada have announced that they will entrench this approach even after a COVID-19 vaccine becomes widely available. And why not? Lower office costs and broader geographic recruitment possibilities are a boon to employers. It’s a win-win.
Moreover, health fears could continue to impair high-density dwelling demand; indeed, research from Britain shows that cramped living conditions might be accelerating the spread of disease. Meanwhile, prolonged border restrictions that reduce the number of immigrants, extended remote-learning approaches for postsecondary students, the closing of restaurants, bars and other entertainment venues, and a depressed job market that limits income growth and social mobility could all accelerate the outmigration from cities. Demand for apartments and condominiums could remain soft for many years.
So what challenges will emerge for Canada’s great cities after the global pandemic is in our rearview mirror?
The primary concern should be the fate of urban apartments and condos, which, after years of significant construction, have suddenly become unpopular. Their prices could decline enough to attract buyers, presumably once a vaccine is widely available. Municipal governments could also find themselves purchasing some of these units for use as affordable short- or long-term housing. Another possibility could be that developers decide to renovate and combine small units to make them larger. But there is also the real risk that the pandemic has convincingly altered consumer attitudes, and that tiny apartments will never again enjoy widespread market acceptance.
A sustained decline in urban density will also have ramifications for businesses in city centres, many of which are owned by individuals and families. Restaurants, bars, gyms and convenience stores that once enjoyed brisk business from locals will suffer from a dwindling clientele and may be forced to close forever.
The consequences of this demographic change will not just be confined to cities, however. The outlying communities that gain new residents and see higher housing demand will also experience effects. Fresh housing construction will no doubt lead to greater urban sprawl, notably in the countryside, which will pose environmental threats – not least because such development often deepens reliance on cars.
New residential subdivisions also tend to obliterate the charm of smaller towns, one of the reasons many long-time residents chose to live there in the first place. Such areas might also struggle to accommodate and provide municipal services to newcomers, just as cities will see their municipal tax base eroded as they lose residents. This influx of people from larger cities could spark culture clashes with rural communities.
Canada’s urban landscape is in a state of rapid flux, at least for the short term. The permanence of the changes remain to be seen. Cities have survived pandemics before because employment, cultural and educational opportunities continued to beckon. Will this time be different because of the advancement of technology? The long-term implications of this are only beginning to emerge.
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