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An owner picks up after their dog in a park Toronto's CityPlace neighbourhood on July 21, 2019.Christopher Katsarov/The Globe and Mail

A new report suggesting the Greater Toronto Area could be facing a shortage of 200,000 rental apartments within a decade is highlighting the conundrum of a region that is building more high-rise apartment buildings than anywhere else in North America but still has a stubbornly unaffordable housing market.

The report – prepared by real estate research firm Urbanation Inc. for the Federation of Rental-Housing Providers of Ontario – says rapid population growth in Ontario means the rental market needs to expand faster than its current capacity: “42,000 units [need] to be built annually during the 15-year period from 2017 to 2031, but will be delivering approximately 21,000 units per year, resulting in a shortfall of over 20,000 units per year.”

Similar research by the Canadian Centre for Economic Analysis (CANCEA), has a slightly longer timeline and includes more housing types than just rental and expands its projection province wide, but comes up with a similar 211,000 housing units short by 2046. “Construction of dwellings needs to keep up with population growth. If you accept that, then Ontario will need 2.3 million new units by 2046, (based on Ontario Ministry of Finance projections), said Paul Smetanin, CEO of CANCEA, in an e-mail, in which he also laid out the stark housing data. "Average annual starts over last decade: 67,100 (based on CMHC starts by intended market). Average starts needed: 88,200 (an increase of 32 per cent),” he wrote, adding that, by his estimates, these unbuilt units represent annual average loss of $1.95-billion in GDP from unrealized construction activity.

There’s some evidence that the combination of COVID-19 and an upsurge in recent condo completions has lowered rents in the city’s priciest downtown apartments close to 20 per cent over the last six months. But Urbanation president Shaun Hildebrand says this perhaps temporary break is precisely the moment to move swiftly to close housing gaps.

Toronto’s population story is one of enormous churn: More than 600,000 people immigrated to Toronto in the past 15 years, and the birth rate added another 174,399 new new residents. At the same time, more than 380,000 have moved to other cities in Ontario. According to analysis posted online by economist and Ivey School of Business research fellow Mike Moffatt, Toronto is 10 per cent smaller than it could be thanks to that outflow.

“We’ve been the fastest growing city [in North America] in terms of real population growth over the past 5-7 years … and we have been adding an astronomical amount of housing over the course of the last decade,” said Jennifer Keesmaat, formerly Toronto’s chief city planner, who also ran for mayor against incumbent John Tory in 2018. As chief planner from 2012-2017 she took measures to speed up development approvals, but despite a torrid construction pace – 186,094 condo units finished between 2002 and 2018 – Ms. Keesmaat says it’s not just population growth that has kept this new supply from lowering prices.

“We use supply as a catch-all, but it’s not a sufficient way to have the conversation … you have to talk about the types of supply,” she said. “We have wildly underachieved at driving affordable supply, that’s the enormous gap. If middle-income earners cannot find affordable rental in the city, do they apply for affordable housing?”

Downtown Toronto's skyline, seen from a helicopter on June 17, 2019.Fred Lum/The Globe and Mail

Between 1971 and 1996 about 13,000 units of social housing were added to Toronto every year, but following a series of federal and provincial austerity budgets, barely any new social housing was built, erasing the possibility of more than 45,000 units that would have been built if the previous 25 years' schedule had been maintained.

Ms. Keesmaat is supportive of proposals such as inclusionary zoning, a concept Toronto’s planning and housing committee is debating this week with a proposal to set-aside of 10 per cent of every multi-family development for affordable rental units for 99 years.

But supply constraints come in many forms, including the type of land that is allowed to be redeveloped around the GTA, according to Frank Clayton of the Centre for Urban Policy and Land Development at Ryerson University.

“If they would just loosen up the planning and put more land on the market they wouldn’t have to subsidize the middle class, which is what they are really doing,” with schemes such as inclusionary zoning or the development of city lands in programs such as Housing Now, Dr. Clayton said.

His research on the situation Millennials face in seeking so-called ground-related housing shows and that in years past not enough attention was paid by the provincial growth plans to this desire for low-rise housing, a market that has seen strong price growth and dwindling new supply.

“The only way you can keep housing prices reasonable is to produce lots of housing. Once you get a partner you want more space; traditionally [first-time homebuyers] want a single detached house, if they couldn’t get that, they’d go for a semi, if they couldn’t get that they’d go for a townhouse, and then we started in the last decade and a half building stacked townhouses and garden apartments,” Dr. Clayton said.

Missing middle would be the best way to introduce cheaper ground housing in a built-out city, but problem for these five-storey or less developments is there’s a shortage of land zoned to allow them, and what does exist is bid up for high-density, often high-rise development.

According to Ms. Keesmaat and Dr. Clayton, what’s happening is the market is out of balance: condo-owning millennials have nowhere to move, renters have no cheap supply to buy and rents keep rising. And according to Mr. Smetanin, boomers are sitting on millions of empty bedrooms in big houses in “stable” neighbourhoods.

Some cities (Milwaukee, Portland and Vancouver) are beginning to propose or implement mass-upzonings that would convert swathes single-family zoning to allow multi-unit building or subdividing. Toronto, in which close to two-thirds of the housing land is zoned only for single-family – is also studying the option, though Dr. Clayton is impatient with the progress. “The city is going to study it for two years and pick a demonstration area. … Why not just go ahead and do it? Planners have no concept of the relationship between a 10-year planning process, the uncertainty they cause and the relationship between all that and affordability,” he said.

The lack of rental supply causes those earning lower incomes to spend more and more of their income on rent as higher-income renters compete for affordable apartments. In the last decade as condos rented by investors became the only new supply of rental housing – more than 100,000 condo apartments are rented in Toronto – Urbanation’s research showed even small slowdowns in the delivery of new units took all the slack out of the rental market, crushing vacancy rates and driving up rental prices across the city.

The COVID-19 crisis has heightened the crisis, with evictions and a lack of shelter space forcing the creation of new tent cities and prompting the city to propose a $700-million plan to add 3,000 new non-shelter housing units (and the federal government announced a $1-billion fund to for the same purpose across the country). Such moves are likely just the beginning, given Toronto’s unhoused population sits around 8,000 people and growing.

Tony Irwin, president of FRPO, notes the Urbanation report identified 950 sites among his membership (owners of some of Ontario’s largest portfolios of purpose-built rental buildings) that could support infill intensification potentially adding 176,074 rental units, if they could be brought to market quickly.

“The thing I hear most often from my members who do build is some kind of prioritization is needed … creating an expedited process and fast track – some way to have those projects jump the queue – so it doesn’t take 5 or 6 years,” he said. If the region’s hodgepodge of municipal planning regimes is contributing to housing shortages adding up to several thousand units a year maybe it’s time to shake things up. “It seems to us municipalities have all the cards here; they are the ones who need to make some changes perhaps to allow some of this development to occur.”

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