The Greater Toronto Area (GTA) has been facing a housing affordability crisis for quite some time, with escalating prices making it difficult for both renters and homebuyers to find affordable options.
What is the Housing Affordability problem in GTA?
In a surprising revelation, Oxford’s North America Housing Affordability Index reveals that Toronto now surpasses Los Angeles and New York City in terms of affordability, with Vancouver, Toronto, and Hamilton ranking as the least affordable cities on the continent.
To support these findings, a reputable IPSOS poll conducted by BILD-GTA indicates a widespread awareness of the GTA’s severely unaffordable housing situation. Over a 15-year period, from 2004 to 2019, the median price of detached houses skyrocketed by more than 160% (adjusted for inflation), surpassing the rise in the Consumer Price Index by approximately 5.5 times.
These alarming statistics highlight the evident issues plaguing the housing market, necessitating urgent attention and remedial measures. The low supply of new homes in Toronto has been a subject of concern, prompting the Canadian Urban Institute, the City of Toronto, and the Canadian Centre of Economic Analysis to commission a report on the matter.
The findings confirmed the glaring disparity between the demand for new housing in the city and the limited supply available, indicating a pressing issue. A recent report also warns that the rental housing deficit in the Greater Toronto Area (GTA) is expected to double over the next decade, reaching 177,000 units.
This projection is attributed to factors such as “record high immigration” and declining rates of home ownership.
Steps to Counter the Housing Affordability Crisis in GTA:
To address this issue, the Center for Urban Research and Land Development at Ryerson University has identified five fundamental principles that municipalities in the GTA must consider to enhance affordability in the long run and create a sustainable housing market for all income brackets. These include:
- Addressing the Dual Challenge
- Uniform Application of Housing Policies
- Replenishing Approved, Serviced Sites
- Reforming Land-Use Regulation
- Supporting Low-Income Households
Addressing the Dual Challenge:
The GTA grapples with two interrelated challenges: inadequate housing for low-income households and unaffordability for middle-income households. The lack of a sufficient supply of approved and serviced housing sites has forced lower-income households to compete with middle-income ones for a diminishing supply of affordable accommodation. For this reason, an adequate supply of housing sites to meet the demand for diverse housing types and income brackets is essential.
Uniform Application of Housing Policies:
Housing policies need to be uniformly applied across all municipalities in the GTA, as the region functions as a single labor market where people work and live – and coordinated action by the Ontario government is essential. This would prevent price hikes in a particular municipality from displacing residents to adjacent areas, and will also ensure a fair and balanced housing market across the region.
Replenishing Approved, Serviced Sites:
Sustained improvement in housing affordability depends on continuously increasing the supply of approved and serviced sites. This requires reforms to land-use regulations in both areas – built-up and green fields. The current zoning systems lack the flexibility to efficiently produce the necessary number of shovel-ready sites.
Reforming Land-Use Regulation:
Reforming land-use regulations is crucial to make housing more affordable for middle-income households. By reducing regulatory burdens and facilitating infrastructure expansions, municipalities can improve the efficiency of the market in delivering housing options to middle-income earners. In turn, this approach would allow scarce subsidy funds to be redirected to lower-income households with core housing needs – focusing on demand-side housing subsidies rather than supply-side construction subsidies.
Supporting Low-Income Households:
Supporting low-income households through demand-side subsidies is a more sustainable approach to bridging the gap between market rent and their affordable range. This approach enables greater mobility for low-income groups, allowing them to find affordable housing closer to employment and transportation hubs.
How to Find Savings in Your Budget for Affordable Housing
According to the RBC Housing Trends and Affordability report – a household in Toronto would need 66% of its income to cover housing-related expenses in recent times. Let’s take a look:
- First-time homebuyers face an increased expense when entering the housing market initially. The initial cost has surged, making it more challenging for them to purchase a home.
- Renters are experiencing a rise in rental fees. Recent data from RBC indicates a 4.4% increase in rental rates in Toronto over the past three years.
- Even individuals residing in the Greater Toronto Area (GTA) and already owning a home might encounter difficulties due to escalating housing expenses or upcoming mortgage renewals.
Whether you’re a first-time homebuyer, a renter or a homeowner – the housing affordability crisis isn’t likely to go away any time soon. However, there are solutions that can be found for the pressing issue with money-saving tips. These might help you put more into your housing budget, save for a down payment, or even pay off a debt that may be affecting your ability to get a mortgage. Here’s what we recommend:
Consider finding a roommate as an option
In case you are currently renting, you might already have a roommate. However, if you don’t, seeking one out can prove beneficial in terms of cost savings, particularly if your objective is to accumulate funds for a future home purchase.
For instance, let’s say your monthly rent amounts to $2,000. If you divide that in half with a roommate, you would effectively save $1,000 per month, which totals to $12,000 annually.
Furthermore, even individuals who currently own a home can reap advantages by having a roommate to share housing expenses or exploring the possibility of co-ownership, where two or three friends jointly purchase a house. Although this arrangement might result in decreased privacy, it enables you to afford a more substantial and desirable home.
Seek negotiations for your lease or mortgage renewal
If you are a tenant, there’s a possibility of reaching a favorable agreement with your landlord. If you have been a responsible tenant, consistently paying your rent on time and in full, your landlord might be interested in retaining you. By leveraging your good behavior, you could potentially negotiate a reduction in rent or obtain additional benefits within the complex, such as taking on winter responsibilities like shoveling the driveway.
As a homeowner, when the time comes for your mortgage renewal, it’s worth discussing with your broker or lender the potential for cost savings. Inquire about the possibility of securing a lower interest rate or consider transitioning from a variable-rate mortgage to a fixed-rate one. If your renewal date has already passed, exploring the option of mortgage refinancing could be a viable alternative to explore.
Explore opportunities for savings across your various expenses
Considering that 66% of your income is allocated to housing, there might not be much flexibility left for other expenditures. However, if reducing the housing portion is not feasible, there may still be potential to cut back on the remaining 34%.
Take a meticulous look at all your bills, not just those related to housing, and scrutinize them closely. Are you subscribed to both HBO Go and Netflix? Are you paying for services that are no longer utilized? Can you transition from branded groceries to generic alternatives? Are you incurring costly service fees for your bank account? Can you opt for walking or biking during the summer months instead of relying on public transportation?
While the savings from these adjustments may seem relatively small, they can accumulate significantly over time. Moreover, if your objective is to become a property owner within the next few years, these savings could make a notable difference in your down payment or even expedite the timeline towards homeownership. It all boils down to setting priorities and making conscious choices.
Prioritize debt repayment as a key focus
Debt poses a dual threat to your budget. Firstly, the more debt you carry, the higher your monthly payments become. For instance, if you have $9,000 in credit card debt and consistently make only the minimum payments, the accumulating interest will extend the repayment period significantly. Consequently, the funds that could have been allocated to other essential aspects of your budget, such as your mortgage or saving for a down payment, end up being utilized for debt servicing.
Secondly, the impact of debt on housing affordability is intertwined with lender regulations. When seeking a mortgage or refinancing from federally-regulated lenders in Canada (such as major banks), your existing debt levels are meticulously evaluated. If you have excessive housing-related debt, referred to as the Gross Debt Service ratio (GDS), or an overwhelming amount of overall debt, known as the Total Debt Service ratio (TDS), obtaining a mortgage becomes significantly more challenging, and in some cases, even unattainable.
It is highly advantageous to prioritize the rapid repayment of high-interest debts like credit card balances, lines of credit, student loans, and similar obligations. This approach not only saves you money in the long run but also enhances your prospects of securing a mortgage or achieving more favorable terms during the renewal process.
However, in case none of these options work for you, you might even want to consider:
- Opting for a debt consolidation loan, such as the options provided by Debt Care Canada.
- In situations where a substantial amount of debt exists, exploring alternatives like filing for a consumer proposal or bankruptcy may be necessary.
The Bottom Line
To tackle the housing affordability crisis in the GTA, a comprehensive strategy is needed, encompassing several key elements. This includes expanding the availability of authorized housing sites, establishing consistent housing policies, restructuring land-use regulations, and offering specific assistance to low-income households. By embracing these principles, municipalities in the GTA can make significant strides towards fostering an affordable and inclusive housing market that guarantees all residents access to secure and reasonably priced housing choices.