How Toronto’s housing market is transforming the rest of Canada

A “Great Canadian Convergence” is taking place, with ripple effects on housing markets across the country. Are we prepared for the rapidly evolving demand for housing?

Mike Moffatt is a professor of business economics and public policy at the Ivey Business School at Western University and senior director of the Smart Prosperity Institute. Moffatt theorizes that the housing crisis in the Greater Toronto Area will have ripple effects that will reshape communities across the country – he calls it the Great Canadian Convergence. Here he explains how it will happen and what leaders need to do to prepare.

A term I often hear in the conversation about accessibility of housing is that ‘housing is a human right’. So why do our cities seem to do everything they can to prevent housing from being built?

Since the mid-2010s, Toronto’s housing shortage has prompted families to move out of the Greater Toronto Area, or GTA, to cities such as Kitchener and Woodstock, or smaller communities across the province. Before the pandemic, this phenomenon was limited to a radius of 100 kilometers around the GTA, as people still had to commute to work. As remote work becomes the norm, we are seeing a major increase in families moving to Alberta and Atlantic Canada. The number of Ontario residents moving to Nova Scotia has almost doubled since the pandemic: 8,166 people between 2019 and 2020 compared to 15,862 between 2021 and 2022. Meanwhile, the number of Ontario residents moving to Alberta rose in the same time span from 14,550 to 29,422 . This is also the first time since 2014 that the number of Ontario residents moving to Alberta has exceeded the number of Alberta residents moving to Ontario.

With the exodus, house prices have been steadily shooting up across Southern Ontario for years, following the same pattern as those seen in the GTA. April 2017, for example, when prices in the area first started to rise sharply, the reference price of a single-family home in Kitchener-Waterloo rose 35 percent from the previous year to a reference price of $518,900, up from $381,700. Now similar price increases are happening in places like Halifax, where house prices have risen 15 percent over the past year, jumping from an average of $434,700 in September 2021 to $499,900 in September 2022 according to the Canadian Real Estate Association.

The fact is, it doesn’t take that many families moving to rural Nova Scotia or Prince Edward Island to radically transform a local housing market. And so the trend we saw in Southern Ontario is spreading across the country — I call it the “Great Canadian Convergence” — and communities need to be prepared for the consequences.

In the past year alone, about 75,000 people left Toronto, York Region and Peel Region for other parts of the province. Along with rising house prices outside the GTA, there will certainly be greater impacts on the region itself. What will the next generation of Toronto teachers, nurses and skilled trade workers do if they can’t afford to live there? And how will the region address the growing gap between the haves and have-nots?

The solution is ultimately to build more homes. If we create enough affordable housing within the GTA, we can retain more families. In Ontario’s last election, all four parties committed to building 1.5 million homes over the next ten years. Now we just need to figure out how to change zoning rules to increase density and find enough skilled labor to build these houses.

Meanwhile, the phenomenon of families leaving the GTA has, in some ways, has been positive for Ontario communities, where the exodus to smaller centers is boosting revitalization across the province. For the past 40 years, cities in rural Ontario have been trying to figure out how to keep schools open. Now many of those schools are getting portable computers because so many children are moving in. Places across Canada will soon experience something similar.

That’s the good news. The bad? Rising house prices have caused a lot of displacement. Families who earn good money and often work remotely for Toronto employers end up praising local residents. Many have argued – especially in my Twitter replies, when I first started posting about the Great Canadian Convergence – that trying to get people back to the office will reverse this trend. I’m skeptical. It will be difficult for employers to mandate face-to-face work, especially given the ongoing labor shortage:If I can’t work remotely for you, I’ll work remotely for someone else.”

The Great Canadian Convergence represents a clear opportunity to revitalize business and culture in smaller communities and create more jobs. But communities need to plan for the influx of families moving in or face their own housing shortages and affordability problems. Initiatives such as converting vacant retail and office space into housing will help, as will relaxing zoning laws to allow for duplexes and triplexes. In Calgary, for example, a vacant office building was recently converted into 82 units of affordable housing, and Ontario just announced legislation allowing three units on one residential lot.

Municipalities could be in trouble if their population growth projections are exceeded. Ottawa’s official plan includes a goal to build 75,839 homes over the next 10 years. But a report from the Smart Prosperity Institute predicts that Ottawa will need more than 100,000 new homes by 2031. And there is already a housing shortage in the city, driving more and more people to move from Ottawa to surrounding counties: 5,500 did so in 2021, up from just over 400 in 2015. People live in towns like Carleton Place, a 40-minute drive south of Ottawa, and commute into the city. That creates sprawl and pollution, and also means that the Ottawa municipal government has to build more infrastructure without receiving any tax revenue.

The Great Canadian Convergence has the potential to revitalize communities across Canada, but its success will depend on careful, informed planning. If you’re mayor anywhere in Alberta or Atlantic Canada, visit these Ontario cities that have seen an influx of new residents. Talk to the locals. Find out what has changed and what lessons they have learned. Because you’re next.

– As told to Kieran Heffernan

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