The Missing Middle: Situation Dire In Toronto; Optimistic In Vancouver

The Missing Middle: Situation Dire In Toronto; Optimistic In Vancouver

Written By: Jim Adair
Monday, November 20, 2017

In the Greater Toronto Area, 45 per cent of housing units are single-detached homes, 35 per cent are apartment buildings and just 20 per cent are known as the "missing middle" -- including townhouses, triplexes and low-rise buildings.

But soon, demographics suggest that two fast-growing age groups -- those in the 35 to 44 age bracket and those who are 65 -- will both be looking for the same kind of housing in that missing middle. A report from the Ryerson City Building Institute and Urbanation says that few of these projects are underway and there wont be enough to satisfy demand.

The report says that condo development in Toronto reached its highest level ever this year, but that most of the new homes in the pipeline are in buildings that are more than five-storeys tall.

"As millennials get older and seek larger spaces, and baby boomers downsize from detached houses, we need housing units that meet the needs and economic realities of these important demographic cohorts," says the report. "Given the current housing affordability context and projected population increases, the GTA will require more family-oriented housing units in mid-rise and low-rise buildings in comparison to the stock built during the last several years."

"Housing options for people living in the GTA have been either large expensive low-rise dwellings or smaller high-rise condos," says Bryan Tuckey, CEO of the Building Industry and Land Development Association.

"The GTA is in danger of becoming the next London, Hong Kong or New York City -- highly desirable cities, but unaffordable for most people."

The report says there are 105,000 condo apartments under development in the GTA, of which 94 per cent are pre-sold. At least half are owned by investors and will end up serving the rental market.

The price gap between detached houses and condos has tripled since 2007, from about 200,000 to 600,000. The average condo apartment in the GTA is currently selling for about 500,000, while the average detached home is around 1.1 million.

"Growth in the 35-44 age cohort will be higher than it has been in decades," says the report. "With an average first-time buyer age of 36, the 35-44 age bracket is one in which many individuals both move into homeownership and begin to seek larger, more family-friendly housing." In addition, more seniors will be looking for options "with enough space and bedrooms to accommodate their life>But the report says just three per cent of all condo apartments that will come on the market during the next five years are missing middle homes, especially in the downtown core of Toronto where the need is the greatest.

"The proportion of condo units with two or more bedrooms has been declining over time through the GTA -- a troubling trend given the surge of households that will be seeking family-friendly housing over the next 10 years. Only 41 per cent of units currently under construction or in preconstruction have at least two bedrooms, down from 67 per cent in buildings completed during the 1990s," says the report.

Tuckey blames the situation on "complicated and restrictive government policies, already lengthy yet still worsening approval processes, a shortage of shovel-ready and approved land on which to build, escalating land prices and the growing issue of NIMBYism Not In My Backyard."

The Ryerson/Urbanation report says, "If these construction trends continue, the proportion of family-appropriate housing available in location-efficient neighbourhoods close to transit, employments, school and services will decrease and affordability will further erode.

"This increasing demand for family-sized units means that young families will have to drive to qualify for any type of unit, not just detached housing. This may also contribute to pressure on greenfield lands and urban sprawl."

But theres a better story in other Canadian cities. Tuckey says Montreal "has embraced the power of this missing middle -- developers are building low-rise dwellings, mostly three-storey flats and mid-rise apartment buildings within the city and in the suburbs."

In Vancouver, like Toronto, "Strong economic growth has created rising labour demand and consumer confidence side effects, while net migration and a wave of millennials entering their household-forming years have rounded out a perfect storm of demand-side momentum," says a report by the British Columbia Real Estate Association BCREA. "The supply of resale homes has plunged to decade lows. This has led to continuing upward pressure on home prices" because supply has not kept up with demand.

But the report says multi-family starts in Metro Vancouver have recently surged, up to 55 per cent above the 10-year average. There are an estimated 19,700 multi-family starts expected this year and another 19,000 units forecast in 2019.

Although these are mostly not missing middle projects, BCREA says they will have a positive impact on housing availability and affordability because of three key reasons: renters will transfer into homeownership, increasing the rental supply; move-up or downsizing buyers will increase housing supply when they put their homes on the market; and more investors will buy and increase the condo rental supply.

"The aggregate increase in the housing stock can also help dilute the impact of migrants, non-income seeking investors and first-time buyers/renters on the cost of housing," says BCREA. "This surge in multi-family completions isnt the only solution for housing affordability in Metro Vancouver. However, a marked increase in aggregate supply can move the needle toward market balance and help slow the pace of housing price/rent growth in the region."

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