Toronto 1891 Eglinton Avenue East | 167.08m | 52s | Mattamy Homes | Arch. Unfolded

[EnviroTO]

There's a ton of important minutiae to any application and behind the scenes there's always someone more to blame, but to make declarative "this is why there's a housing shortage" posts is unhelpful and doesn't get at the root of the problem (an entirely market-driven, for-profit, housing sector with little to no relief from governments at all three levels).

Ok, correction... this is a symptom of why there is a housing shortage. The reality is though, is that there are a lot of threads similar to this one where the project never starts. To solve the housing shortage properties like this one need to be looked at to understand why after 10 years this is still not developed. Over ten years market conditions have changed significantly so if it can't start as a project now, what is the missing ingredient, and if it didn't start before what was missing. It could be multiple things... a tax/interest regime that made it more profitable to land swap before than to develop, an expensive market with medium interest rates now slowing things down, staffing / expertise costs or availability issues throughout, whatever. My point is that this forum (and the map) is littered with proposals that could collectively be the problem and the solution to the housing crisis if they could get built in a timely manner. Understand why this isn't developed yet and that goes a long way to solving this housing crisis.

 

[ProjectEnd]

A huge part of the issue is that you can't exist in a 'YOLO, FOMO, cheap money' environment forever. Folks who underwrote projects in that time aren't moving forward because their metrics no longer make sense. At the current PSFs ($1500-2000), investment properties no longer make sense, end user sales are even slower than usual, resale is more valuable to purchasers, and folks who did buy in the heady days of cheap money can't close because their valuations are under water.

At the end of the day, this industry is generally not moving forward with new inventory because we've created unsustainable expectations: the bulb burned twice (or more) as bright and now it's out of juice. Land values and construction costs will come down and lots of companies will lose a whole bunch of money, but that's necessary to bring things back to equilibrium.

From Urbanation's presentation this week:

 

[Northern Light]

No wonder there is a housing shortage, look at the date on the first page of this thread and look at so many other threads and see the same thing.

Toronto and its developers... Experts in the delivery of development study. More housing delivered on paper than any other place in Canada. If we could convert our people out of reality and into study things would be perfect.

I'm going to take a different tack than @ProjectEnd

Toronto has been top 3 in housing starts for Cities in North America every year for the last decade.

The industry has built lots; it's simply entitled or zoned more than it could construct.

As I've explained in multiple threads, lots of times, up to recently and even now, crews are pretty much maxed out. Some trades have more slack than others, but crane operators, and drywallers are in acutely short supply.

You could literally abolish zoning and not get any more units built in the Golden Horsehoe, even if the interest rate climate were more favourable, which it is not.

***

Fault developers for building too much crap and government for allowing it.

Too few elevators, units that are too small with bizarre/non-functional layouts, and some aesthetic issues too!

By all means lets dump on gov't and industry for focusing too much on investor boxes and too little on purpose-built rental.

But changing the above would produce better housing, not more.

Curtailing demand is the only way to cope in the near term, we simply can't add more than 200,000 residents to Golden Horseshoe each year and build sufficient supply to even keep up w/demand never mind exceed it, which is what would
be needed to tackle high prices and lack of available units.

 

[ProjectEnd]

The current slackening in housing / condo starts is starting to force hard pricing to come down as folks see the end of the current tunnel where they have no work after the next job. It's an interesting elasticity - they've invested hugely in workforce and machine power, and the idea that all of that could just be sitting idle in a yard in Vaughan is starting to cause some distress. So their calculus is that they take the next job at a rate that pays the bills and keeps them afloat but doesn't see much profit.

 

[Northern Light]

The current slackening in housing / condo starts is starting to force hard pricing to come down as folks see the end of the current tunnel where they have no work after the next job. It's an interesting elasticity - they've invested hugely in workforce and machine power, and the idea that all of that could just be sitting idle in a yard in Vaughan is starting to cause some distress. So their calculus is that they take the next job at a rate that pays the bills and keeps them afloat but doesn't see much profit.

I'm fascinated by how certain price points have held, not just on the residential side.

Look at the this charge of Commercial Office Space rent vs availability from Cushman Wakefield's latest Market Beat:

Source: https://cw-gbl-gws-prod.azureedge.n...2023.pdf?rev=33406b08bff54c28a7d34ee48685882f

The rent ask is defying gravity and logic. Triple the vacancy rate, rent is actually above 2019 levels!

 

[innsertnamehere]

I'm fascinated by how certain price points have held, not just on the residential side.

Look at the this charge of Commercial Office Space rent vs availability from Cushman Wakefield's latest Market Beat:

View attachment 520936

Source: https://cw-gbl-gws-prod.azureedge.n...2023.pdf?rev=33406b08bff54c28a7d34ee48685882f

The rent ask is defying gravity and logic. Triple the vacancy rate, rent is actually above 2019 levels!

These can be deceiving as it ignores incentives and inflation. Asking rents have increased 8% since covid - but inflation in that period has been 15%.. so that's a real decline of 7%. Plus on top of that landlords are stacking massive incentives (fit out funds, short-term discounts, etc.) which weren't previously offered and which aren't reflected in the asking rent figure.

Ultimately landlords are hesitant to give up their asking rents as that protects their revenues over the long term. They would much rather hand out sign-on incentives which protect long-term revenue, so that is always the first thing they try to incentivize leasing.

Anecdotally I know some businesses that got large renovation incentives and rent decreases for them to *renew* their leases, yet alone for a new tenant. The office market is in the absolute crapper right now.

 

[innsertnamehere]

I'm going to take a different tack that @ProjectEnd

Toronto has been top 3 in housing starts for Cities in North America every year for the last decade.

The industry has built lots; its simply entitled or zoned more than it could construct.

As I've explained in multiple threads, lots of times, up to recently and even now, crews are pretty much maxed out. Some trades have more slack than others, but crane operators, and drywallers are in acutely short supply.

You could literally abolish zoning and not get any more units built in the Goldenhorsehoe, even if the interest rate climate were more favourable, which it is not.

***

Fault developers for building too much crap and government for allowing it.

Too few elevators, units that are too small with bizarre/non-functional layouts, and some aesthetic issues too!

By all means lets dump on gov't and industry for focusing too much on investor boxes and too little on purpose-built rental.

But changing the above would produce better housing, not more.

Curtailing demand is the only way to cope in the near term, we simply can't add more than 200,000 residents to Golden Horseshoe each year and build sufficient supply to even keep w/demand never mind exceed it, which is what would
be needed to tackle high prices and lack of available units.

A big reason Toronto has also seen "zone and flips" become such a big thing is that there is basically 0 existing entitlements in the city. Every single development needs to go through an extensive, years long entitlement process. It's no wonder landowners find value in it even with no intent to build. Developers need a supply of entitled land to move to construction to respond to market shifts - if you have a 3-4 year lead time on construction start, you can't do that.

Drive down to the QEW to Hamilton where the city, which never utilized Section 37 benefits and thus had no incentive to keep zoning artificially restrictive, and you get almost no "zone and flips" - most applications are from builders who intend to build as it's only a site plan. They are varyingly successful at building given the low psfs in Hamilton which make it challenging to pencil.. but the problem isn't entitlements as the City has actually done their job and given as-of-right permissions for appropriately sized developments. There isn't value in zone and flips as there is already adequate supply of entitled land.

 

[egotrippin]

57% of condos built since 2016 are considered to be investor owned, I imagine that factors heavily into affordability issues too. Now one might argue they wouldn't exist had investors not bought them, but it's a lot of housing going to the exact opposite of people who need it.

 

[Undead]

This is an issue with many causes which requires "silver buckshot" solutions because there's no magic sliver bullet answer.

First, like NL said, we must limit demand (lower "population growth").

At the same time, bring in much more construction labour; and bust up the unions to force them to accept new hires. Currently, many unions restrict hiring to keep wages high.

Interest rates need to stay at a reasonable level, say 2-3% (still low by historical standards) to reduce real estate speculation.

Zoning should be loosened to allow multiplex and midrise in more areas.

Reduce development redtape but also hire more planning staff because the current crop are severely overworked under the volume of applications.

In the long term, our entire economy needs to pivot away from the mass migration/endless demand generation model. I would argue for the Norway/Gulf model: a small population provided for by vast natural resource wealth.

This was our traditional model that we should have never abandoned for the speculative endless money printing regime.

 

[Obsidian]

57% of condos built since 2016 are considered to be investor owned, I imagine that factors heavily into affordability issues too. Now one might argue they wouldn't exist had investors not bought them, but it's a lot of housing going to the exact opposite of people who need it.

I really don't get the logic you are saying here and which many in the public stick to. is the 57% of investors stopping non-investors from buying homes in Toronto???
don't we have way more units for sales than actual buyers?? isn't there always more units for sale than buyers??

would removing 57% of condo built since 2016 from the rental market be good for affordability in the city???
Don't we want more rental units in the city to keep prices stable??

 

[Northern Light]

This is an issue with many causes which requires "silver buckshot" solutions because there's no magic sliver bullet answer.

Yes

First, like NL said, we must limit demand (lower "population growth").

Self-evidently, I agree, LOL

At the same time, bring in much more construction labour; and bust up the unions to force them to accept new hires. Currently, many unions restrict hiring to keep wages high.

I don't think this a large factor at this point. If you want to train as a high mast crane operator, there are spots available. Filling them is a challenge, even though the potential pay is easily six-figures.

I'm not going to suggest organized labour has not and does not constrain apprenticeships in some disciplines........but I don't think that's a large factor overall at the moment.

Interest rates need to stay at a reasonable level, say 2-3% (still low by historical standards) to reduce real estate speculation.

Somewhat disagree. Lower interest rates are desirable from the standpoint of making the economics of new builds work, but while they would potentially increase construction at the margins, they would also increase speculation.

Investors are among those most effected by high interest rates, many are highly leveraged..

Zoning should be loosened to allow multiplex and midrise in more areas.

Yes, though largely already has been in Toronto; some further loosening for as-of-right greater height and purpose-built rental on main streets is also needed, and will likely be in place by the end of Q1 2024.

Reduce development redtape but also hire more planning staff because the current crop are severely overworked under the volume of applications.

Toronto Planning got significant pay raises last year and substantial hiring....

I can't speak for the assorted gov'ts beyond City limits..........but Toronto should be in a decent place shortly. There's some ongoing reorganization issues to get things just so.......

In the long term, our entire economy needs to pivot away from the mass migration/endless demand generation model. I would argue for the Norway/Gulf model: a small population provided for by vast natural resource wealth.

Absolutely, 100%

This was our traditional model that we should have never abandoned for the speculative endless money printing regime.

Uhh, I'm not sure we ever had this model down the way the Swiss, or the Danes or Norwegians do............but yes, we were a bit closer to it in the past; and we went the wrong direction.

 

[Northern Light]

I really don't get the logic you are saying here and which many in the public stick to.

You don't 'get' alot of things..........you're boosterish for growth with blinders on, and always have been.

is the 57% of investors stopping non-investors from buying homes in Toronto???

Yes.

don't we have way more units for sales than actual buyers?? isn't there always more units for sale than buyers??

No.

If this were true, prices would be falling.

You need to understand supply and demand better.

would removing 57% of condo built since 2016 from the rental market be good for affordability in the city???

No one is talking about that. We're talking about ownership units that are built for investors, incidentally rented; instead being purpose built rentals.

Don't we want more rental units in the city to keep prices stable??

Sure, we want more rental units, but what we have is investor-owned units, some (not all) of which are being rented.

They are sized too small to fit investor budgets and preferences.

They aren't sized or laid out for occupants/renters/live-in owners.

This notion that units would not be built but for investors is BS.........

There were few, if any investor owned units before the 1990s........

Housing was still built and it was far more affordable than today.

 

[EnviroTO]

There are two issues which overlap because of investors. One is the negative effects of low interest rates in terms of inflation, and the other is the rate of population growth as compared to housing development rate.

Low interest rates took money from the future to put it in the economy now. This has caused general inflation which really isn't so bad if all boats rise the same amount, but the reality is that low interest rates (that were not passed on to credit card holders) affected the money available for investors. Not all boats went up at the same rate and those invested in real estate or employees by the industry (real estate, construction, construction supplies) are ahead. Yes, salaries increased significantly, yes costs went up, but it feels like for the last 15-20 years (data not from study, only observation) general inflation was something like 50%, whereas housing and construction went up 200%. Low interest unbalanced the market.

The other part of the issue is population growth compared to housing construction. Yes, one option is lower population growth rate and for Canada that means putting the brakes on immigration. The option option is build more faster. We have been bringing in people from other companies to fuel the economy in many areas but has the growth in tech world equalled the growth in construction workers? If the economy is to remain balanced wouldn't rapid growth in the population in a certain set of fields require growth in the fields that support those people? Yes, over the past 15 companies built housing, maybe the most housing ever, but Toronto is the biggest it has ever been, and is growing faster than ever, so unless stats are per capita or per population growth, starts about total units are meaningless.

Proposed Solution : Keep interest up (it will be painful but the economy will rebalance). Grow construction and development capacity through trades training, foreign developers, and immigration. Provide construction financing loans that are 0% for five years and normal rate afterwards so the cost of construction is paid for.

 

[Northern Light]

The option option is build more faster. We have been bringing in people from other companies to fuel the economy in many areas but has the growth in tech world equalled the growth in construction workers?

There is no vast surplus of high-mast crane operators in other countries from whom we can poach, so far as I'm aware; no vast surplus of drywallers either.

We generated tech workers, because the world (and Canada) has been churning them out en masse.

But that simply isn't true of the trades in the same way.

There are a wide variety of reasons for this, apprenticeship ratios/availability is one; but even where disciplines have opportunities; such as those in high-mast crane operation. Filling the available spots is hard; despite very good pay and almost guaranteed full-time employment.

Retirements are also far exceeding our ability to train replacements.

Grow construction and development capacity through trades training, foreign developers, and immigration.

See above. I don't believe this is feasible.

Proposed Solution : Keep interest up (it will be painful but the economy will rebalance).

I'm ok w/this if we curb demand in other ways; because the above will decrease supply.

Provide construction financing loans that are 0% for five years and normal rate afterwards so the cost of construction is paid for.

Who on earth is providing 5-year construction loans at 0%? Not the banks; not private equity. Do you mean the government should provide 0% construction loans for 5 years to for-profit developers? You must be kidding.

Canada had just under 300,000 housing starts last year. Addressing our issues w/housing supply would demand considerably more. But just funding what we're building now......

At a construction cost of ~$700,000 per unit that's a 200 Billion dollar construction loan for just 1 year, or a 1 Trillion over 5 years.

For all of that, it wouldn't really impact affordability much, because developers will not automatically pass on savings; and even if they did, the resulting price point for rent or ownership would be out of reach for millions of Canadians.

 

[EnviroTO]

There is no vast surplus of high-mast crane operators in other countries from whom we can poach, so far as I'm aware; no vast surplus of drywallers either.

We generated tech workers, because the world (and Canada) has been churning them out en masse.

But that simply isn't true of the trades in the same way.

We have a constant pipeline of people through university into tech. They key would be to make it advantageous to do the same in trades. A Baccalaureate of Construction Delivery program where people graduate with the skills to run their own construction business complete with 3-4 trades certifications perhaps. The promise of a life in Canada, a university education, and employment afterwards could build a pipeline of talent that allows us to reintroduce competition and innovation in the market.

Who on earth is providing 5-year construction loans at 0%? Not the banks; not private equity. Do you mean the government should provide 0% construction loans for 5 years to for-profit developers? You must be kidding.

Yes, it would be the government. The idea is the loan would be at 0% (or incredibly low) during periods of active construction and during the one year warranty period, limited to 5 years duration at that low rate, and after that period the interest would be at market rates. Perhaps the lower the interest rate, the greater the commitment on sale prices being in a targeted range or to include greater number of 3 or 4 bedroom units/homes for families. The goal would be to put the incentive on construction and building only, and to not reward holding on to units afterwards. A complimentary taxation regime could also make property speculation an unprofitable venture and so that holding land that is zoned for development and has servicing is taxed in a way that there is pressure to complete development and pass the property onto people who will actually use it.

For all of that, it wouldn't really impact affordability much, because developers will not automatically pass on savings; and even if they did, the resulting price point for rent or ownership would be out of reach for millions of Canadians.

If there is supply above demand, if it is profitable to build housing, and it is unprofitable to hold onto properties that are underutilized, those properties will be unloaded. Right now the biggest cost in housing is the property, not the build.

Right now the economics favour property speculators that are making money on property based on the potential of that property while paying taxes for its current use. With the right tax regime this could be flipped upside down to have people see the property as what it is, to want to keep farm land zoned for farming until they actually are ready to build, to keep property zoned low density until ready to build high density, because without using the property to its potential they can't afford the taxes.