The Soaring Cost of Home Ownership in Canada: A Challenge for Toronto

The dream of home ownership feels increasingly out of reach for many Canadians, particularly in major cities like Toronto. Over the last decade, the cost of buying a home has skyrocketed, raising critical questions about affordability and accessibility. This article delves into the recent trends in the Toronto housing market, the political responses shaping the upcoming federal election, and expert insights on what the future may hold.

A Historical Perspective

From the 1980s to the late 2000s, the price of the average home in Toronto and the Greater Toronto Area (GTA) typically fell within three to five times the average annual household income. This ratio has shifted dramatically since 2010, with current data from the Toronto Region Real Estate Board (TRREB) revealing that the average home now costs nearly 10 times the yearly income of the average household. This sharp increase not only stresses potential homebuyers but also shapes the political landscape, as one in six electoral seats in the federal election are located in the Toronto region.

Political Promises to Address Housing Affordability

Recognizing the housing crisis on their doorstep, major political parties have rolled out various proposals aimed at making home ownership more achievable. Here is a breakdown of what the Liberal Party, Conservatives, and New Democrats are proposing:

Liberal Party Proposals

1. GST Elimination on New Homes: The Liberals plan to remove the five percent federal Goods and Services Tax (GST) on new homes priced under $1 million, but only for first-time home buyers.
2. Accelerated Home Building: They propose to double the current number of new homes constructed to 500,000 annually within a decade, using a $4 billion Housing Accelerator Fund to incentivize municipalities to streamline building permit processes and reduce zoning restrictions.

Conservative Party Proposals

1. Broader GST Exemption: The Conservative plan addresses a broader range of new homes, offering GST removal for all new homes priced under $1.3 million, a significant expansion compared to the Liberal proposal.
2. Mandatory Construction Increases: Their strategy includes requiring cities to up new home construction by 15 percent annually, threatening to withhold federal funding from municipalities that fail to comply.

New Democratic Party (NDP) Proposals

1. Massive Construction Goals: The NDP’s ambitious plan aims for three million homes built over the next five years, advocating for increased funding to expand the Housing Accelerator Fund to $8 billion.
2. Focus on Affordable Housing: They emphasize the importance of building near public transit routes and increasing the availability of multi-unit housing in all neighborhoods.

Expert Insights: Assessing the Proposals

The Real Impact of GST Changes

Experts cast doubt on how effective the GST cuts would be in making homes more affordable, highlighting that resale homes—which make up about 75% of the market—are not subject to GST. As Steve Pomeroy, a professor at McMaster University, notes, "Developers typically absorb additional costs into the market price of new homes." This often results in buyers not benefiting significantly from tax cuts.

John Pasalis, president of the real estate brokerage Realosophy, further critiques proposals that benefit all buyers over first-time owners, urging a targeted approach to make home ownership achievable for younger families.

Speeding Up Home Construction: Carrot vs. Stick

All parties propose to increase the pace of new constructions, but their approaches vary. Pomeroy differentiates between "carrot" and "stick" methods: the former uses incentives and collaboration with municipalities, while the latter relies on penalties for non-compliance. He argues, "You catch more bees with honey."

Several experts point out that developers have stalled approved projects due to unfavorable market conditions, meaning municipalities are not solely to blame for delays in construction. The implications of such reality raise questions about the effectiveness of penalizing them for inaction when developers are the ones holding back.

The Future of Affordable Housing

In addition to procedural changes, the parties also have differing views on building affordable housing. The Liberal proposal to create a Crown corporation called Build Canada Homes aims to finance affordable construction across the country, while Conservatives focus on selling federal land for new housing developments.

The NDP emphasizes that all surplus federal land should be used exclusively for affordable housing, underscoring a clear commitment to prioritize accessibility over profit.

Navigating Challenges Ahead

As experts like Pasalis and Pomeroy suggest, addressing the housing affordability crisis requires more than just election promises. The interconnected challenges of investment-driven price hikes, speculation, and limited availability of land make any substantial impact a long-term endeavor. It becomes abundantly clear: meaningful change requires collaborative efforts to adjust policies that address systemic barriers and lower the threshold for potential homebuyers.

Conclusion

As Toronto’s housing market continues to grapple with soaring prices, the upcoming federal election prompts critical discussions around policy reforms. The proposed measures from Canada’s leading political parties offer various pathways to ameliorate the situation, though skepticism remains about their potential effectiveness. Ultimately, while political promises may evolve, the reality faced by potential homeowners demands persistent focus, comprehensive solutions, and the collective effort of all stakeholders involved.