Two important things to note about the title of today’s blog, before we get started:
1) Toronto can’t build condos; it’s a city. Developers build condos.
2) I put “families” in parenthesis for a reason.
Ryerson University released a report this week lamenting the lack of 3-bedroom condos, and most of the media reports refer to “Toronto” doing the building, as opposed to “developers.”
Since when have developers been tasked with urban planning and civil engineering?
Why would anybody expect the free market to take us in the “right” direction?
I’ve been barking up this tree for a long time!
Believe it or not, the topic of “building larger condos for families” has been in discussion since 2009.
Check this out:
This report dates back to October 13th, 2009.
Eight years. Wow.
And here we are, in 2017, with the average home price up around 95% since the report was written, and maybe a handful of 3-bedroom condos built in the same time period.
Did the city fail us?
Or did they merely allow nature to take its course?
In that 2009 report, it was suggested that Toronto’s Official Plan be amended to require that developers of condominium units with more than 100 units include at least 10% 3-bedroom units.
I can’t find, with any certainty, a section of the Official Plan that specifies whether or not this amendment was made.
But over the last few years, the 3-bedroom units that have been built are not, in any way, suitable for “families.”
Why do I keep putting the word families in parenthesis?
Because I think it’s a word that gets thrown around a lot in the world of politics, and most of the time, it’s being used by somebody who has an agenda, is trying to prove a point, and/or wants something.
What is a family, anyways?
A married couple and their dog?
A husband and wife with an “only-child?”
One of those clans from Arkansas with 19 children who get their own TV show?
Call me cynical, but I can already see some politician, municipal, provincial, or federal, saying, “We need to build more housing for families,” to a roaring applause.
But perhaps I should back up a little…
This week, Ryerson University’s City Building Institute, in partnership with Urbanation, released a report on the state of condominium development in the city of Toronto, entitled: “Bedrooms in the Sky: Is Toronto Building the Right Condo Supply?”
I did speak to Globe & Mail columnist, Jeff Gray, on Monday about the topic, and you can find his article here:
Here’s an excerpt:
A study by Ryerson University’s City Building Institute and Urbanation, a real estate consulting firm, says that only 41 per cent of condominiums under construction or in preconstruction in the GTA have at least two bedrooms. That’s down from 67 per cent in buildings completed in the 1990s.
After a decade spent catering to millennials in the 25-34 age demographic and building small studio or one-bedroom condos, the report says, the city faces a shortage of large units as that cohort ages and starts having children. The GTA will be home to an additional 207,000 residents in the 35-44 age bracket over the next decade, steeper growth in that demographic than it has seen for 20 years.
The report, entitled Bedrooms in the Sky: Is Toronto Building the Right Condo Supply?, warns that many of those millennials will be looking to “upsize” and find larger – and affordable – condos in which to raise families in the city. But if they cannot find those units, the report says, they may be forced to seek more affordable housing on the city’s fringes, or even beyond the province’s Greenbelt.
The Toronto Star’s Tess Kalinowinski also picked up the story with her column:
Here’s an excerpt from this article as well:
The report called, “Bedrooms in the Sky: Is Toronto Building the Right Condo Supply?”, shows the price gap between detached houses and condos has tripled since 2007 — from $200,000 to $600,000.
In the City of Toronto, 38 per cent of condos in the pipeline have at least two bedrooms, compared to about 60 per cent in the 1990s. Across the entire region, only 41 per cent of condos being built have at least two bedrooms, down from 67 per cent.
The decline in the number of two-bedrooms may be a result of investor demand for smaller units. Sixty per cent of new construction condos are bought by investors, said Urbanation’s Shaun Hildebrand.
At the same time, buildings are getting taller — averaging 21 storeys compared to 15 in the 1990s. That’s not always appealing to families and seniors, said Burda. Only 7 per cent of coming units are in buildings five to eight storeys and only 3 per cent are low-rise walk-ups — the kind of housing planners call the “missing middle.”
In downtown Toronto, low-rise buildings account for only 9 per cent of development, compared to 29 per cent in the 1990s.
About 70 per cent of condo development is in the City of Toronto with 47 per cent (45,000 units) in the core. Toronto’s old suburbs, which contain about five times the amount of land, have about half the number in development.
I’ll be sure to update the blog this week if/when I get a copy of the report, but I think this is one report you don’t really need to read to know what it’s going to say:
1) Toronto real estate is expensive.
2) Developers are primarily building 1-bedroom condos.
What more is there to say before you start to draw conclusions?
It’s expensive to buy a house in Toronto? No kidding.
Anybody wanting to have children will need more than one bedroom? That’s true.
Do the math, and we realize that with not everybody being able to afford a freehold home, some people will have to consider raising a family in a condo. Right.
So then we get to the crux of the matter: that developers aren’t building “family-friendly” condominium units, ie. those with 3-bedroom condos.
But the obvious conclusion, to some, is that “developers need to start building more 3-bedroom condos downtown.”
And I’m here to tell you, quite simply, that I disagree.
Now here’s where I risk making things political, and I’ll try to keep the rhetoric to a minimum.
But if we are to assume that the free market will continue to determine the price of real estate (again, without going into politics, I believe a certain political body is crazy enough to start legislating the price of real estate…), then what good is building 3-bedroom condos if “families” can’t afford them?
As I said in the Globe & Mail article, the city’s heart was in the right place. They realized that there weren’t enough 3-bedroom condos, so they tried to force developers to build more of them.
But as is always the case with government intervention in the real estate markets, every action has unintended consequences.
Requiring developers to build more 3-bedroom condos, presumably for “families,” isn’t a bad policy.
But the problem is: there was no requirement on the size of the required 3-bedroom units.
So what we’ve seen over the past few years is a slew of 800 square foot 3-bed, 2-bath units, which I called, in the Globe & Mail article, “a dorm.”
I’ve seen these units before, where your living/dining/kitchen is one small, combined room, with micro-appliances, and no real room for a couch and a dining table. The three doors to the three bedrooms are all within arm’s length, and there’s absolutely no way to envision a family comfortably living there.
Who would comfortably live there?
Three foreign students.
Three foreign students, who don’t really need the use of a kitchen, don’t want to interact, and who basically study in their rooms, and unwind by watching Netflix on their laptops, on their beds.
Do foreign students buy condos?
But real estate investors do, and they crank out an incredible yield if they choose to rent out the condo room-by-room.
So let’s say, for argument’s sake, that the government got both of the first two parts of the condos-for-families equation correct: they required developers to build more 3-bedroom condos, and they mandated that the units must be, say, 1,400 square feet or more, so a family could comfortably live there.
What is the third part of the equation?
If it’s not obvious by now, you’re not following along.
So now you’ve required developers to build 3-bedroom condos for families. Great.
You’ve required the units to be large enough to avoid the units only being suitable for students. Perfect.
Now are you going to step in and legislate the price of these units in a free market?
Because if the government is willing to do that, then what the hell is the point of all this?
A 1,400 square foot, 3-bedroom condo in the downtown core would likely average around $1.1 Million.
What kind of “family” can afford that?
The whole notion of “building for families” is, in my opinion, ridiculous.
One might suggest that to stand back and do nothing isn’t the answer, but don’t worry – I have the answer for you.
The answer to “how to house families living in the downtown core” isn’t to force developers to build 3-bedroom condos, perhaps of a certain size, that families can’t afford.
The answer, and I’m not being facetious here, folks, is for families to not attempt to live in the downtown core, because the idea is, as I said, ridiculous.
If you think I’m being a jerk, I’m not.
I’m being reasonable, rational, and logical.
Market dynamics dictate price, price dictates affordability, and affordability dictates who lives where.
I don’t think we need to bring the word “should” into this, either.
Families should be able to live downtown, or they should be able to live wherever they want.
But “should” leads to fantasy. And our market is a daily reality.
Again, if we want to get political here, then we can.
It seems to me that our increasingly-socialist government is not only allowing the population to believe that every single man, woman, and child should be able to afford their own home, but actually promoting it.
Show me a city on planet earth where the ownership rate is 100.00%, I challenge you.
So why in the world are we talking about families being able to afford 3-bedroom condos in the downtown core?
Don’t worry, yet again, I have the solution. And it’s such an easy one, even a Premier could understand it.
Ready for this?
Move out of the city, and commute.
There. Your solution.
The solution is not to force developers to build 3-bedroom condos that families will never be able to afford, but rather to encourage, promote, and advise families that there are other areas in the GTA or Golden Horseshoe in which the could live.
There are 3-bedroom, 3-bathroom houses available in Pickering Village for $550,000.
It’s a 38-minute GO Train ride from Ajax Go to Union Station.
I’m not saying I’d want to do that every day, but if we’re talking about people who can’t afford to live downtown, then why don’t we give them options?
I had lunch with a few Manhattanites on Tuesday, and I asked them where they lived.
One of the guys said he lived in New Jersey, and took the train to the Financial District every day.
An hour, he said it took him, to and from work, every day.
And when I asked why he didn’t live in lower Manhattan, he looked at me as though the answer was obvious and said, “Because I can’t afford it.”
So why is Toronto any different?
Yes, I know; different political climates, and thus different expectations of the population.
But it seems to me that people who live in Toronto have this idea that they “should” be able to afford to live here, and when they can’t afford to live here, they don’t understand that they don’t have to live here, even if they work here.
Something has got to give.
I pull my hair out when I think about the government forcing developers to build crappy 3-bedroom condos that nobody wants to buy, just to say “We’re doing something about the problem.”
How about building infrastructure?
How about building another 150 subway stops across the GTA, more train tracks, more highways, more roads, and more transit?
How about connecting the Golden Horseshoe, so that people can move around freely, and efficiently?
How come in the Provincial Liberal budget this past spring, the City of Toronto was basically shut out?
Right, I forgot, we’re not going to make this political.
If you think the answer to the “where to we house families?” question is to force developers to build 3-bedroom condos, then let me know.
Otherwise, I’d love to hear your solutions…