Five ways that Canada's housing market is broken

This episode explores the critical issues plaguing Canada's housing market, including high prices, low vacancies, and regulatory challenges.

1. Many Canadian cities, including smaller or mid-sized ones, are experiencing critically low vacancy rates, exacerbating the housing crisis.
2. Historical urban planning decisions, such as Vancouver's 1972 zoning laws, have long-term effects on housing availability and types.
3. Regulatory hurdles and development delays significantly impede the construction of new housing, leaving prime real estate undeveloped.
4. University towns are facing unique challenges with housing due to increased enrollment without corresponding increases in residence capacity.
5. The episode highlights the disparity in housing development across different regions, with some areas seeing significant growth in family-sized homes, contrasting sharply with others.

1: Introduction

An overview of the episode's focus on Canada's housing market challenges. Rachel Levy McLaughlin: "Canada's housing market is in bad shape."

2: The Vacancy Crisis

Discussion on the low vacancy rates across Canada and their implications. Matt Lundy: "Rental vacancy rates...in smaller or mid-sized cities are shockingly low."

3: The Giraffe Building Saga

Exploration of a problematic real estate development in Toronto. Jason Kirby: "This building has been sitting empty...while the rest of the area has been built up."

4: University Housing Crunch

The impact of increased university enrollment on local housing markets. Jason Kirby: "There's basically more first year students than the university's residence has the capacity to hold."

5: Urban Planning and Housing Types

Analysis of urban planning's role in housing types and availability. Frances Buhla: "Vancouver used to have a lot of different single family zones...they're gradually simplifying that."

1. Advocate for updated and flexible urban planning to accommodate diverse housing needs.
2. Support local policies that incentivize the construction of varied housing types.
3. Engage in community discussions to understand and address local housing challenges.
4. Consider the broader impact of university expansions on local housing markets and advocate for integrated planning.
5. Stay informed about local development projects and participate in public consultations to ensure community needs are met.

The problems with Canada’s housing market have spread beyond major cities like Toronto and Vancouver to smaller communities across the country. Vacancy is low, houses are prohibitively expensive for many Canadians, and even rental prices have spiked an average of nearly 9% over the past year. How did it get this bad, and why is it so hard to fix?

We zoom in on five examples that demonstrate how and why the market isn’t working. Reporters Matt Lundy, Jason Kirby, Frances Bula and Shane Dingman join us.

People

Rachel Levy McLaughlin, Matt Lundy, Jason Kirby, Frances Buhla, Shane Dingman

Companies

The Globe and Mail

Books

None

Guest Name(s):

None

Content Warnings:

None

Vas Bednar
Welcome to lately a new Globe and Mail podcast. I'm Vas Bednar, and every Friday I'm going to be having a conversation about big defining trends in business and technology that are reshaping our everyday find. Lately, wherever you get your podcasts.

Jason Kirby
People are really angry and frustrated with the housing market and they don't really know why we got into this mess.

Rachel Levy McLaughlin
That's Globe reporter Jason Kirby.

Jason Kirby
A lot of the reasons when you start to pull them apart are fairly straightforward, extremely infuriating, could have been handled differently and they could all add up to where we are now.

Rachel Levy McLaughlin
I don't need to tell you that Canada's housing market is in bad shape.

Vacancy rates in many cities are near zero. Canadian rent prices have spiked around 9% in the past year alone. And buying a house remains out of reach for so many people.

So my colleagues dove into five specific examples from across the country to help us make sense of this current housing crisis.

Today I'm speaking with Globe reporters Matt Lundy, Jason Kirby, Frances Buhla, and Shane Dingman to talk about what these situations can teach us about Canada's dysfunctional housing market.

I'm Rachel Levy McLaughlin and this is the decibel from the Globe and Mail.

Matt Landy, good to have you here.

Matt Lundy
Thank you for having me.

Rachel Levy McLaughlin
So Matt, you're an economics reporter for the Globe and you were looking at vacancy rates outside of the major cities. So what did you find?

Matt Lundy
Yeah, I was looking at the rental vacancy rates across Canada and what really struck me was how low they were in these smaller or mid sized cities. So places like Red Deer, Alberta, wherever the apartment vacancy rate was 0.8% last year. Seven years ago it was north of 13%, which is like unusually high. But it just goes to show that things can really change in a hurry. And you've got other places like Charlottetown, Troy Riviere, Quebec, places that you wouldn't necessarily associate with the housing crisis if you don't live there. But those are places with vacancy rates under 1% as well. So there's just not a lot of available housing out there, no matter where you go. Pretty much.

Rachel Levy McLaughlin
So what's going on in Red Deer? Why did we see such a drastic drop in vacancy rates?

Matt Lundy
Yeah. So for one, they're clearly not building enough or they haven't built all that much over time.

Like the province at large, they are going through this boom period for the population.

Alberta grew 4.5% last year. That was the highest since 1981.

It's not just immigration that is fueling this, although that is part of it, but they are getting massive migration from other provinces, BC and Ontario in particular, where people are looking for affordable homes. Alberta is certainly more affordable than BC and Ontario and that's putting a lot of pressure on the system. There's a lot of demand right now and that means in places even like Red Deer, there's just not a lot of available housing.

Rachel Levy McLaughlin
I understand there's something about the rental rules in Alberta that's playing into this. Can you talk me through that?

Matt Lundy
Well, one thing that is going to make people fairly vulnerable, I would say, in Alberta is that they do not have rent control. So they don't have mandated limits on annual rent increases. A lot of provinces do, some don't. For tenants, this is a pretty vulnerable situation because conceivably if you're landlord said, hey, we can easily rent this place out to someone else, there's so much demand out there, I'm going to hike your rent by $500 a month. There are some people in that equation are going to be like, you know what, it's pretty rough out there. I'm just going to do that. I'm going to figure out a way to make ends meet and that can be really tough. And we do see in the numbers that Alberta right now for a lot of reasons, and not purely because of rent control, but their rents are like skyrocketing right now from a lower base than places like Toronto and Vancouver, where it's already really expensive. But things are going up in a big way there.

Rachel Levy McLaughlin
So how does this lack of vacancy problem affect people in the province, both homeowners but also renters?

Matt Lundy
There's a lot of issues at play here. One is that we clearly have an issue with homelessness in various cities. And when you don't have a lot of available housing, people end up in pretty precarious spots at the other end of things as well. One area where we've seen a huge increase in renters is two income, white collar, professional households, people who normally would be buying a home and freeing up space for other people who are priced out of the market, as well as just people paying way too much for their housing. And that means it's crowding out other things that they could be doing, ways that they could be saving for the future.

So it really runs the gamut, all these implications.

Rachel Levy McLaughlin
And are we seeing this in other parts of the country as well?

Matt Lundy
Yeah, the vacancy issue is really a national thing. Like the vacancy rate last year across the country was 1.5%, which is the lowest it's been since at least 1990. That's as far back as the stats go.

It is a national problem. We really aren't building enough rental housing. And that's something that really came about. Like in the nineties. We stopped building rental housing sort of in the nineties and two thousands, and we're living with a lot of the consequences now.

Rachel Levy McLaughlin
Next, we're going to talk about a single building that tells a much bigger story.

The Globe's Jason Kirby is here to tell us about the giraffe building in Toronto. Jason, welcome.

Jason Kirby
Thank you very much for having me.

Rachel Levy McLaughlin
So paint a scene for me of this giraffe building in Toronto. It's at the intersection of Bloor and Dundas, a major intersection in Toronto. I actually live right by this building. So for those who haven't seen it, describe this building for us.

Jason Kirby
Well, it gets its name not because it looks like the shape of a giraffe. It's actually a very squat little two story building, commercial retail on the bottom. And it formerly residences on the second floor. But it's painted exactly like giraffeskin. It's this mottled yellow and brown patchy paint. It's a very rundown looking building now. But this still kind of comes through, stemming from when it was going to be called the giraffe condos. And this was their kind of like their presentation building.

Rachel Levy McLaughlin
And in your story, I haven't seen this personally because I think it was gone by the time I started living in this neighborhood. But there was a sign. Can you just tell me about the sign?

Jason Kirby
Yeah. The sign existed and it hung there, kind of like mocking everybody who went by saying units starting from 199,000, which, you know, if you were into like the 2019 period, you'd be like, wow, where can I get a $199,000 home in Toronto? But that was literally, it had been sitting there for years and years and years because this building has been sitting empty for 15 or 16 years.

Rachel Levy McLaughlin
So what's the story behind this building? What's been going on?

Jason Kirby
Well, basically, developers got it. They decided they were going to call it the giraffe condos. They put forward their proposal for this really tall condo building. The city opposed it because they said that it was too large for the footprint of the site, and they rejected it. There were appeals, that appeal got rejected, and basically that ended that plan. And so then that developer sold it. Another developer took it over, sat on it for a number of years, didn't do anything, parceled together some other units, and then they in turn flipped it to somebody else. And so then another developer came in. They did get approval for their building, but then they didn't proceed with it. And so now as of December, it's back on the block again, you know, going around for its fourth owner. And there's not been anything built on it all that time, just sitting empty of this prime location while the rest of the area has been built up. And it's just the juxtaposition of what we're talking about here with this shortage of housing, with this prime real estate sitting on a subway stop, sitting, you know, on a go train station, you know, right on the line there. And it's hardly alone. It's just like one of many. Every neighborhood in Toronto has these. So we don't really have a shortage of land, but we have all these problems where on the one hand, it takes forever to get developmental approval from the city to go ahead, but then on the other hand, the city complains. Well, we even when we do approve, developers end up just sitting on these sites and they don't do anything.

And so as you're walking around knowing that we're in a housing crisis, to see all this land just sitting undeveloped, it's extremely frustrating.

Rachel Levy McLaughlin
So, Jason, you also looked at another example of Canada's housing problems, and this one is at the University of Guelph. So what's going on at the University of Guelph this year?

Jason Kirby
Well, basically what happened was the university decided to dramatically boost its enrollment. They did that for financial reasons, they say, because the province has kind of frozen tuition and frozen some of the grants and the funding to schools. And so if you can't get more per student, you need more students. So they decided to boost their enrollment. What happened, though, was they boosted it so much that there's basically more first year students than the university's residence has the capacity to hold. And so you ended up with these stories of, you know, 1314 hundred students being on these waitlists for these residences, students and parents who thought that there was a guarantee that they were going to get a residence spot. And then they find that there isn't. And now they're out there trying to find accommodation in this really tight, low vacancy rental market in Guelph.

Rachel Levy McLaughlin
Right. So what does that mean for the students? What kind of position are they in?

Jason Kirby
There's anxiety, there's frustration, there's anger. You're gearing up to go to your first year of university and you don't even know where you're going live. I spoke to one single parent who was like I don't know how I'm going to pay the extra costs for my daughter to go to university because it's going to cost more. You know, if you're going to go off campus and find an apartment, you're going to probably have to do a twelve month lease. It's going to cost more. I spoke to one person who said like typically a room three or four years ago would go for about dollar 500 a month. Now you're looking at 1000, 1213 hundred dollars a month. That's a big change in a short amount of time. So it's a financial pressure and just the overall anxiety that they're going through.

Rachel Levy McLaughlin
So what does this situation tell us about university towns and their housing markets?

Jason Kirby
Well, this has been building for a number of years because universities and colleges and private schools have been increasingly boosting their enrollment, particularly targeting international students because they pay higher tuition. And it's great for solving your budget problems. But what they haven't been doing at the same time is building out their residence and their accommodation, offering to house all those people. And they've been basically offloading it onto the city. If you go back to the pre pandemic, you know, and it talked about the housing crisis, people in Toronto and Vancouver would kind of like, oh yeah, yeah, I know all about the housing crisis. But now it's really been spread out into a lot of smaller cities and communities from Nova Scotia all the way to Vancouver island where you've got this imbalance. It's basically a planning mess where more students are being brought in but no plans to actually accommodate them.

Rachel Levy McLaughlin
We'll be right back.

Vas Bednar
Welcome to lately a new Globe and Mail podcast that's all about navigating life in the new economy. I'm your host, Bastner.

Every Friday I'm going to be having a conversation, maybe even a raucous one, about big defining trends in business and technology that are reshaping our everyday. It's about the innovations that are changing our world, whether you've noticed them yet or not. Join us for the latest on lately wherever you get your podcasts.

Rachel Levy McLaughlin
Now we'll turn to Vancouver, which is trying to build more homes. But a rule dating all the way back to the 1970s is getting in the way.

The Globe's urban affairs contributor Frances Buhla is here to explain. Frances, thanks for being here.

Frances Buhla
Oh, thanks. It's great to talk about my favorite subject of the last 30 years.

Rachel Levy McLaughlin
You wrote about this eight unit apartment building that's being torn down in Vancouver to make room for three single family homes. What's the bigger story of why this is happening?

Frances Buhla
So that apartment building was built at a time where you could build small apartment buildings in various places in the city. And the council of the day in the fifties and sixties also allowed for the massive redevelopment of the west end that you see in Vancouver today with a lot of apartment buildings next to Stanley park and the beaches. And they were starting to allow some taller buildings in other parts of the city, which had been pretty low rise. And then a new reform council swept in, the kind that was like, we're going to listen to the neighborhoods, we're going to listen to the residents. We're not going to be under the thumb of developers anymore. So they down zoned a lot of the city. And so this particular site, which is very attractive, it's on Kitsilano Point, surrounded by beaches. Just a beautiful area where this apartment had been allowed. It was part of this general down zoning in the city to only permit by right single family houses, something that people thought was a great move at the time and put a sticking their thumb in the eye of evil developers, but actually resulted in the housing shortage that we see today and not unique to Vancouver. It happened in many cities and resulted in a real slowing down of the ability to build denser housing and the shortages that we see today.

Rachel Levy McLaughlin
Right. So it seems like this 1972 decision from city council was pretty significant in shaping the city of Vancouver. Is that fair?

Frances Buhla
Oh, for sure, for sure. Because about 60% of the city is reserved for single family zoning where, you know, less than half the population lives and the other half is kind of crammed into these small areas where, you know, more density was allowed over the years.

Rachel Levy McLaughlin
So politicians have repeatedly vowed to reduce red tape and increase density in Vancouver. How much are we seeing that happened?

Frances Buhla
Well, it's starting to accelerate. You know, for a long time when I covered Vancouver, there was very little change. You know, people would come out and object to any new rental apartment, even townhouses and council would often concede defeat in those cases.

In 2009, they started allowing laneway houses, and that was a change. And then, you know, a few years ago, they started allowing duplexes. But it took a long time to happen because there was incredible resistance from homeowners, who are the biggest voting bloc in city elections. And city elections often have low turnout. So that homeowner voting block is incredibly important to most politicians.

Things really only changed when politicians realized there's a lot of millennials who are also voting, and they're really angry because they can't get into housing. And that's when you started to see some changes happening just in the last few years as that demographic shift happened and a lot of anger about being unable to access housing.

Rachel Levy McLaughlin
So what does this example that we're seeing in Vancouver sort of tell us about the wider housing problems that we're seeing in Canada?

Frances Buhla
Well, in the fifties, sixties and seventies, there was a lot of building going on, single family houses, suburbs were exploding and a lot of apartments as well because the federal government had policies in place to encourage it. There were provisions for tax write offs for people investing in apartments and there were certain tax benefits to owning apartment buildings. And there was a fairly robust social housing program.

And gradually the federal governments of various eras got rid of those, thinking everything was fine. And as I've said to people, it's a bit like a plane that runs out of gas, but it can still glide for quite a while. So I feel that's like, that's what happened with Canada's housing dynamic, was that things seemed to be fine because the plane was still gliding along in the air for a long time and it took people quite a while to realize, no, this is eventually going to crash because we're just not building enough and we're not. We've eliminated policies for creating lower cost housing.

Rachel Levy McLaughlin
A lack of housing is one thing, but there's also the issue of what type of housing is being built. The Globe's real estate reporter Shane Digman is going to tell us more. Hi, Shane.

Shane Dingman
Hi.

Rachel Levy McLaughlin
You looked at Peterborough, Ontario and the types of homes that they're building there. Tell me about that.

Shane Dingman
Yeah, it all came from a sort of a tweet, which is a silly way to maybe start a story. But, you know, Mike Moffat, an economist in Ottawa who works at the University of Ottawa Smart Prosperity Institute just tweeted a chart of a bunch of places that we're building three bedroom homes between 2016 and 2021. And Peterborough, which is like a small city of under 100,000 people between sort of Toronto and Ottawa, was building more of those types of homes, three bedrooms and more types of homes than Toronto, the largest city in the country, one of the most expensive cities in the country. And Toronto, I think their stock grew like less than 1%. Peterborough, their stock went up by almost 8%. And the percentages are one thing, but in sheer numbers, Peterborough had Toronto beat, which is rates versus real numbers can sometimes be really stark. So they built almost 3000 homes with those kinds of bedrooms and Toronto built less than that.

Rachel Levy McLaughlin
Right. And it's not just Peterborough that's building more of this type of housing than Toronto, right?

Shane Dingman
Oh, yeah, that's right. Toronto is like 14th on the list in Ontario. Just Ontario. And lots of municipalities are doing better in terms of sheer numbers and also in percentages so that Toronto doesnt build houses. We should be clear. They built almost 50,000 houses in the same time period. But what they build is different. So Toronto, their fastest growing unit was actually homes that didnt have bedrooms. These are bachelor apartments. Those went up like 28,000. Thats like almost a 30% jump in that time period.

Rachel Levy McLaughlin
So how is it that Peterborough is building more units of this size than.

Shane Dingman
Toronto is, has a lot to do with sort of the land economics of the two cities.

Vas Bednar
Right.

Shane Dingman
So Toronto were surrounded by a greenbelt and so theres not a lot of like, land, just raw land that could be built into sort of single family home, ground level housing, they sometimes say. And so what you have to do, if you're going to be building these kind of homes in Toronto, you got to build them in apartment buildings or maybe townhouses. But Toronto, like a lot of municipalities, charges more money in development fees and taxes. The more bedrooms you have in a sort of ownership unit that has, that is going to be sold. So, like, if you have a three bedroom apartment, it costs almost twice as much as a no bedroom or one bedroom apartment, and you're calculating how much you owe the city for building that thing. But also, it's much more expensive to build in Toronto. So if you have a chunk of land you could develop, you're going to try to build the most amount of housing you can build. And that sometimes means cramming as many small units into a sort of building envelope that you can get.

Rachel Levy McLaughlin
So it's almost a disincentive in Toronto to build, you know, three bedroom apartments.

Shane Dingman
There is, you know, the city seems to have finally recognized this because now for purpose built rentals, they have lowered the cost of a three bedroom or a family style unit for purpose built rentals. But it's only marginally lower than it is for a two, two bedroom just for rentals. If it's ownership housing, like a condominium or a freehold townhouse, it's still more expensive for more bedrooms.

Rachel Levy McLaughlin
So I have to say, it's interesting talking about this because it feels like we're always talking about adding more density. And so these buildings that we're talking about that Toronto's building zero bedrooms would be adding density. So what's the concern with what's happening here?

Shane Dingman
I guess the issue is do you want to have Toronto be a place where people can raise a family? Because what happens is not that Toronto doesn't have land. We have restrictive zoning that pushes all of the density and development into very spiky corridors. There's a lot of talk about the avenues plan for Toronto that we're going to make our major streets more dense. When you look at, say, Edmonton and young, those buildings are like 30, 40, 50 stories downtown. There are several 90 story condominium buildings in the works. So very, very high density. And then what we have in the rest of the city is this ocean of land. Almost two thirds of the available land is zoned that it can never be anything but essentially like a single family home. These expensive house neighborhoods have lost population in the last 20 years, whereas the rest of the city has grown.

Rachel Levy McLaughlin
Because people have to move out.

Shane Dingman
Yeah, exactly. Well, and because people age out and then their properties come this like, bank account, you know, it gains in value and it's extremely expensive and nobody can buy into that neighborhood who has a young family because it's now well above what the sort of starting salaries could support. And so you have this sort of vicious cycle of like this land that we won't let change gets more expensive and less populated every year. We leave it that way.

Rachel Levy McLaughlin
So we've talked through some problems, but.

Matt Lundy
What about solutions with this Alberta example? We just need more housing.

It's a really easy one. Thankfully, the government is trying to bring in some new methods or I removing some taxation that would help get more housing built on this front. But we just need way more of.

Jason Kirby
It for the giraffe building situation people are starting to look at. I guess you could call it use it or lose it rules.

Not necessarily that you're going to have your land taken away from you. As a developer, you know, we're not talking about seizing property, but once you get approval, if you don't actually proceed with the development in a certain time spanish, maybe you start to lose all those approvals and that's going to impact. If you're looking to resell that property, that's going to impact it.

Frances Buhla
Vancouver used to have a lot of different single family zones and in some of them you had to like match the house on either side of you, you know, architecturally when you built and really ridiculous things like that. And they're gradually going through and simplifying and stripping that out. Vancouver now allows multiplex and the city continues to kind of cram density into, you know, sort of smaller areas where they think it's more acceptable.

Jason Kirby
You're already seeing this clamp down on international students.

How many are going to be allowed to come in? But also we're no longer going to see schools be able to just foist the problem of accommodation onto the cities and onto the municipalities. And you're seeing this now they're starting to develop into their budgets the plans to dramatically boost their student housing accommodation offering.

Shane Dingman
If we want to see different types of housing being built, we need to change our rules, our planning rules, to encourage those things. If we want to see more family style housing being built in Toronto, we have to change our rules to allow for it. And so far, cities have shown a reluctance to do that. But it's beginning to change. There's been a lot of money thrown at these cities by the federal government to try to convince them to change is slow going. And hopefully over time, they'll take the lesson that more people is good for you and more people living in your town is good for your tax base, for example.

Rachel Levy McLaughlin
That's it for today.

I'm Rachel Leafy McLaughlin.

This episode was produced by Kevin Sexton.

Our producers are Madeline White and Mihal Stein. David Crosby edits the show. Adrian Chung is our senior producer, and Matt Fraynor is our managing editor. Thanks so much for listening and we'll talk to you soon.