In the Toronto Real Estate Board’s just released Market Year in Review & Outlook Report, prominent policymakers highlight the importance of increasing the supply of “missing middle housing” in the city of Toronto. The report defines missing middle housing as housing units that fall between single-detached or semi-detached homes and high-rise apartments. That definition includes townhomes, duplexes, laneway homes and low rise apartments.
Though last year’s mortgage stress test and rising interest rates have curtailed home sales and partially put the brakes on home price appreciation, detached and semi-detached homes are still simply too expensive, especially for first-time buyers. Barring a catastrophic housing collapse that situation is unlikely to change. As such, home buyers are forced to look for alternatives, explain TREB report authors.
Of course, unaffordable detached homes in Toronto are nothing new. There is a reason why so many high-rise condominiums serve as a more affordable housing option for Toronto residents. Unfortunately, growing families and homeowners looking to move up from a condo don’t have many choices other than detached or semi-detached homes.
According to the report, Toronto “builders shifted their offerings to high-rise apartments in the mid-2000s, with reduced construction of townhomes and low-rise apartments — housing types that are typically closer substitutes than high-rise apartments for single- and semi-detached homes.”
That wasn’t always the case. Between 2006 and 2016, only 1,750 missing middle housing units were built yearly, as opposed to the 2,800 units built annually between 1971 and 2005. Production for missing-middle homes peaked between 1946 and 1970, when 3,875 units were completed annually — approximately 200% higher than the current completion rate.
Though the demand for more missing-middle homes exists, there’s plenty of red tape and conflicting interests preventing supply expansion.
One of the biggest problems, according to TREB is that municipal governments, not the free market, control land usage through the application of The City of Toronto’s Official Plan. This plan outlines all the rules and policies that must be followed when determining land usage. Under its current iteration, the Official Plan protects a large percentage of Toronto’s neighbourhoods from densification.
Another problem is that Toronto has a ward-style municipal government, in which its politicians focus on the concerns of its constituents rather than the city as a whole. Though there is a consensus among policymakers that the city as a whole would benefit from increasing the allowed population density on the official plan, there is little incentive to do so at an individual ward level, because homeowners are more concerned about the impact of new development on their property values than citywide problems.
Some potential solutions offered by TREB’s report include incentivizing the construction of second suites in existing detached and semi-detached homes, converting older industrial areas into missing middle residential communities, and easing restrictions on the type of housing permitted in all residential areas, either gradually, or through density transition zones.