It now costs an average of $1 million to buy a new detached house in the GTA. As of March 31, the average price of a new detached home available for sale in the GTA was $1,045,659.
Why is this happening? It’s primarily because there aren’t enough low-rise homes out there to satisfy demand.
We’ve all seen the recent signs of demand outpacing supply; lineups in the winter to get into new homes sales centres, and bidding wars and bully offers on resale homes. These are symptoms of our housing supply problem and the fact that supply is not keeping pace with demand due to government intensification policies and a lack of serviced developable land.
The home building and land development industry is meeting the province’s intensification requirements and is building more townhomes, high-rise condos and fewer detached homes. However, the demand for single family detached homes has not diminished. The GTA has record-low levels of new detached homes available for sale, which is driving up prices and reducing housing choice for consumers.
Across the entire GTA, the inventory of new detached homes is shockingly low with only 1,634 available for sale as of March 31. In March 2006, there were 11,149 detached homes in remaining inventory, according to new homes sales data provider Altus Data Solutions.
What’s happening here is not unique. There is a growing body of research and data showing a correlation between restrictive land use policy and increasing home prices south of the border.
Two recent reports out of the U.S. looked at why the biggest and richest cities are experiencing a housing affordability crisis. One study, in the Iowa Law Review found that regulatory barriers are strangling housing supply and that when cities cut back available land for development, land and housing prices rise. The second report by conservative think tank Center for Opportunity Urbanism makes the same link between land use regulations and affordability in a variety of American cities.
In Canada, chief economist with Mortgage Professional Canada Will Dunning recently wrote that more low-rise homes are need to meet the needs of the growing GTA and that in fact, we need at least 10,000 more annually.
If we want the GTA to continue to grow there needs to be a collaborate approach to tackle the issue of housing affordability.
About the Author: Bryan Tuckey is President and CEO of the Building Industry and Land Development Association (BILD) and is a land-use planner who has worked for municipal, regional and provincial governments.