Homeownership Is Slipping Away in Toronto – And What Can Be Done

Over the past decade, the Greater Toronto Area (GTA) has witnessed a notable decline in homeownership rates, primarily due to escalating housing costs and various economic factors. This trend has significant implications for prospective homebuyers, sellers, investors, and newcomers, especially in cities like Brampton, Mississauga, Vaughan, and Oakville.

The Decline in Homeownership Rates

Between 2011 and 2021, Canada’s homeownership rate decreased from 69.0% to 66.5%. In Ontario, this rate fell from 71.4% to 68.4% during the same period. This downward trend is even more pronounced among younger adults; for instance, homeownership among individuals aged 25 to 29 dropped from 44.1% in 2011 to 36.5% in 2021.

Factors Contributing to the Decline

Several key factors have contributed to the decreasing homeownership rates in the GTA:

  1. Escalating Property Prices

The GTA has experienced a significant surge in property values. From 2006 to 2021, home prices in the region increased by 211%, reaching nearly $1.1 million. This sharp rise has made homeownership less attainable for many residents.

  1. High Government Taxes and Fees

Government-imposed taxes and fees have substantially increased the cost of purchasing a home. In Ontario, approximately 36% of a new home’s purchase price is attributed to government taxes and fees, equating to over $380,000 on an average-priced home. These costs encompass development charges, land transfer taxes, and other municipal fees, all of which contribute to the overall expense of homeownership.

  1. Limited Housing Supply

The GTA faces a persistent housing shortage, which has intensified competition and driven up prices. Between 2016 and 2021, housing stock growth was predominantly concentrated within three kilometers of Toronto’s core and on the urban fringe, leading to a “donut” pattern of development. This uneven distribution has resulted in limited availability of affordable housing options in many desirable areas.

  1. Population Growth

The GTA’s population has been growing rapidly, increasing demand for housing. From 2016 to 2021, Ontario’s population grew by 775,448 residents, with 274,185 added to the Toronto census metropolitan area. This population surge has further strained the housing market, exacerbating affordability issues.

Impact on Different Demographics

The decline in homeownership rates affects various groups differently:

Young Adults

Affordability challenges have led many young adults to reconsider homeownership. A recent Ipsos poll revealed that 72% of Ontarians aged 18 to 34 plan to leave the GTA within the next five years due to housing affordability concerns.

Renters

With homeownership becoming less attainable, more individuals are remaining in the rental market. However, the rental market is also facing challenges. In the past five years, the GTA lost 27% of its private rental apartments that were affordable to households earning less than $60,000 annually. This reduction in affordable rental units has led to increased competition and higher rents.

Government Initiatives and Campaigns

In response to these challenges, various initiatives and campaigns have been launched:

Fair Taxes on Ontario Homes Campaign

The Toronto Regional Real Estate Board (TRREB) has initiated the “Fair Taxes on Ontario Homes” campaign, advocating for the reduction of housing-related taxes to improve affordability. The campaign calls for actions such as cutting development charges, reforming the land transfer tax, and reviewing municipal taxation policies.

Policy Recommendations

To address the housing affordability crisis, several policy recommendations have been proposed:

  • Reducing Development Charges: High development charges have been identified as a significant contributor to increased housing costs. TRREB recommends that the provincial government conduct audits of large urban municipalities to ensure these charges are transparent and aligned with actual infrastructure costs.

  • Updating Federal HST Home Rebate Program: The current thresholds for the federal HST rebate on new homes have not changed since their introduction, leaving many homebuyers ineligible for benefits. Adjusting these thresholds to reflect current market prices could provide relief to buyers.

Conclusion

The decline in homeownership rates in the GTA is a multifaceted issue influenced by rising property prices, high taxes and fees, limited housing supply, and rapid population growth. Addressing these challenges requires coordinated efforts from government bodies, industry stakeholders, and the community to implement effective policies and initiatives that promote housing affordability and accessibility for all residents.

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