There are two big real estate narratives circulating around our news and social media that may lead many people to think we are building too many condos here in Toronto. First narrative: Covid has led many people out of the city like the Pied Piper. Second narrative: Toronto is building an insane number of condos. If people are leaving and we are building too many condos, shouldn’t we have a housing oversupply coming very soon?

Let’s look at these two popular Toronto real estate narratives a little more closely. Let’s start with people fleeing the city to live in a more spacious property outside of Toronto. To some extent, this is true. It really is happening. Some cities and towns outside of Toronto have seen much larger price increases than inside the city since Covid. If some people are able to work remotely outside of the city, they are choosing to do so. Still, I think this storyline has been overplayed in terms of its impact. People are leaving the city, but it’s not an exodus. Prices are up here too. Competition to buy condos and houses are still common place. Rents have bounced back to pre-pandemic levels. Simply put, people are leaving the city, but demand was so high before the pandemic, that people who still want to buy here far outnumber the people who have left. Real estate is still a seller’s market.

Now, let’s go to the other popular narrative: Condo construction has gone nuts in Toronto. Because of this, many believe that there are too many condos that will flood the market. To this point, I will agree with one thing: There are a lot of condos under construction. In fact, Toronto has, once again, more cranes in the sky than any other city in North America of any other size. Not only that, 43% of all cranes in the sky in North America are in Toronto. In other words, more condos are under construction here than any other city in North America by a long shot. You can find out more details here. It’s not a new distinction. We’ve had this title many times over the past 10 years. I’m sure we’ve all seen photos of Toronto from 20 years ago when the city looks very different than it does now. Go back 40 years, and it’s almost unrecognizable.

So, if we have that many condos being built and there is a demand for remote work out of the city, that leads to the question: Is Toronto building too many condos as people supposedly drain out of the city?

If you just want my opinion, and don’t wish to read any further. The short answer is: no.

Now, why do I say this? Let’s explore.

AFFORDABILITY CAUSES MORE MIGRATION THAN COVID

Yes, Covid had causes some upheaval of sorts for people leaving the city. Some of us are not tethered to our office chair as much as we were in the past. Because of this, we can live anywhere with more space. Covid made that clear. But here’s a reality check: People were leaving the city in large numbers before Covid was even a commonly used word. And the reason? Affordability. I think affordability is a much bigger driver of people leaving the city than Covid. Paradoxically, the places sought out by those seeking affordability have risen in price faster than Toronto since Covid. So, living close to Toronto has become more expensive if you leave. You have to move quite far from Toronto if you want to buy a larger property at a reasonable price. We still very much have a housing crisis.

SUPPLY ON THE FLY

Some believe there are not too many condos under construction in Toronto. I say we need more housing. Not just condos, but all types.

To stabilize housing affordability in Toronto, we need to build more. So, those condos under construction are needed. We need to encourage supply, not make it more difficult. I’m not here to be a poster boy for new construction developers. I’m not here to say that developers are wonderful people or not. But we do need to encourage smart development. We have been doing the opposite, even though there is a lot of construction under way for condos and rentals. I’m not suggesting we just let developers do whatever they like. We don’t need condos on the green belt, for example. Still, we should make it easier to build. And most of the legislation going through in the last five years discourages developers and dumps a lot of cost on them. Not exactly a recipe for encouraging more housing supply.

DEMAND IS STRONG LIKE BULL

Bottom line for Toronto: People still want to live here. I could go on about how wonderful Toronto can be – the restaurants, the culture, the sports, and the access. Even if none of that appeals to you, people also want to live here because Toronto produces a lot of employment opportunity and people need/would like to work here. They come from other parts of Canada and abroad.

The taps of immigration have been turned down for much of Covid. And in the coming years, the government is going to try to make up for the deficit. With increased immigration you are going to see many more folks coming to Toronto and other major Canadian cities. The demand is coming, and it’s going to be strong.

ZONING BALONEY

When real estate markets become too heated, governments often respond by throwing a bucket of water on demand. They can make it more difficult for buyers to purchase a property. They can create legislation to discourage developers from building in Toronto. All with very good intentions of protecting renters and creating affordable housing. I’m all for creating affordable housing, but you need to create incentives to do so. If supply is the biggest issue, what should government do? End exclusionary zoning. The reason there are so many high rise condos downtown has to do with the nimbyism and exclusionary zoning that exists in much of the city. How much? Around 70% of Toronto is in the “yellow belt”. These are parts of the city where you can only build single family houses, and where single family housing is largely what you’ll find there. I’m not suggesting we build a 40 storey condo next door to a bungalow, but I am saying we should be able to build a triplex with ease, or a 3 or 4 condo townhome where a bungalow used to be. So, when we see how many big condos are going up in Toronto, particularly downtown, we know it has a lot to do with the choices developers have. They can only build in 30% of Toronto.

So, when you hear about the many condos under construction in Toronto, and your stodgy relative from Alberta says something like: “Who’s going to live in all those condos units?!” at the next Holiday gathering, you will know that this is very likely nothing to be concerned about. Same goes for all the people “fleeing” the city. Though some have left, many more are coming in.

When real estate markets become too heated, governments  often respond by throwing a bucket of water on demand. They can make it more difficult for buyers to purchase a property. They can create legislation to discourage developers from building in Toronto. All with very good intentions of protecting renters and creating affordable housing. I’m all for creating affordable housing, but you need to create incentives to do so.  If supply is the biggest issue, what should government do? End exclusionary zoning. The reason there are so many high rise condos downtown has to do with the nimbyism and exclusionary zoning that exists in much of the city. How much? Around 70% of Toronto is in the “yellow belt”.  These are parts of the city where you can only build single family houses, and where single family housing is largely what you’ll find there. I’m not suggesting we build a 40 storey condo next door to a  bungalow, but I am saying we should be able to build a triplex with ease, or a 3 or 4 condo townhomes where a bungalow used to be.  So, when we see how many big condos are going up in Toronto, particularly downtown, we know it has a lot to do with the choices developers have. They can only build in 30% of Toronto.

So, when you hear about the many condos under construction in Toronto, and your stodgy relative from the burbs says something like: “Who’s going to live in all those condos units?!” at the next Holiday gathering, you will know that this is very likely nothing to be concerned about. You know the truth!