BROKER PORTAL

Why Canadians Are Choosing Urban Life Over The Suburbs

March 18, 2015

The following is a guest contribution by Ren Thomas, an urban planner, researcher, and writer interested in urban issues such as housing, immigration, transportation, growth management, and governance. She works as a research and planning consultant in Toronto with a range of public, private, and non-profit clients. She holds a PhD in planning from the UBC School of Community and Regional Planning.

Recently, academic researchers and journalists have described changing housing preferences in Canada and the US, from single-family detached housing in suburban neighbourhoods to urban mid-rise and high-rise housing types. In the US, 29 per cent of all new privately owned housing units were in structures of five units or more in 2014, a major increase from just 12.2 per cent in 1994 and 15.8 per cent in 2004. In Canada, 68.2 per cent of all rental market housing starts in 2012 were in the country’s 15 largest urban areas. The rate of housing starts per 10,000 Canadians was 26.8 for sale to homeowners, 22.3 for sale as condominiums, and 6.3 for the rental market. Considering the postwar housing ideal that has dominated the Canadian landscape for six decades, this is a significant change in housing choice. So what’s driving the shift?

Demographics

There have been major shifts in demographics in Canada, including more single-person households, couples without children, and young people living with their peers. In 2011, the National Household Survey showed a higher percentage of single-person households than couples with children for the first time ever. Young adults are marrying later, if at all. These fundamental shifts from the two-adult two-child household, that stalwart household formation of the postwar era that drove construction of suburban single-family housing, indicate changes in housing and transportation choices. These trends have been seen in many other industrialized countries, including the US, Finland, Italy, and The Netherlands in the past several decades, suggesting that changes in household structure are not just temporary. Smaller households need less space, couples without children may not be prioritizing nearby schools or spacious back yards, and households with one income may find it difficult to manage the mortgage on a single-family detached house.

One group that’s driving the change in housing preferences is the Millennials, born from the early 1980s to the late 1990s. They are drawn to mixed-use urban neighbourhoods for their social and leisure activities, walkability, and varied employment options. With decreased economic prospects and academic debt, Millennials are less able to afford the single-family home — and their tendency to marry and have children later, if at all, means that the option may not appeal to them. Millennials in a number of countries around the world also choose to take public transit or bike rather than drive, which means their housing locations skew towards dense, transit-supportive areas. Decreased driving and vehicle licensing among Millennials has been observed in the USNorwayGermany, and Japan, which suggests a generational shift rather than a temporary blip.

While it’s difficult to tell whether Millennials will retain these choices as they grow older, choices that we may have considered “transitional” (e.g. taking public transit, living downtown, living in affordable or rental housing) are now extending far past the end of college/university until their 30s and 40s. Even if Millennials eventually change their preferences, it still means meeting housing and transportation needs for another decade or two, because the minority of those who opt for the traditional household with children are doing so much later in life.

When you combine the Millennial trends with those seen in other demographic groups, the long-term need for smaller, more affordable housing units in mixed-use locations becomes clearer. Retiring Baby Boomers are downsizing and looking for neighbourhoods with services, including health care and shops, where they can walk for their daily needs.

Recent immigrants in Canadian cities are also looking for neighbourhoods with good transit services and affordable rental housing or public housing options, which tend to be located in city centres. But immigrants’ housing preferences are shaping housing demand in suburban municipalities as well: Richmond, Surrey, and Port Moody in BC and Vaughan, Markham, and Mississauga in Ontario. In these immigration reception cities, smaller units, multi-family buildings, townhouses, and rowhouses are quickly overtaking construction of low-rise single-family housing. A quick glance at planning policies and housing strategies in these municipalities reveals that they encourage a mix of housing types and tenures — some even require it.

Shifting Homebuyer Preferences High-RisePhoto: James Bombales

Housing affordability

The shift to smaller, high-rise units is linked to housing affordability — or lack thereof. Canadian housing policy has focused on home ownership since the 1970s, cutting back on funding programs for renting, co-operative, or public housing types while retaining incentives for homeowners. The result has been a rapid increase in the percentage of ownership units being built each decade, and very few of the other tenure types. This forced scarcity has made many renters battle low vacancy rates and sky-high rents, or somehow scrape together a downpayment for a condo unit. In the 1960s and 1970s, rapid construction of rental buildings and federal programs supporting co-operative and public housing contributed to a more even distribution of tenure types.

Yet despite the prioritization of ownership as the most desirable type in the housing continuum homeownership rates among Canadians have been between 60 to 70 per cent ownership since at least 1961. So despite perceptions that most Canadians would like to own a home, the reality is that 30 to 40 per cent of the population at any given time rents, lives co-operatively or in public housing.

Things aren’t so rosy for owners either. Ben Rabidoux, an analyst with M. Hanson Advisors, has written extensively about Canadians’ love affair with homeownership. Canadians’ housing prices are fast outstripping any increases in incomes: in 1999, the price of a home was 3.2 times income; in 2010, it was already 5.9 times income. The average Canadian has the highest debt-to-income ratios in history: home ownership was close to 70 per cent by 2011, but the mortgage debt of the typical household was 100 per cent of its disposable income. For one in five first-time homeowners, over 30 per cent of their income goes towards mortgage payments. Inevitably, the lack of real increases in incomes has had an effect on housing choices, skewing towards the smaller units.

From stability to investment

One of the major appeals of homeownership has always been its stability: a family could live there for their entire lives, welcoming children and then grandchildren into the split-level ranch. But today’s Canadians are highly mobile — partly because they have to be. Numerous authors, including urban researcher Richard Florida, have pointed out how difficult it is to stay in the same location for several decades given the current economic climate. Housing choices that made sense for Wally and June Cleaver, living in 1950s economic stability, don’t make sense for today’s single-person household working a precarious job or immigrant couple struggling to gain a toehold in their professions in a new country.

Canadians have also increasingly turned to housing as investments rather than a place to put down roots. Particularly for condo units in hot housing markets, which are often bought before they are constructed and then sold when they are finished, speculation is rampant. This generates millions for individuals and households who can afford to invest, but single-person and single-parent households, immigrants, young adults, and seniors tend to lose out as housing prices climb steadily higher each time a property is sold.

Shifting Homebuyer Preferences CyclingPhoto: James Bombales

Transportation shifts

For decades, we’ve been planning the Canadian city around the car, from arterials and highways to strip malls and suburbs. But since the late 1990s, transportation authorities have shifted to planning for rapid transit, municipalities began encouraging mixed-use development, and land use and transportation planning started to overlap so that infrastructure investments could be used more efficiently.

One reason for this is sustainability: as the public became more concerned about greenhouse gases, urban sprawl, and climate change, governments developed policies and programs that encourage non-motorized transportation such as cycling and walking, encouraged employers to provide their employees with transit passes, introduced higher parking fees and reduced parking allowances.

Other reason are congestion and long commute times. As reported in the 2011 National Household Survey, Canadians’ commute to work was an average of 25.4 minutes, but Torontonians had the longest commutes at 32.8 minutes, and 28 per cent of Toronto commuters, 30 per cent of Oshawa commuters and 27 per cent of Barrie commuters spent over 45 minutes travelling to work. A 2013 study by the CD Howe Institute estimated that the costs of congestion the Greater Toronto and Hamilton Area range from $7.5 to 11 billion annually. Last summer, the Toronto Region Board of Trade and the Ontario Chamber of Commerce recommended taxes to support solutions to gridlock, including a parking space levy and increased regional and sales taxes. An increasing percentage of urban residents are opting for shorter commutes by living closer to their place of work, or by taking transit or cycling to work.

Shifting Homebuyer Preferences CongestionPhoto: James Bombales

As this article illustrates, changing demographics, decreasing affordability, investment goals, and changing transportation strategies are driving the demand for multi-unit and affordable housing in transit-accessible, walkable, mixed-use neighbourhoods. There seems to be enough demand to locate these types of housing options throughout urban areas where urban services such as public transit already exist, and not just in our city centres. However, there are real barriers faced by planners and developers, including outdated municipal by-laws, plans, and policies that do not permit higher density development or specify key locations where mixed-use, multi-unit buildings would be welcomed. Heights and densities are often specified in secondary plans, but there can be significant public backlash to increased density in established residential neighbourhoods. Another major barrier in many cities is infrastructure to support this new growth — Canada does not have stable funding for new transit infrastructure, and even costs to maintain roads and bridges are significant.

 

One way that municipalities have introduced “gentle density” and affordable housing options is to permit secondary suites and laneway housing in established neighbourhoods. Mid-rise housing also provides a less controversial, and more livable, option. In January 2015,Ontario’s Building Code was revised to allow wood-frame construction of buildings up to six storeys in height, removing a major barrier to the viability of mid-rise multi-unit residential buildings. Quebec also allows this innovation as of 2014, and British Columbia got the ball rolling in 2009. This has already contributed to a wealth of four to six-storey residential buildings in Vancouver and other cities that blends more easily into existing neighbourhoods.