It might be difficult to envision in the current climate but Toronto’s downtown neighbourhoods were once open to all manner of people looking to purchase their own homes. Unfortunately, the real estate market has changed over the years and numerous factors have led us to the new state of the market. However, the real estate market isn’t static and, unlike many pundits claim, it isn’t a sure thing.
A Wonderful Ride Through History
Beginning in the late 1940s and ‘50s with post-war recovery, the housing market was in high demand. Hundreds of thousands of soldiers were returning to start families and buying their homes. It was typical for many young families at the time to make a down payment on a house with, guess what, some help from the Bank of Mom and Dad. Sound surprising? It shouldn’t be. The real estate market was hot and a significant majority of the population were lower-income working-class families, usually with only one income. These houses wouldn’t typically sell for a huge return on investment either. It was normal to buy a house and stay in it throughout your life. Only moving if it was a necessity.
By the 1960s, the suburbs began to boom with families. Families required larger lots than what was available in the downtown area. It also wasn’t feasible for families to buy a fixer-upper even with dual incomes. The Bank of Mom and Dad assisted a lot of young, working families in securing their first home which would often stay in the family for two generations. According to the Toronto Real Estate Board’s (TREB) records for Average Home Prices and Sales Volume, average home prices in 1967 were $24,000 which, when adjusted for inflation, equates to $184,180 in today’s prices.
Additionally in the late 60s and early 70s, immigration was high and many families and different cultural groups were coming to Canada to find a new life. Many of Toronto’s neighbourhoods were made up of new immigrant diaspora. Pooling their life savings together, these families would purchase a house in downtown, keeping it in the family and renovating it reminiscent of their cultural heritage. Many of these renovations are still visible today in heritage houses. If you visit Roncesvalles or Little Portugal you’ll see the classic cultural decor and renovation styles that many families brought to their neighbourhoods.
The 1970s were a transitional time in Canada. The typical household structure was changing with an increase in non-traditional living arrangements and households with two incomes. Households were having fewer children and moving away from the suburbs into the city. On the workforce side of things, downtown was beginning to attract white-collar services and industries while manufacturing and labour were moving out of the downtown core. Many white-collar workers were moving closer to downtown to reduce their commutes.
Toronto began to gentrify in many areas during the 70s. Gentrification is the process of revitalising a neighbourhood that is in decline through investment and development often to suit the lifestyles of the upper and middle classes. A huge criticism and downside to this process is that it displaces lower-income residents as their neighbourhood and house values rise and they are slowly outpriced of their own homes. Unfortunately for Toronto, the gentrification process has moved more towards re-investing and revitalising neighbourhoods to cater to upper-class and affluent tastes, displacing both the middle and lower-class residents.
In this period, gentrification rejuvenated many of the houses and businesses in many neighbourhoods downtown including Cabbagetown, Leslieville and Queen West Village. It was a period of growth and investment that benefited these neighbourhoods greatly at the time.
At the beginning of the 70s, Toronto’s average home price was $29,429 (adjusted for inflation $199,010), and rose to $70,830 ($248,087) in 1979 according to TREB. That's a 141% increase in a decade. Understandably, working-class families struggled to purchase their own home towards the end of the 70s.
In the 1980s, there was a 260% rise in average home prices over the decade. By 1989, the average home cost $274,000 ($508,538). When the housing market crash in ‘89, real estate values fell upwards of 35%, mortgages were suddenly affordable for many lower-income and middle-income families. A real estate boom began headed by many younger professionals purchasing their homes in the downtown area. Additionally, the city of Toronto rezoned much of the downtown core to combat the market crash and the city thrived for it.
In 1990, average house prices fell to $255,000 ($449,458) and continued to fall through the decade as the housing market recovered. By 1999, the average home cost $228,000 ($338,530.43).
Additionally, the downtown core developed into a hub for business, retail and entertainment, commute times were becoming increasingly more important. The population in Toronto soared and suddenly proximity to downtown became the most valuable asset. These traditionally working-class neighbourhoods were suddenly being filled with professionals eager to move close to the downtown core. Real estate values rose dramatically leaving working-class and middle-class families unable to afford to live in the neighbourhoods they and their parents grew up in.
Investors intent on gutting and rebuilding luxury housing on the dilapidated homes that had been passed down for generations drove up the price. By 2010, the average home price $431,000 ($509,296). This trend continued into the ‘10s with an investor boom. Condos and luxury housing were being bought up quickly by international investors who would flip the house rather than live in it. Many properties remained empty and those that were rented out were marked up at a high cost. Buying a home in the downtown core was more of an investment rather than for accommodation. Many properties were at the end of their lifespan and working and middle-class were unable to afford a crumbling property that would require tens of thousands of dollars before it would become habitable.
The State Of The Market
With the investor boom and trend to cater to high-income and affluent markets, Toronto and its downtown core are unaffordable for many families and prospective buyers. The average price of homes in Toronto finished 2019 at $819,319 with many single-family homes and larger residences costing well over $1 million while condominiums can still be purchased under $1 million. As the population increases, the demand for housing will continue to increase, driving the price up. With notoriously rigid zoning laws and bylaws, it isn’t simple to construct higher-density housing to increase supply.
Toronto’s real estate market began 2020 with an unsurprising increase in sale price. Both semi-detached homes and condominiums have been steadily rising, however, the supply of both these types of properties are severely short compared to their demand. The average number of listings declined in January compared to previous months and the statistics from January 2019. This shortage will continue to drive the price of real estate higher which is unfortunate for middle and working-class families looking to enter the real estate market.
Space is a limited resource in the downtown core. Luxury condominiums or monster mansions are favoured by investors because of the lucrative profit. The cycle continues and the market gears more towards investment rather than addressing the supply and affordability crisis for middle and lower-income workers and their accommodation.
Rezoning could potentially assist this issue but lack of motivation for investors and developers to build affordable housing means that the missing middle issue will always persist.
These solutions are dependent on legislation which is a tricky beast to navigate in normal areas. In the housing market and real estate industry where red tape and bureaucracy already reigns supreme, passing legislation is a long, drawn-out process that isn’t guaranteed to be a success even after all of the effort.
Thinking Outside Of The Box
With the Toronto real estate market in its current state, prospective owners need to be creative. Contrary to popular belief, it is not impossible for younger buyers to own a house but more often than not, it requires thinking outside of the box.
GOCO will always advocate for co-ownership to combat the increasingly frustrating real estate market here in Toronto. We always acknowledge that it won’t work for everyone but it’s a feasible and creative solution for many.
We talk a lot about pooling resources to be able to overcome the affordability issues in Toronto. Pooling resources isn’t always financially based. Consider the traditional multigenerational household that was very popular in immigrant communities and neighbourhoods. Separately, these families would not be able to afford a house in Toronto but collectively, they could pool their resources - financial or practical - to afford a home. Childcare and housework could be shared between the members so that even those who couldn’t work were still able to assist and contribute.
Co-ownership and co-operative real estate isn’t limited to family ties though. Many young groups and millennials are getting together and co-purchasing a house to live together. It is not limited to an age group. Finding the perfect group for you is dependent on your wants and needs as we spoke about in The Steps To Co-Ownership: Finding Your Perfect Partners. Whether your friends, family or strangers, what’s most important is that you are all on the same page with a co-operative homeownership mindset.
Co-ownership isn’t going to suddenly make Toronto’s real estate prices drop. However, it does offer the opportunity to build personal wealth through real estate in an increasingly competitive and unaffordable market. Individuals need to get creative and explore alternative options to owning their own home. GOCO is here to help individuals who are interested in exploring co-ownership and encourage those who are curious about it to contact us. Yes, it sounds unconventional and perhaps even scary, but that is often the nature of shifting a paradigm when it comes to home ownership.
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