Toronto's decision to legalize fourplexes marks a significant step toward addressing the housing crisis; Daniel Foch and Nick Hill delve into the significance in episode 89 of The Canadian Real Estate Investor.
In a much-needed move, the city of Toronto legalized the construction of fourplexes across all neighbourhoods without the burden of development charges.
In episode 89 of The Canadian Real Estate Investor, hosts Daniel Foch and Nick Hill delve into the significance of this policy change. They explore the implications of this decision not only for Toronto but for the entire country, highlighting the opportunities and challenges it presents to real estate investors.
Shifting household dynamics
The dynamics of household sizes in Canada and the United States are changing. According to Foch and Hill's research, over the past century, average household sizes have significantly decreased, with more people opting to live in smaller households. However, a recent trend shows a reversal, as the average number of people in a household is growing.
Empty bedrooms and housing inequality
The hosts also shed light on the prevalence of empty bedrooms in Canada. Despite a significant number of spare bedrooms across the country, many households still struggle with overcrowding, revealing an imbalance in housing outcomes.
According to a 2017 report by the Canadian Centre for Economic Analysis, there are more than five million spare bedrooms in Ontario alone, while a substantial portion of the population remains under-housed. Toronto, with an estimated 2.2 million empty bedrooms, further exemplifies this issue.
Toronto's fourplex policy
Toronto's recent policy change allows low-rise housing with two, three or four units in a single building to be developed city-wide. The move aims to expand housing options, accommodate the growing population, and remove exclusionary zoning practices. Foch and Hill note that this change presents a significant opportunity for investors to meet the demand for affordable housing in the city.
Cities and regions worldwide have successfully implemented similar policy changes to address their housing crises. Examples include Oregon, California, Minneapolis, Tokyo, New Zealand, Copenhagen, and Barcelona. These cities have seen positive outcomes such as increased housing supply, improved housing affordability, and better integration of missing middle housing.
The impact on Toronto's housing market
With Toronto projected to attract 700,000 newcomers by 2051, low-rise housing supply has consistently lagged behind demand. The new policy aims to bridge this gap and provide a more feasible environment for multiplex development. Additionally, multiplexes will be exempt from Floor Space Index (FSI) provisions, allowing for more practical construction.
Aging in place and neighbourhood preservation
The pair explains how multiplexes offer an ideal solution for older homeowners to age in place, allowing them to downsize while staying close to familiar surroundings. Furthermore, this policy change can contribute to the preservation of regional greenspaces by utilizing urbanized land more effectively.
Future implications and challenges
According to Foch and Hill, this policy change is just the beginning of a broader cycle. Initially, new units may come at higher prices, but over time, they are expected to become more affordable as they become normalized. They also touch on various factors influencing the policy's success, including building codes, labour shortages, financing options, CMHC policy requirements, parking standards, construction technology, and transit availability.
So what does all this mean for real estate investors? Listen to episode 89 of The Canadian Real Estate Investor to find out.