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Is housing about affordability or desirability?

Ben Myers | The Numbers Game | 2015-11-04

Ben MyersEarlier this month, I attended the Urban Land Institute’s first Toronto Symposium, a conference intended to foster debate on city building, facilitate sharing of ideas, and reveal recent survey research on Canada’s major housing markets.

A common theme among several of the conference panels was the issue of residential housing affordability, and several theories were presented on ways to combat this growing concern.

I had the pleasure of presenting my thoughts and findings on the residential housing markets in Canada in front of 625 people during the emerging trends segment that kicks off the ULI symposium.

Not an enviable task

That was a task made that much more difficult when you’re slotted behind industry veteran Blake Hutcheson of Oxford Properties Group!

My presentation included findings from a survey I conducted for my Fall 2015 Market Manuscript housing research report. I polled residential developers on what they felt was the greatest risk to the health of the Canadian housing market, and affordability received the second-highest response.

I posed this question to the ULI audience: Is it about affordability or desirability? A 1,000-square-foot condominium in downtown Toronto costs the same as a 3,500-square-foot single-detached house on a 50-foot lot in north Oshawa.

There are plenty of affordable housing options in north Etobicoke, Scarborough, Clarington and areas of Newmarket in the GTA.

Is it an issue of affordability?

Is it an issue of affordability, or is it that the inexpensive options are not located in desirable communities and lack available transit, suitable employment opportunities and expected neighbourhood amenities. Are these areas too far from family and friends, or just not up to a certain standard?

Many of the more reasonably priced neighbourhoods close to major centres lack viable transportation options.

Panelists at the conference advocated for more subway lines to move people; a UBER executive suggested their new car-pool service could improve congestion; and commentary surrounding driverless cars suggested their potential to reduce accidents could improve commuting times.

Surprisingly, I didn’t hear anyone talk about high-speed rail – moving people from the outer suburbs to the urban core of cities would be a solution for affordability and desirability.

A dilemma identified at the symposium was that top university graduates are often choosing where to live based on affordability, and places like New York, San Francisco and Vancouver are missing out on top talent.

Employers seeking out “18-hour” cities

Employers have recognized this trend and are curtailing their investment in these markets and seeking out “18-hour” cities with more reasonably priced housing to expand or move their businesses.

There have even been rumblings of major corporations creating their own housing stock nearby or within their office grounds to ensure suitable and affordable housing is available for their employees.

Is there an opportunity for developers to build campus-style dorms for employees of major corporations? Would this type of affordable housing attract tenants, or is it not sufficiently desirable for recent graduates tired of living that way?

Conversation will continue to rage

The conversation regarding affordability and what home type, home size and location the average household should qualify for will continue to rage. As the population grows and lands are built out, what standard of living should people be reasonably entitled too?

Luckily, through innovative associations like ULI, creative solutions are being discussed and debated.

To follow the ULI Toronto Symposium conversation, check out the #UrbanizeTO and #ETRE2016 hashtags on Twitter. To see further results of my surveys, download the Fall 2015 Market Manuscript here

Fortress Real Developments is a diversified real estate development and investment company that partners with established builders and developers across the country. Fortress sources equity capital for the partnership, in addition to providing value-add services such as market research, structuring of debt, marketing, and other realty services.

Ben assists in evaluating both the market conditions and projects that Fortress is active in. Follow his blog posts and commentary on the Canadian Housing Market at www.fortressrealdevelopments.com/news or follow him on twitter at @BenMyers29

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Ben Myers is President of Bullpen Research & Consulting, a boutique real estate advisory firm, that works with land owners, developers, and lenders to better inform them of the current and future macroeconomic and site-specific housing market conditions that can impact their active or proposed development projects. Follow Bullpen on Twitter at @BullpenConsult or find Ben at www.BullpenConsulting.ca.

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