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The urbanization of families

Toronto has more people living in apartments than not. Looking at 2016 census data, the City of Toronto has about 1,112,930 occupied private dwellings and the breakdown between apartments (both lower and higher than 5 storeys) and grade-related housing is roughly 60/40. If you look at what’s been built more recently, the split is closer to 80/20. From 1996 to 2014, about 78% of all housing completions in the city were condominiums/apartments.

So what is obvious to me is that the City of Toronto is becoming more dense, rather than less dense, and that family housing is destined to become more urban. As of 2011, there were 10,145 more families with children living in apartments/condominiums in the city compared to 15 years earlier. By comparison, the number of families with children living in low-rise housing remained more or less flat over this same time period.

Of course, what this data doesn’t speak to is the number of people and families that may have opted to leave the City of Toronto for the suburbs — driving until they qualify for the kind of housing product that they would like to consume. The number of children living in higher density housing might be increasing within the city, but we probably shouldn’t ignore the pull toward the suburbs that still exists during family formation.

Cities around the world are working to make their urban environments more suitable to families and young children. Here in Toronto we have something known as the Growing Up Guidelines. But the focus seems to be largely on design considerations — think playrooms and stroller-friendly foyers. That’s crucial, but it’s not everything. There are also very real economic realities to consider.

The average price of remaining condo inventory in the Greater Toronto Area last quarter was nearly $1,100 psf. That puts a family-sized 1,000 sf suite at $1.1 million — and a lot more if you’re in a central neighborhood. The average would be closer to $1.5 million downtown. Obviously not all families can afford this. So there’s an affordability challenge. It’s one thing for the critics to say that developers should be building larger suites, but the market needs to be there.

Another consideration is that of financing. Most developers rely on construction financing in order to build their projects. And in order to build a new condominium, there is typically a requirement to pre-sell a certain number of suites (revenue is the actual governor). This is generally a lot easier to do with smaller suites and with investor suites because these buyers tend to be more comfortable waiting out construction.

Families, on the other hand, usually have a more immediate time horizon. It’s harder to forecast when the need will arise and it may not be financially viable to do that pre-emptively. And so I would argue that in addition to having an affordability challenge, we also have a financing structure in place that biases the type of homes that get built. There are, of course, advantages to this model. Pre-sales are a way for lenders to mitigate risk. It helps to ensure that the market doesn’t get ahead of itself. But there are side effects.

Despite all this, we are seeing more families with children in higher density housing. Anecdotally, I see it happening in elevators with the number of strollers. This trend is destined to continue, but the winds are not entirely at the back of this shift.


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