We talk a lot about the greenbelt here in Toronto. Some argue that it’s squeezing the housing market and driving up prices.
But what about the yellowbelt? (Credit to Gil Meslin for the term.)
Here is a land use map of Toronto:
The yellow areas are “neighborhoods.” They, along with parks, ravines, watercourses, and valleys, make up ¾ of the city’s land area. The Official Plan describes these areas as being “stable” – meaning they will see little physical change. Supply cannot adjust to demand.
I get why this is the way it is and I understand how difficult it would be change something like this. But let’s not ignore the impact that this land use constraint has and will continue to have on the housing market.
It’s the yellowbelt. Thank you Gil for letting me to steal the name.
Yesterday I sent out this tweet, which included this graph:
The chart is from Altus Group and it is a monthly price index of new low-rise vs. high-rise housing in the Greater Toronto Area (GTA). I have posted similar charts in the past, but every time this chart gets updated the spread widens and the market looks even crazier.
Some people responded on Twitter by saying that this is clearly an indication of a bubble. I don’t know if that is the case.
But, as I have said many times before, I do believe that it tells a vivid story around supply. Low-rise housing is severely supply constrained in the GTA and high-rise housing is less so. That has helped to stabilize pricing in the latter case.
Now, you could look at this chart and say that the pace of low-rise price increases is simply unsustainable. The market must correct.
But you could also look at it and say that the market is going through a fundamental shift whereby more and more families will start living up, as opposed to out – which should then translate into high-rise pricing trending upwards as unit sizes increase. This is where I think we are headed.
What do you reckon is happening?
This month the White House released a Housing Development Toolkit. The report starts by talking about the local barriers to building and makes this statement:
“The growing severity of undersupplied housing markets is jeopardizing housing affordability for working families, increasing income inequality by reducing less-skilled workers’ access to high-wage labor markets, and stifling GDP growth by driving labor migration away from the most productive regions.”
It then goes on to highlight a number of tools that American cities have adopted or should adopt “to promote healthy responsive, affordable, high-opportunity housing markets.”
They are:
Establishing by-right development
Taxing vacant land or donate it to non-profit developers
Streamlining or shortening permitting processes and timelines
Eliminate off-street parking requirements
Allowing accessory dwelling units
Establishing density bonuses
Enacting high-density and multifamily zoning
Employing inclusionary zoning
Establishing development tax or value capture incentives
Using property tax abatements
None of this will be news to regulars of this blog. We have spoken about almost every single tool in the above list.
I’m not necessarily sold on all of them (good discussion to have), but I have gone on ad nauseam about eliminating parking minimums (off-street parking); the value of accessory dwelling units (commonly called laneway housing here in Toronto); and the negative impacts of barriers to building.
The good news is that there’s growing alignment around a similar set of actions. Change takes time. There’s usually a heavy bias towards the status quo.
We talk a lot about the greenbelt here in Toronto. Some argue that it’s squeezing the housing market and driving up prices.
But what about the yellowbelt? (Credit to Gil Meslin for the term.)
Here is a land use map of Toronto:
The yellow areas are “neighborhoods.” They, along with parks, ravines, watercourses, and valleys, make up ¾ of the city’s land area. The Official Plan describes these areas as being “stable” – meaning they will see little physical change. Supply cannot adjust to demand.
I get why this is the way it is and I understand how difficult it would be change something like this. But let’s not ignore the impact that this land use constraint has and will continue to have on the housing market.
It’s the yellowbelt. Thank you Gil for letting me to steal the name.
Yesterday I sent out this tweet, which included this graph:
The chart is from Altus Group and it is a monthly price index of new low-rise vs. high-rise housing in the Greater Toronto Area (GTA). I have posted similar charts in the past, but every time this chart gets updated the spread widens and the market looks even crazier.
Some people responded on Twitter by saying that this is clearly an indication of a bubble. I don’t know if that is the case.
But, as I have said many times before, I do believe that it tells a vivid story around supply. Low-rise housing is severely supply constrained in the GTA and high-rise housing is less so. That has helped to stabilize pricing in the latter case.
Now, you could look at this chart and say that the pace of low-rise price increases is simply unsustainable. The market must correct.
But you could also look at it and say that the market is going through a fundamental shift whereby more and more families will start living up, as opposed to out – which should then translate into high-rise pricing trending upwards as unit sizes increase. This is where I think we are headed.
What do you reckon is happening?
This month the White House released a Housing Development Toolkit. The report starts by talking about the local barriers to building and makes this statement:
“The growing severity of undersupplied housing markets is jeopardizing housing affordability for working families, increasing income inequality by reducing less-skilled workers’ access to high-wage labor markets, and stifling GDP growth by driving labor migration away from the most productive regions.”
It then goes on to highlight a number of tools that American cities have adopted or should adopt “to promote healthy responsive, affordable, high-opportunity housing markets.”
They are:
Establishing by-right development
Taxing vacant land or donate it to non-profit developers
Streamlining or shortening permitting processes and timelines
Eliminate off-street parking requirements
Allowing accessory dwelling units
Establishing density bonuses
Enacting high-density and multifamily zoning
Employing inclusionary zoning
Establishing development tax or value capture incentives
Using property tax abatements
None of this will be news to regulars of this blog. We have spoken about almost every single tool in the above list.
I’m not necessarily sold on all of them (good discussion to have), but I have gone on ad nauseam about eliminating parking minimums (off-street parking); the value of accessory dwelling units (commonly called laneway housing here in Toronto); and the negative impacts of barriers to building.
The good news is that there’s growing alignment around a similar set of actions. Change takes time. There’s usually a heavy bias towards the status quo.
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