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Introduction
Issue
The city of Toronto is Canada’s financial capital and a major business hub that attracts not only the local Canadians but also many people around the world. It is one of the most attractive destinations for people because of its improved transport and health infrastructure, high levels of security, low unemployment rates, and cosmopolitan nature (Pinki 2019). In the modern society where cities are fiercely competing to attract investors and highly qualified professionals in different fields, the City Council of Toronto must ensure that the city remains attractive. The leadership of this city has done exemplary work in ensuring that security is maintained and the infrastructure meets global expectations. However, one of the main concerns that the city has to address is the high cost of renting a house. According to Waterston, Grueger, and Samson (2015), Toronto has the most expensive one-bedroom units in the country, going at an average of $2,350. Most expatriates and middle-class Canadians are sensitive to the cost of rental units when choosing an appropriate city in which to settle. There is a concern that this city may become unattractive to some of the highly skilled professionals needed to drive the local economy. The issue that this study seeks to address is articulated in the question below:
What can the City of Toronto do to make rental housing more affordable?
Recommendation
The City of Toronto should develop and effectively enforce strict policies on rent rates for both commercial and residential housing.
Background
One of the factors that define the attractiveness of a city is the availability of an affordable housing system. Toronto, like many other cities around the world, has a few housing units owned and operated by the city council, but the majority of the rental houses are owned by private individuals and managed by realtors (Zhang 2019). The problem that has emerged is that the increasing population in the city has led to an unprecedented increase in the cost of renting a housing unit. Cases have been reported where a tenant is evicted with the claim that the house needs to be renovated only for it to be placed back to the market without any renovations but at double the price (Lee 2016). Young families are finding it increasingly difficult to find affordable space to live in within the city, especially those who are at the entry-level of employment. They need to be close enough to the central business district or the industrial area to ensure that they report to work in time, but most of the housing facilities are too expensive. Some are forced to share their space with others so that they can share the cost, but such arrangements are inappropriate for a family.
The Central Policy Problem
The City Council of Toronto has enacted various policies and regulations that are meant to guide the housing system. According to Bozikovic et al. (2019), these policies are seen to be friendly to residents, especially the middle class who are driving the city’s economic growth. On paper, these policies seem to be effective, and they outline heavy government involvement. They show that the council is doing everything within its powers to ensure that its residents are protected from any unfair practices by the owners of these facilities. Figure 1 below shows the structure of the government’s involvement in the housing system. Concepts such as shelter support, affordable housing, emergency shelter services, homeless prevention and housing first solutions, social housing, and community-operated shelters all define this system (Padgett, Henwood, and Tsemberis 2016). It gives the impression of a system where the government is keen on limiting practices such as arbitrary eviction, unreasonable price hiking in private rental facilities, and the ability of the city authority to provide alternative housing to those in need. One can believe, by looking at the policy structure below, that housing is not an issue in this city because the local government understands what should be done to provide shelter for everyone irrespective of their financial capacity.
The reality is significantly different from the image presented in the above figure. Just like other major global cities like Monaco and London, real estate investors have invaded the city of Toronto and their primary focus is to make as much money as they can (Bourgeault et al. 2017). It is common to find cases where houses are sold above the market price primarily because of speculation, and the existing policies are not helping to put a stop to the greed. Once a new owner has acquired the property, they will most likely evict the current tenants with the claim of intending to renovate them. Little will be done to the house, but when it is taken back to the market, the price will increase significantly, probably to reflect the new price at which it was bought. Mathieu and Rider (2019) explain that greedy businessmen have learned how to circumvent some of the existing laws and policies to ensure that they can increase their prices at will. The outcome has been a combination of both demand-pull and cost-push increase of price as the city continues to attract more residents from all over the world.
History of the Problem and Past Attempts to Solve the Problem
The housing problem in the City of Toronto has developed over the years and has become worse within the past decade. In the mid to late 20th century, the city started experiencing an increase in population, but the vertical space was not a major problem, and as such, it was common to find Victorian and Edwardian-era residential buildings in various enclaves such as Yorkville, The Annex, and Rosedale (Kading and Walmsley 2018). During this time, most of the city’s housing policies focused on safety, security, ease of movement, and proper waste management systems. However, that relaxed approach to housing policies started changing rapidly in the late 1990s during the population boom as the city entrenched its position as one of the leading global financial centers.
The population boom was particularly influenced by a massive movement of Chinese into the city. Lee (2016) observes that most of the Chinese were moving to the city in search of better employment opportunities while others were escaping the repressive rule under the communist government. Immigration has persisted and currently, the Chinese make some of the largest racial groups in the city. Other people from Asia, parts of North and South America, Europe, and Africa also moved to the city to tap into the emerging opportunities. By the mid-2000s, it was evident that housing was becoming a major problem. The city council has since initiated various problems to help address the problem. One of the successful policies that the council proposed was the promotion of phased development, a concept of mixing higher-density apartment blocks with single-detached housing (Watt and Minton 2016). The concept was meant to retain some of the traditional architecture of the city while at the same time creating more residential space through the skyscrapers. It helped provide enough space for the additional residents at that time. The immigration trend did not stop, and that meant the solution that the council offered was short-lived. As such, it allowed private players to play active roles in addressing the problem.
Assessment of the Effectiveness of the Current Policies
The government has allowed private developers and real estate agents to take control of the housing sector with the promise that they will be regulated effectively. However, Bozikovic et al. (2019) note it is apparent that policies meant to regulate activities of these private players are not as effective as residents of this city would prefer. One of the policies that guide the sector state that all residents of the city have the right to affordable housing. However, that is not the case as many youths who are in low-cadre employment and many foreign students are forced to share small rental units. Another major policy is that no one shall be arbitrarily evicted from their houses or be subjected to a sudden increase in their rent (Lee 2016). Realtors have developed ingenious ways of achieving their selfish goals. Some tend to increase the rent annually in a way that is not commensurate with the increase in income of the residents. Others are using the excuse of the need to renovate their houses, as discussed above.
These practices have made it easy for the landlords and their agents to increase the rental cost at will depending on the perceived demand, which in many cases are based on speculations. Table 1 below shows a comparative analysis of homelessness in major Canadian cities. It shows that the City of Toronto has the highest number of homeless people, at slightly over 5000 people, though it may appear normal based on its massive population compared with the other cities in the list (Pinki 2019). It is important to appreciate the effectiveness of some of the current policies such as the city’s emergency shelter beds policy. It provides over 3250 shelters to the homeless, which explains why the city is performing better than most of the other cities on the list when it comes to battling the problem.
Source (Bourgeault et al. 2017, 76).
How Similar Problems Have Been Addressed in Other Cities
The comparative analysis shown in the table above shows that the housing problem is not unique to the City of Toronto. Some cities such as Red Deer and even Vancouver have registered worse performance when it comes to battling homelessness. According to Kading and Walmsley (2018), the same problem of unaffordable housing has been witnessed in various global cities in the region and globally. In London, most of the locals have been pushed to the suburbs because of the massive increase in the cost of the rent. In Monaco, New York, Florida, and Paris, the problem is the same as the middle class finding it difficult to afford to live in the city. However, some major cities are performing better when it comes to ensuring that housing facilities are available. In Beijing, China, the average rent for a two-bedroom flat is $ 1400, an amount which is almost half what it costs in Toronto despite its massive population and the booming economy (Zhang 2019). The success may be attributed to the firm control of the housing sector by the Chinese government. In Lisbon, Portugal, the government has also managed to control the rental prices to protect residents. In both cases, it is apparent that the active involvement of the government has helped reduce the greed of private investors.
Evaluation of Policy Options and Recommendations
Possible Options to Address the Policy Problem
The discussion above clearly demonstrates that the cost of renting a house in the city of Toronto is significantly high, especially for the middle class and low-income earners. The study also shows that the high cost of rent may affect the attractiveness of the city to highly skilled professionals that the city needs to promote sustainable development. If nothing is done to address the problem, it is evident that the trend will continue and affordable housing will become out of reach to many residents. As such, the researcher proposes two policies that the City Council of Toronto should consider (Bozikovic et al. 2019). The first option is to subsidize the cost of rent for the middle class to ensure that they do not struggle to get affordable accommodation. The second option is to develop and effectively enforce strict policies on rent rates for both commercial and residential housing.
Strengths and Weaknesses of the Options
The first option is to subsidize rent for the middle class and low-income earners who are more likely to be affected by the regular increases. In this case, the government will opt not to interfere with the market forces. The goal of this strategy is to ensure that the city can attract both local and international real estate investors. As Infanti (2018) observes, many investors are often keen on avoiding markets that have heavy government regulations and involvement. It creates a feeling that the government can arbitrarily acquire one’s property or subject an investor to measures that may be frustrating. This policy will reinforce the popular belief that Canada is a country where the government allows market forces to define demand in the market. Besides attracting local and international investors in real estate, this move will also attract investors in others sectors of the economy. The strategy will likely lead to the construction of more apartments within the city because of the attractiveness of the market. With time, supply will match the demand, and the market price will correct itself, making housing affordable to the residents.
The first strategy has weaknesses that may likely cause political heat within the city. The proposed subsidy will be an extra expense on the side of the government, which would lead to an increase in taxes that individuals and companies will have to pay (Bozikovic et al. 2019). The council members and the general population are likely to reject any solution that will involve increase expenditure. When the council members are aware that the proposal lacks public support, they will reject it to ensure that they protect their political career (Lee 2016). Secondly, the strategy will encourage the growing greed among the players in the real estate sector. There is the possibility these individuals will continue increasing the cost, knowing that the government will always foot the extra bill. As Bourgeault et al. (2017) observe, in some cities such as London, the rent increase is purely based on speculations as opposed to market forces of demand and supply. Such practices may become common in the City of Toronto as well, a trend that may push most of the middle class out to the suburbs or other more affordable cities.
The second option is for the government to develop and effectively enforce strict policies on rent rates for both commercial and residential housing. In this case, the government will set the maximum amount of rent that property owners and their agents can charge on their property per year. The amount should be based on the level of inflation and consistent with the gradual increase in the rate of income of the residents (Infanti 2018). Realtors can charge lower than the set limit to attract loyal tenants but they cannot go higher. The main advantage of this strategy is that the city will get rid of property speculators who may want to make huge profits at the expense of the middle class.
Rent will be set at realistic rates based on consultation that should take place among all players in the housing industry, especially the property owners, their agents, and representatives of the residents. This strategy is also advantageous because it is less likely to attract political tension. A few individuals within the council who represent the interest of the rich or those who are part of the club may try to oppose the strategy. However, the fact that this strategy does not involve burdening people through increased taxation means that it will be attractive to the general population, and as such, will more likely be supported by the majority. The strategy has also worked in major cities such as Beijing where despite the economic boom and the massive population, housing is more affordable to the locals.
It is necessary to admit that this proposed solution has weaknesses that the council will have to deal with to ensure that the interests of all stakeholders are protected. One of the biggest concerns is that it may paint an image of a dictatorial system of leadership in this city. Investors may fear coming to Toronto because of the perception that the government will not respect market forces of supply and demand, and instead regulate their profits (Infanti 2018). These policies may draw an undesirable comparison to those in communist nations such as China. In such a case, the growth in real estate development may drop significantly as major investors will move to other cities where they feel their investment will be protected. As a result, the current housing shortage may worsen as many people will be attracted to the attractive rental rates but investors will be pushed away to other markets.
The Recommended Solution
The City of Toronto should develop and effectively enforce strict policies on rent rates for both commercial and residential housing. This option is superior because it is sustainable in the long term. It will also protect the city from greedy investors who may push the middle class out to the suburbs. When implementing this policy, the government should start by explaining to the stakeholders why it is necessary (Kading and Walmsley 2018). Using various platforms, government representatives should engage both tenants and property owners in the positive discussion, the current state, providing appropriate case studies that demonstrate dangers of the current trend, and outlining benefits of this policy and its sustainability. It should then be rolled out when the government is certain that everyone understands its benefits.
Reference List
Bourgeault, Ivy, et al. 2017. Population Health in Canada: Issues, Research, and Action. Toronto: Canadian Scholars.
Bozikovic, Alex, et al. 2019. House Divided: How the Missing Middle Will Solve Toronto’s Affordability Crisis. Toronto: Coach House Books.
Infanti, Anthony. 2018. Our Selfish Tax Laws: Toward Tax Reform That Mirrors Our Better Selves. London: England The MIT Press.
Kading, Terrance, and Christopher Walmsley. 2018. Small Cities, Big Issues: Reconceiving Community in a Neoliberal Era. Edmonton: AU Press.
Lee, Marc. 2016. Getting Serious About Affordable Housing: Towards a Plan for Metro Vancouver. Vancouver: Canadian Center for Policy Alternatives.
Mathieu, Emily, David Rider. 2019. “Ontario, Federal Government Make $1.4B Housing Deal to Help Low-Income Renters.” The Star, Web.
Padgett, Deborah, Benjamin Henwood, and Sam Tsemberis. 2016. Housing First: Ending Homelessness, Transforming Systems, and Changing Lives. Oxford: Oxford University Press.
Pinki, Barua. 2019. “Housing Affordability in Toronto: Low-Income Earners and Recent Immigrants.” Major Papers 116 (1): 1-48.
Waterston, Sarah, Barbara Grueger, and Lindy Samson. 2015. “Housing Need in Canada: Healthy Lives Start at Home.” Pediatric Child Health 20(7): 403-407.
Watt, Paul, and Anna Minton. 2016. “London’s Housing Crisis and its Activisms.” Journal of Analysis of Urban Trends, Culture, Theory, Policy 20 (2): 204-221.
Zhang, Beibei. 2019. Social Policies, Financial Markets and the Multi-Scalar Governance of Affordable Housing in Toronto. Urban Studies Journal 4(1):1-8.
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