Housing Affordability and the Standard of Living in Toronto

Press Release, Housing Affordability, Wendell Cox

Over the past two centuries, the world has become more urban, as people have moved to the cities to better their lives. Cities exist because, as large labour markets, they facilitate a higher standard of living for residents and reduce poverty. Governments place a high priority on these social goods. Achieving them requires that governments pursue policies that lead to higher household discretionary income (income after paying taxes and for necessities). Governments must also proactively avoid policies that reduce discretionary income. Regrettably, urban containment policy, the subject of this report, increases house prices relative to income, thereby reducing discretionary income and the standard of living while increasing poverty. Alain Bertaud, former principal urban planner at the World Bank, expressed the important role played by urban planning as follows: “Increasing mobility and affordability are the two main objectives of urban planning. These two objectives are directly related to the overall goal of maximizing the size of a city’s labor market, and therefore, its economic prosperity.” Yet, the dominant strain of urban planning, urban containment policy, leads to a lower standard of living and greater poverty by increasing housing costs relative to income. This occurs because urban containment policy places artificial limits on the supply of land and housing, which drive up prices because of an excess of demand over supply. The cost of housing is the largest element of household budgets and is thus a major determinant of the standard of living and the extent of poverty. There is a need to focus on the fundamental priority of improving the standard of living and reducing poverty (Section 1). This report examines urban planning policy and its impact on housing affordability in the Toronto area.

Places to Grow Throughout history, urban areas have tended to expand as they added population. Population densities accompanied strong population growth, especially as transpor- tation improved, from the era of nearly exclusive walking that existed before the early 19th century, to transit and then the automobile. Despite claims to the contrary, Toronto is a compact urban area, the densest urban area in either Canada or the United States. There is a strong concern among urban planners that urbanization is consuming too much land and that people have become too dependent upon automobile transport. In an attempt to control urban expansion, which is pejoratively called “urban sprawl,” urban containment policies have been implemented in some metropolitan areas for nearly 70 years. More recently, curbing urban expansion has been justified by the worry about sustainability (principally the reduction of greenhouse gas emissions). The province of Ontario has adopted a strong program of urban containment policies, Places to Grow, which requires significant densification, includes strong restrictions on suburban expansion and gives priority to transit improvements over highway expansion (Section 2).

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