Worries about a possible bubble in Toronto’s housing market are causing banks to limit construction loans and contributing to the city’s low housing supply, according to Toronto’s Chief Planner Jennifer Keesmaat.
“In 2016, the City Planning department approved 20 per cent more units than the industry built,” Keesmaat said in an interview with BNN. “I’m hearing from developers that it’s hard to get a construction loan. [Banks] don’t want to be throwing good money after bad, so you’re actually seeing banks pulling back and constraining the supply.”
This is despite that fact that the city’s housing market is showing key signs that it’s in a boom, not a bubble, Keesmaat argues.
“An indicator [that we’re not in a bubble] is the absorption rate,” Keesmaat said. According to Keesmaat, units are not sitting on the market, they are being purchased.
Quick home sales, the way Toronto is seeing them, is a very strong sign of a robust economy, she said.
But there are multiple factors that are constraining supply.
“Developers often have trouble securing cranes since there is so much development activity taking place in the city already,” she said.
Another factor is a labour crunch. “When you have a boom, you need people to build. You need skilled labourers like plumbers, electricians, dry wallers,” Keesmaat said. “We need to focus on building up the labour in the industry so that we can actually build the housing that we need.”
With all factors taken into consideration, it’s no wonder why developments are sitting stagnant for years, without so much as a shovel in the ground.
A high-profile example is the Mirvish+Gehry development at King Street and Duncan Street in Toronto's Entertainment District.
“We raced to approve this complex project, and it proceeded through the approvals process in a record breaking 18 months,” Keesmaat said. “However, it has now been 'sitting' for three years, as the developer is trying to pull together the builder and the funding to make it a reality.”
While Keesmaat is confident in what needs to be done to increase supply, she says Toronto will continue to feel the pressure because demand is through the roof.
“We’re not going to see much relief in the near future.”
An earlier version of this article incorrectly cited the approval of the Mirvish Village development at Bathurst Street and Bloor Street instead of the Mirvish+Gehry development at King Street and Duncan Street. BNN regrets the error.