Toronto housing among least affordable on this global index. Here's what experts say needs to change
A new global index suggests Toronto is among the world's worst cities when it comes to housing affordability — as experts blame decades of policy missteps, development delays, and overwhelming population demand for the problem.
The 2025 Global Cities Index from Oxford Economics finds that as a result of Toronto's expensive real estate market, residents 'spend more of their income on housing than residents of nearly every other city in the world.'
While the federal government recently promised to eliminate the GST on first-time home purchases under $1 million, critics argue that restrictive housing policies, costly development charges and sluggish approvals have created a market that's out of reach for most buyers.
The average price of a home in the Toronto area did decline four per cent year-over-year in May but still stood at more than $1.1 million, according to the latest data from the Toronto Region Real Estate Board.
'Over the past 20 years Toronto's population has grown by 35 per cent but affordable housing hasn't kept up. The result? Life is getting too expensive for families,' Mayor Olivia Chow said during a press conference on Friday. 'Young people are giving up on the dream of home ownership.'
The City of Toronto has a program where it will defer development fees for some projects so long as at least 20 per cent of its units are affordable.
However, demand for the program has far exceeded the city's ability to fund it and as a result Chow says that there are projects totalling 300,000 new units from about 70 different developers that are 'shovel ready' and just 'sitting there in the pipeline' waiting for funding from other levels of government.
In Toronto alone, development fees can add more than $100,000 to the cost of a new home and in some areas in the GTA development fees can easily double that, says Frank Clayton, Senior Research Fellow at Toronto Metropolitan University.
Prime Minister Mark Carney has previously promised to help municipalities reduce those fees by 50 per cent through additional payments that could be distributed by the provinces though he has not provided a timeline for those investments.
'If a municipality takes $200,000 up front, developers got to increase their prices such that $200,000 is reflected ultimately in the price of the house,' Clayton said. 'Builders won't build, unless they can cover their costs.'
Toronto housing
A real estate sign is displayed on the front lawn of a house in Toronto, Ontario, Canada, on Thursday, May 11, 2017.
Clayton identifies three key culprits behind Toronto's crisis: high fees, restrictive planning rules, and relentless demand — the latter driven in part by immigration. Last year alone, nearly 300,000 newcomers arrived in the region, fuelling further housing pressure.
'You need sites. You need sites that are zoned, and you need sites that are serviced,' Clayton said. 'The planning system is very unresponsive to changes in demand.'
'We have to act now'
New home sales in the GTA hit a seventh consecutive month of record all-time lows in April, owing in part to a significant reduction in housing starts.
Dave Wilkes, president and CEO of the Building Industry and Land Development Association (BILD), says time is running out to fix the system.
'We are seeing real market consequences. 80,000 people leave the GTA,' Wilkes said. 'The longer we wait, the longer that it's going to take to balance supply and demand.'
Wilkes is calling for urgent action on housing taxes — especially the harmonized sales tax (HST) formula, which hasn't been revised since 1991.
'Making that change on HST today is the most immediate thing we could do,' Wilkes said. 'It would bring costs down by a dramatic 13 per cent for the first million dollars of a purchase.'
He also warned that the federal government's plan to remove GST only for homes under $1 million misses the mark in high-cost cities like Toronto, where the average sale price sits well above that.
'Under a million is just not a product type that is available in the GTA,' he emphasized.
Row of houses in Toronto
Children ride bikes by a row of houses in Toronto on Tuesday July 12, 2022. THE CANADIAN PRESS/Cole Burston
What is the market is lacking?
Jason Mercer, Chief Information Officer for the Toronto Regional Real Estate Board, says affordability has technically improved — but warns that too little new construction could reverse that trend.
'Two years ago, a lot of households simply wouldn't have qualified,' Mercer said. 'Today, I would argue that a lot of those households could qualify, because prices have edged lower and interest rates have come down.'
Still, Mercer says demand will eventually rebound, and if the city can't match it with supply, prices will climb again.
'We haven't done a good job keeping up with housing supply to meet that population growth,' he said. 'From a public policy perspective, we want to look at ways that we see sort of a sustained pipeline of new housing coming online.'
A turning point with urgency
Clayton says the roots of the crisis stretch back to the early-2000s when Ontario shifted its land-use focus towards environmental protection, including the establishment of the Greenbelt.
He argues the policy limited where housing could be built, and gave too much power to growth management plans that discouraged the types of homes most people want — townhouses and detached units.
'We have to have a competitive supply of land,' Clayton said. 'Because if there's competition, then prices don't go up very much.'
Despite efforts from all levels of government to address the issue — including a recent Ontario bill aimed at speeding up construction — most experts agree that housing affordability won't be meaningfully restored unless there's a broad and urgent shift in policy, from zoning and fees to taxes and timelines.
'The time for discussion has concluded. We really need the time for action,' Wilkes said.
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