Housing Affordability Crisis Costs GTA Up to $8B Annually
With the peak of COVID-19 behind us, the Greater Toronto Area’s housing affordability crisis appears to have only worsened during the course of the pandemic as housing prices rose higher.
Subsequently, the workers the Toronto area heavily relies on, including personal support and other healthcare workers, supply teachers, community, and social services workers — most of which don’t receive a wage premium — continue to be priced out of the neighbourhoods in which they work, making outmigration a serious issue for the region.
A new report from the Toronto Region Board of Trade and WoodGreen Community Services shines a light on the economic and social losses derived from the shortage of affordable workforce housing, and the damage that will compound if nothing is done to rectify the problem.
The report, Housing a Generation of Essential Workers, The Cost of Inaction, revealed the regional shortage of affordable housing for workers costs upwards of $8 billion annually.
Overall, the cost of the affordability crisis to the GTA economy and employers ranges, on average, from $5.88 billion to $7.98 billion per year. Over a five-year period, the cumulative losses would be $29.4 billion to $37.9 billion in outmigration, higher turnover, wage pressure, and lost productivity brought on from rising housing costs, which are amongst some of the highest in North America, according to the report’s analysis from Prism Economics.
According to the report, for every two international immigrants settling in the region, there was one established resident moving to another region in Ontario. Ten years ago, the ratio was five arrivals to one departure. As a result, the cost of outmigration in the GTA is $3.05 billion annually.
The report says increased job turnover rates attributing to housing affordability continue to increase employers’ recruitment costs and are estimated to cost employers $180 million per year.
For employers that can pay a premium to hire within the city, rising wage pressure is eating into their bottom line. Wages and salaries in the GTA have increased 1.4% faster than outside the region, resulting in up to $2.8 billion in additional payroll pressure for employers.
Additionally, the report says roughly 16% of GTA workers commute more than one hour to work, resulting in up to $195 billion in productivity lost annually to long commutes.
“These staggering numbers show that housing solutions must be part of our region’s economic recovery plans,” says Jan De Silva, President and CEO of the Toronto Region Board of Trade.
Between 2008 and 2018, housing costs increased by roughly 115% in the Toronto region, while median income only increased by 25%, reads the report, highlighting that as the costs of living have continued to increase at rapid rates, income levels for many city-dwellers have only increased at a marginal pace.
Though, as we prepare for the post-pandemic reality, the need for workforce housing is dire.
“More than a third of occupations do not receive a wage premium – this includes teachers, nurses, and social service workers. These are essential workers who are struggling to stay in the city, making outmigration a serious issue for the region,” says Anne Babcock, President and CEO of WoodGreen Community Services.
According to the report, some employers pay a “GTA Wage Premium” to retain workers and account for the higher cost of living compared to other parts of Ontario. For industries that cannot pay the premium — often in the broader public sector — their workers are more likely to leave the region or face a gruelling commute.
“The resulting higher rate of employee turnover forces organizations to pay increased recruitment costs and harms their productivity. In many ways, businesses, their employees, and families are already bearing the burden of our region’s collective inaction on workforce housing,” reads the report.
However, while the report’s findings are shocking, De Silva says they are only part of the whole picture and true success will be measured by how many more low- and middle-income workers are living in decent homes that they can afford.
To achieve this, the report recommends the following actions:
- Set targets for workforce housing units that align with the city’s current goal of building 40,000 new units of affordable housing over the next ten years;
- Strengthen existing multi-sector partnerships, and build new ones that engage the expertise needed to successfully deliver projects;
- Unlock more low-interest public and private financing for projects that will provide workforce housing;
- Commit more publicly-held (including institutional) land for mixed-income housing, and leveraging density to maximize this scarce resource;
- Deliver both rental and ownership options that can meet the needs of workers and provide longer-term affordability; and
- Streamline approvals processes for projects that will deliver a substantial amount of workforce housing.
“To protect our city and region’s future prosperity, we need a commitment from governments and both the private and not-for-profit sectors to build the workforce housing units we desperately need,” added De Silva.