Why Canada Stopped Building Homes for Families

For years, Canada's housing strategy focused on increasing the number of housing units built. But even during periods of record apartment construction, family-sized homes became increasingly scarce.

In this episode of the Demografix, Mike Moffatt and Cara Stern unpack a major problem hidden inside Canada's housing statistics: the country is building fewer family-sized homes than it did 20 years ago.

Why are three-bedroom homes becoming so difficult to find? Why are developers building more small condos instead of homes for families? And how do zoning rules, development charges, land shortages, and housing policies shape what gets built?

The conversation explores:

• Why housing "units" and housing "homes" are not the same thing
• The dramatic decline in single-detached homes, semis, and townhouses
• Why family-sized condos remain rare and expensive
• How rising land costs and government policies affect housing supply
• The connection between housing affordability and Canada's falling birth rate
• Why many young families are leaving major cities
• Policy solutions that could help create more family-friendly housing

If Canada wants cities that work for young families, workers, and future generations, we need to start measuring success by more than just the number of housing units built.

Chapters:

00:55 What Families Actually Need In A Home

02:00 Why Three-Bedroom Apartments Are So Rare

04:09 Why Condos Stop Making Sense For Families

05:00 Canada Is Building Fewer Family-Sized Homes

07:06 The Problem With Counting “Units” Instead Of Homes

09:03 Who Shoebox Condos Actually Work For

10:07 If Demand Is Strong, Why Aren’t Builders Responding?

12:14 Why The GTA Builds Fewer Family Homes

14:02 Urban Boundaries, Sprawl, And Long Commutes

15:16 Taxes And Fees That Favor McMansions

16:52 Why Developers Don’t Build Family-Sized Apartments

18:28 Housing Costs, Birth Rates, And Families Leaving Cities

22:05 How Canada Could Fix Family Housing

Research/links:

From Policy Gridlock to Housing Growth: A Roadmap for Gentle Density

https://www.missingmiddleinitiative.ca/p/from-policy-gridlock-to-housing-growth 

Hosted by Mike Moffatt & Cara Stern & Sabrina Maddeaux

Produced by Meredith Martin

Funded by the Neptis Foundation https://neptis.org/

Transcript

SPEAKER_01 0:00

People decide that they don't want beanie babies. You know, the market gets f gets flooded with them, nobody buys them, and the price collapses to nothing. Well, of course, that didn't happen with three-bedroom homes. Prices didn't go down, they went up.

SPEAKER_00 0:13

There was no way that it would ever make sense to get one of those condos if you want space for kids. Demographics hosted by Mike Moffat and Kara Stern. Housing starts across Canada over the last decade have been relatively high compared to historical averages, but it's still much harder to find a family-sized home to raise children in than it was a generation ago. Now, a lot of that shortage does have to do with unusually rapid population growth, which we've discussed on a number of episodes, but that's actually only part of the story. Our housing start data, it masks a dramatic shift in the type of homes that get built in this country. And it's a big shift away from building homes that work for families with kids.

SPEAKER_01 0:55

So, Kara, you're a mom of two kids. So let's say your family needed to move, you know, for whatever reason. So you're out there, you're looking for a new home. You know, like what kind of features, like what do you picture in your mind uh a home would look like that would suit uh you and your family?

SPEAKER_00 1:12

Well, it's somewhere that definitely has enough room for the kids. So they need space indoors to be able to play. They need some sort of like outdoor area, weather. I don't care if it's a backyard, it could be a local park, it just has to be somewhere that they can go and be in green space. And they definitely need to have three bedrooms because I'm going a little bit bananas with my kids sharing a room and waking each other up all the time.

SPEAKER_01 1:33

Yeah, and I think of like we we ask a lot of parents that question. They're they're all gonna have different lists, you know, they might want to be, you know, walkable distance to a school, this, that, or the other. But I think you're gonna find with most parents of kids that that three-bedroom thing is a must-have. And the thing is, if you are, you know, having to have three or more bedrooms, then you are almost certainly going to be looking at either a single detached or semi-detach or maybe a townhouse unit. You're you're gonna be kind of limited to those housing options. Because if we go back to census 2021, over 80% of all single and semi-detached homes had three or more bedrooms. Over 70% of town homes had three or more bedrooms. So if you're just looking at the listing and kind of say, okay, I'm looking for these three housing types, most of what the algorithm's gonna send you is gonna be three or better more bedroom homes. But if you start to look at apartment units, and that could be, you know, rentals or condos, you know, only about 16% of low rise apartment buildings or apartment units, and those are ones that have five or fewer stories, only about 16% of those are going to be three plus bedrooms. And if you start looking at high rise, only seven percent of those have three bedrooms or more. So if you're looking at apartments, you're gonna have a really tough time finding a place that that meets your needs, particularly if those needs are three or more bedrooms. And actually, doubly so if you're looking at newer buildings in big cities, because new builds, particularly in high rise, have been shrinking all the time. So, really, if you want three bedrooms, you're kind of limited to single-detached, semi-detached, and townhomes.

SPEAKER_00 3:14

I'm actually surprised that 7% uh have high rise units have three bedrooms or more. I thought it would, I would have guessed it was even less because it seems so rare. You see one bedroom, you see two bedrooms, you see studios, but you almost never see three bedrooms, especially in the rental market.

SPEAKER_01 3:28

Well, yeah, absolutely. And I think many of those are older, and many of those are, you know, catering to folks who aren't in the middle class. So, you know, think of like the 62nd story kind of penthouse units and that kind of thing, you know, and it's not the type of home you would think, you know, you're running around with two small children, and you know, I've got a three million dollar penthouse. You know, I like I like to think we pay well at missing middle, but not uh three million dollar home penthouse. Well, yeah.

SPEAKER_00 3:55

And when you talk about the apartment sizes shrinking over time, like that's a huge part of it too. I remember looking at condos think when I was looking to buy a place and I was like, do we move into a house? Do we move into a condo? And I was totally fine with the idea of a condo because I do actually like that lifestyle and I do actually like that you have all of your, you have a lot of people in the building, you can get to know people who live in the same building. You don't have to go outside to see them, and which is was kind of nice when I had a very young child that I could do that on a winter day. And when we were in a high rise. But when we started looking at them, the prices of even the two bedrooms that were like, you know, 800 square feet, even 600 square feet was considered like a pretty big unit because a lot of them were much smaller than that. And very quickly we realized if you want like 800 square feet, let's say, you can spend at the time, it would have probably been like, you know, $1.2 million on a two-bedroom condo is kind of what it was around. And then we noticed that houses were less than that for about that same size, and you often get like a basement or some sort of extra space that you have. So it didn't make there was no way that it would ever make sense to get one of those condos if you want space for kids.

SPEAKER_01 5:00

Yeah, absolutely. And if you know you have a kind of limited uh budget, and by limited, I mean, you know, not multi millions of dollars. You're rich enough, you can find whatever you want. But if you, you know, have a kind of middle class lifestyle, you know, don't come from massive amounts of of family wealth, and you want something with three or more bedrooms, you really are limited to what I call and and many other people call ground-oriented homes. Those are the single-dached, semi-detached uh town homes. You're not going to be able to find those kind of apartment unit condos. And what's important here is that those housing types that I mentioned, the single-detached, semi-detached, and row homes, they're actually getting increasingly harder to find. We're building fewer of them. So if we go all the way back to the year 2000, which I can't believe was, you know, about 26 years ago, because I remember it well, you know, we were building at the beginning of the century somewhere between about 100,000 and 140,000 of these ground-oriented homes each year, you know, kind of between 2000 and the start of the financial crisis. But we were only building about 30,000 to 70,000 apartment units. So, what that really means is for each apartment unit, we were building two or three of these ground-oriented homes, which suit families. Now, the low supply of those apartments that was a real problem. Like we needed to get those numbers up. And thanks to two decades worth of government reforms, apartment starts are on the way up. And I mean like way, way up. Like last year, we had about 165,000 housing unit starts in Canada. That's an all-time record. That's absolutely worth celebrating. But the problem is uh ground-oriented housing starts, we went in the other direction. They've fallen quite a bit. Last year across Canada, we only had about 76,000. And that's a 40% drop from where what we were doing 20 years ago. So, you know, we look at the data, we go, okay, the type of really small units, you know, it kind of looks like a hockey stick. We're building a lot of them. But when it comes to things that suit, you know, family with two children, really building less and less and fewer and fewer of those types of units.

SPEAKER_00 7:06

It's really frustrating the way that politicians talk about this because, you know, they talk about housing units, not homes. And when you think about it, like what makes a suitable home for one family doesn't necessarily work for another. We've said it before in the way of, you know, a unit isn't a unit is a unit, is the way that they've looked at it. And that's not how people look at it. It's just how politicians and people trying to count the housing starts look at it. But if you build a 40-story tower with 400 shoebox condos, yes, you've added 400 units and are getting closer to hitting your target. So, you know, the mayor might get to hold a press conference and talk about all the progress they've made towards their targets, but none of those units accommodate a growing family. And those 400 units are like, they're basically useless for a couple trying to transition out of the roommate phase of their lives and start a family. And those 400 shoeboxes have a lot fewer bedrooms than like houses used to, or the kind of ground-oriented housing that you've been talking about. And so they fit a lot fewer people than 300 townhomes.

SPEAKER_01 8:03

Yeah, exactly. So our housing start data is really misleading because of this kind of unit is a unit is a unit's mindset. If we look at number of bedrooms, it's actually fallen quite a bit. And, you know, don't get me wrong, small apartment units have their uses. There is a market for that. So it's not about saying, okay, stop doing that thing. But, you know, we have to be looking at, you know, the entire universe of housing that we're building. And that universe, you know, contains fewer and fewer family-sized homes. And that is a real problem. And so long as governments, whether it be the federal government, provincial government, municipal governments, simply think in terms of units and set targets in terms of units, we're not going to be building the types of homes that work for all families. We're we're going to bias the system towards building a lot of shoebox condos and not much of anything else.

SPEAKER_00 9:03

And we do need those shoebox condos. Like I sometimes get my backup a little bit when people say, no one wants to live in them. They're unlivable. But at the same time, I keep thinking there are a lot of people who would be very happy with them because, you know, think about people who are living with a roommate and would love to live on their own. Well, that gives them an option of it being a less expensive way to live on their own. I think about like the homelessness crisis and how many people would be happy with those, you know, teeny tiny microunits. Like there is a market for that at the right price. Maybe in those cases, if the government would make social housing out of them. But we do need them. The fact that they're still so expensive tells me that there still isn't enough of them. But we really, really, really need three bedroom homes. There are so many millennials out there. So many of them are looking for homes to raise kids. And even if they don't want kids, they want to live in a place where they can like have a partner and maybe have a little home office because a lot of people are working from home too. So the number of bedrooms that they need, like it's actually higher than what people would expect. So I don't really understand why developers aren't building it because when there is so much demand for it, you think that they would want to respond to that and actually build those homes, right?

SPEAKER_01 10:07

Yeah, and you're absolutely right that it's not a lack of demand that's the issue, you know. And it's fair to ask that question because, you know, tastes for well, anything change over time. And when things become less popular, all else being equal, companies are going to start producing less of it. But something else happens when things become less popular, all else being equal. And that's the price goes down, particularly for resale items. So let's say, you know, people decide that they don't want beanie babies or early 1990s baseball cards or nickelback CDs. You know, the market got f gets flooded with them, nobody buys them, and the price collapses to nothing. Well, of course, that didn't happen with three-bedroom homes. You know, prices didn't go down, they went up. And not only did they go up, they grew actually much faster than incomes. Those homes became incredibly valuable, not something that you could get, you know, for a dollar at a garage sale.

SPEAKER_00 10:59

And they haven't dropped as much as some of these other places have, because I know lots of people right now looking to buy a home, and a lot of them are looking for that family-sized home. And they haven't dropped the same way you hear in the news. Oh, real estate, there's been a crash, there has been a crash, and yes, they've gone down since 2022, but they are so far from affordable right now.

SPEAKER_01 11:16

Well, absolutely. And in many provinces, they're at all-time highs right now. So, you know, yes, there has been some decline in the GTA, Southern Ontario, Lower Manly and BC, other places, prices have gone up. So there's a lot of demand out there. And, you know, I occasionally hear things from older people suggesting that it is a demand problem. You know, they'll say things like, Well, those homes aren't getting built anymore because millennials decided that they don't want to have to mow the lawn. Uh, you know, and if that was truly the issue, again, we would be seeing a massive collapse in the price of those ground-oriented homes. That just hasn't happened.

SPEAKER_00 11:51

Yeah, people there would definitely still want to live in these kinds of homes. And it's really frustrating to see that they aren't, they just aren't building them at this rate that we needed. And you'd think that builders would respond to those higher resale prices by building more because, you know, prices go up, they can make more money off of it. But instead of building more, they actually did the opposite. They're not building them at anywhere near the rates they used to. So, what's going on there?

SPEAKER_01 12:14

So, there's a few different ways we can answer that question. Uh, I think the most straightforward is comparing two types of communities. In the first type over the last 20 years, I would think of like Alberta, southwestern Ontario, shout out to Tilsonburg, Atlantic, Canada, and so on. Uh, we continue to build those homes and in some cases actually increase the rate of building them over the last 20 years. Other parts of the country, obviously, the GTA, and I would actually say in particular, the kind of 905 belts uh around Toronto, you saw a massive decline in the building of uh family-friendly homes. So go, okay, well, what's the difference between those kind of two buckets of communities? And there's a bunch of different ones. So, in places in the 905, uh, approvals times can be much slower than in say southwestern Ontario, zoning can be much more restrictive. So there's a number of reasons, and I'm sure I'm gonna miss some. If I missed your favorite reason, please leave us a comment in the comment section. We'd love to hear from you. But there's two in my mind that really jump out. The first one is land cost and scarcity. You know, in places where we stop building single-family homes, what we saw was massive spikes in land price, and that was due to land scarcity. And also, you know, when land gets scarce, uh, that attracts speculators. So, you know, price goes up, speculators come in, cause the price to go up further. Land got really, really expensive. Now, in some places, that development land got scarce just simply because we used most of it. You look at you know parts of lower manland BC. It's like, okay, you've got mountains, you've got ocean, you've got the US border, you're kind of running out of land. But in a lot of the Dyno Five, it actually became artificially scarce due to tight urban urban growth boundaries and well, the green belt.

SPEAKER_00 14:02

Yeah, for a while growing up in the suburbs, I would see like the expansion of subdivisions further and further away from the city. And I kept thinking to myself, at some point you'd think it's going to be too far to commute. So there, like there is that kind of limit, even if you don't even put the green belt in there, there is a reasonable amount of commuting time that people are going to accept. And so I wonder how much that plays a role in this as well.

SPEAKER_01 14:27

Well, I'd actually say it's the opposite because what happened was a lot of those families moved to southwestern Ontario and still continue moving into the GTA. So, you know, we made a number of policy decisions to say, well, we don't want people doing 30, 40 mile commutes to their jobs on Bay Street. So we'll put in a bunch of policies and now they're doing 80, 90 mile commutes to their jobs. You know, it's so instead of living in the 905, they're living in Oxford County and still driving in. So, you know, in fact, we we tended to make sprawl worse because of these land use issues. But I think that's a topic for another episode.

SPEAKER_00 15:06

And at the same time, while restricting those urban growth boundaries, we of course didn't allow multiplexes in cities, so you couldn't actually build up. So you're limiting it in all directions.

SPEAKER_01 15:16

Yeah, absolutely, because we didn't allow for infill development. It got really hard to build family-sized uh homes in the GTA. And then on top of that, you start to add taxes. And with taxes, I would include fees like development charges. They absolutely went through the roof in both the city of Toronto and the GTA writ large, which made building middle-class family-sized homes prohibitively expensive in the few places that they were allowed. And, you know, kind of ironically, it economically favored McMansions because the development charges on a small 1200 square foot detached home and a 12,000 square foot McMansion are exactly the same. So this would be like if the government put a $5 tax on pizza, but that tax is the same whether or not you bought a small pizza or an extra large pizza or even just a single slice of pizza. You buy any amount of pizza, you pay a flat $5 tax. Well, under that scenario, who on earth is going to pay by the slice? Or in this case, who on earth is going to uh buy and build a small single family home when you get tax or the nose for it?

SPEAKER_00 16:27

No one would want to get the smallest amount of pizza if they can get the entire pizza for the same price, although I guess there's a land cost, so maybe the base price of the pizza before the taxes uh would be different. But at the same time, I told yeah, that makes a lot of sense. That's just a logical thing that developers would do. But then why didn't they shift to building family-sized apartment units when they realized that there was a shortage of family-sized homes and people were going to want those family-sized homes?

SPEAKER_01 16:52

So the reason is project costs, you know, the cost of construction for high-rise is much, much higher per square foot than for ground-oriented buildings because of their complexity. You know, the other day I was looking at a Bloomberg Associate's report for the city of Ottawa. I'll link to it in the show notes. And it showed for the Ottawa region, pure construction costs. So this doesn't count land or taxes or marketing or finance costs, anything else, you know, just you know, drywall, electrician's time, and so on. If you look at those construction costs, if you're building single detached, it's about 205 bucks a square foot. It's about the same for town homes, but if you're building high-rises, it's about 320 bucks a square foot. It's roughly 50% higher. So it's so much more expensive per square foot in order to build high-rise units. But the costs are even worse than that when I say it's about 50% higher. Because for a single detached home, you know, if you're a developer and you're selling it, you're selling a hundred percent of the space. It's purely efficient. But for a high rise, that figure drops to about 80% because you you are selling the units themselves, you're not selling the hallways, you're not selling the elevator, you're not selling the lobby. That doesn't go into the purchase price. So there's also this efficiency loss just because you need all of these uh other components. So the project economics are brutal, and particularly in the GTA, you know, no middle class family with kids is gonna pay over a million dollars to live on the 56th floor of a high rise, you know, to get enough space. It just doesn't make any sense.

SPEAKER_00 18:28

And if they're trying to prepare their life for having a kid, they might not even have that kid because they would say they don't have the room for it. So it's really tough for people trying to have a family. If they're looking at the options like where am I going to raise them? What kind of home can I have for them? If they find that they can't afford something that's big enough for their family, that they can actually feel good about raising their kids in that kind of space, then they're just going to not have kids. And people are making that choice all the time. We know our birth rate is at the lowest it's ever been. It's at 1.25, and that is considered ultra low. And so we're seeing this affect what people are able to do with their families, what they're able to, how many kids are able to have, where they're able to start families. We're seeing a lot of people leaving cities because there's just no options for them within the cities.

SPEAKER_01 19:14

Yeah, absolutely. And that's the kind of big issue that we are creating cities without children, because either the individuals or the couples in that city just kind of look around and go, okay, well, I'm just not gonna have kids because I just can't make the numbers numbers work. Not that most millennials think like economists and accountants, but enough of them don't.

SPEAKER_00 19:32

No, but they're looking at their budget and going, the numbers just don't work. There's just no way to make this happen.

SPEAKER_01 19:38

Yeah, exactly. They can figure it out without the use of an Excel spreadsheet or or you know, doing doing calculus. Or, you know, if they really want to have kids, they're moving out. They're they're moving to, you know, the the 519, they're moving to smaller communities outside of the of the GTA. Some cases they're they're leaving Ontario, in other cases, they're leaving Canada. So you get this big out-migration, you actually weirdly get kind of sprawl on steroids because you get people who are going far away from the city but still commuting back to work every day. So, you know, it just it doesn't make for a strong inclusive economy when you basically price out middle class families from from having kids and also living next to or or near or in a city.

SPEAKER_00 20:24

And when you say inclusivity, it sounds like it's saying, like, okay, well, there's a it's a goodwill thing to be able to do this, but it's actually just looking at the economics of it. Like, if you have all these parents who are basically the ages of people who are in their prime working years moving out of cities, that's gonna have an impact on what kind of jobs people can work in the city. Like, we need people to work in the city. There's lots of jobs that they can't all be super high-paying jobs that are only the most senior people and then like the lowest entry-level ones. Like, you need to have some of those people with experience and in all different kinds of careers. There's a lot of jobs that it's impossible to find people in the cities. And it, of course, if if they're not high paid and they can't afford to live in the city, then they're not going to be there to work those jobs. So it's actually a big economic problem for our urban areas.

SPEAKER_01 21:11

Yeah, absolutely. Because you I often hear from, you know, particularly older folks saying, well, you know, why don't young people just move somewhere cheaper?

SPEAKER_00 21:18

Just move to Alberta if you're in Toronto, like it's so much cheaper.

SPEAKER_01 21:21

Well, well, exactly. But you know, think think about the the logic there. You know, we're basically saying, okay, we're we're gonna have all the seniors live in Toronto and all the nurses and uh physical therapists living in North Bay. How is that going to work?

SPEAKER_00 21:36

They'll just commute North Bay to Toronto, very good commute. You know, it's lovely, it's a beautiful thing driving through Ontario.

SPEAKER_01 21:41

Yeah, no, yeah, absolutely. So I just go, okay, like how you know, how is this going to work where you have a community of all old people and no kind of middle class people there to uh you know actually do do the work? So it just doesn't work. You have to have cities that work for young middle class families. There's no way around that.

SPEAKER_00 22:03

So, how do we actually go about fixing this?

SPEAKER_01 22:05

Well, there's a few things that that we can do. Uh, so I'll give a list here. Again, it won't be exhaustive. So if I missed your favorite policy prescription, please let us know in the comments. First, we got to fix development charges. They're not only too high, but as I mentioned for granite-oriented homes, the system is designed to favor McMansions. So you hear this complaint and say, okay, well, why don't developers build smaller homes? Why do they only build McMansions? It's like, well, because that's what the tax system incentivizes. Second, is we need to be realistic about how much land we need, and that's gonna mean tough decisions about urban growth boundaries. Third, we need to build a diversity of low-rise housing types, including multiplexes, European-style apartments. So that's gonna require both zoning and building code reform. And finally, we need to reform condo regulations to make it much easier to be able to purchase a home in a multiplex and not just rent one. We had a report a few months ago called a roadmap for gentle density. We'll link to it in the show notes, but it mapped out the issue and provided recommendations on how to make it possible to own and not just rent a multiplex unit or other form of family-friendly gentle density housing. So there's four ideas right there. I'm sure there's a more that that we could discuss, but this is a solvable problem.

SPEAKER_00 23:24

The idea that people could buy multiplex units is a good one because right now it seems like a lot of people would build multiplex units and you know, they live in one, rent out the others potentially, or maybe they just rent them all out. It's it's the system is designed for that, but there are a lot of people who do still want to own their home. And if they can afford it, then they're going to make that choice. And so once again, if the family-sized units are not available in the cities, even in these gentle density builds, then they're not going to live there. They're going to move away.

SPEAKER_01 23:52

For a lot of families, they want to be able to own a home. And if our solution is gentle density and multiplexes, then we absolutely have to reform the system to allow middle class families to own individual units and not, you know, have some rich person, you know, own the entire building, own all eight units, and rent out the other seven. That just doesn't work.

SPEAKER_00 24:14

Thanks everyone for watching and listening. Our producer is Meredith Martin, our editor is Sean Foreman.

SPEAKER_01 24:19

And if you have any thoughts or questions about stuff that you can find cheap at a garage sale, please send us an email to missing middle podcast at gmail.com.