Canada needs more cities to solve housing crisis not bigger cities, report finds

Increasing housing supply in big cities like Toronto, alone, is unlikely to do much for affordability, a new report by think tank C.D. Howe Institute argues.

 

What we really need is more cities, it says.

 

The report, titled “Making Housing More Affordable in Canada: The Need for More Large Cities,” highlights a “paradox” in Canada: while we have above-average investments in housing compared to other “advanced” countries, which have largely kept pace with population growth, house prices here have risen faster.

 

From 2010 to 2024, Toronto and Berlin led international major cities in house price growth, followed by Sydney, Vienna, Frankfurt, Amsterdam, London and New York, the report found.

And while there are affordability issues in many Canadian cities, Toronto and Vancouver are feeling these pressures “more acutely.”

 

The authors say they agree with the popular strategy of increasing housing supply and reducing “burdensome housing regulation” to support more development, but they argue that solely focusing on major cities is inadequate because having more housing only there will attract people from less populated parts of the country, thus increasing demand.

The report notes that in 2024, 17.5 per cent of Canada’s total housing starts were in the Toronto area and 12.2 per cent were in the Vancouver area. In both cases, the housing starts exceeded their proportion of Canada’s population.

 

In order for housing to become more affordable for existing renters and future homebuyers, it’s “essential” that Canada’s smaller cities become more attractive places to live and work, the authors assert.

 

That means smaller cities need more supply, employment opportunities and amenities that make them competitors against large cities as a desirable place to live, the report says.

 

“In the absence of this approach, any increase in the supply of housing focused only on our large metropolitan areas will be offset by increased in-migration from other Canadian cities, causing house prices — adjusting for wages — in our current large cities to either remain unchanged or even increase.”

 

Subsidies meant to support the emergence of new big cities will have to come from higher levels of government, the report adds, and they’ll have to be targeted towards specific cities with the most potential to grow.

 

“If they are spread out across too many cities, no individual city will become large enough to rival our big cities, and affordability will not improve,” it says.

Among efforts that could make “secondary cities” more attractive are the funding of world-class research at universities. London, Ont., is one example, with world-class Western University.

 

The report pointed to other examples outside of Canada of secondary cities growing into larger cities, such as: Raleigh-Durham, N.C., in the U.S.; Bologna, Italy; Ruhr Valley, Germany; and Galway, Ireland.

 

Municipalities can also enact policies that make them more attractive to businesses, such as offering business support to small and medium-sized enterprises, which face disproportionately higher financing costs.

 

Further, post-secondary institutions will be critical in providing job training programs to create workers who are ready to join the workforce, incentivizing businesses to locate there.

 

 

 

This article was first reported by The Star