TRG Guest Blog: Toronto’s Housing Puzzle and Why Supply Alone Won’t Solve the Crisis | Toronto Realty Blog

Every fall we publish a magazine called INSIGHTS INTO REAL ESTATEor simply what we call ‘Insights’.

This will be emailed to all our clients and published on the Toronto Realty Group website.

I have already shared an article about it multiple representation by TRG’s Matthew Morrison, as well as my own article on the history of pre-construction apartmentsI want to continue the series today.

Next: An article on Toronto’s housing crisis by TRG’s Chris Cansick…

Toronto’s housing puzzle: why supply alone won’t solve the crisis

By: Chris Cansick, real estate agent
September 2025

Complex problems are not often solved with simple solutions.

You’d be hard-pressed to find a Torontonian who hasn’t read, heard about or discussed our city’s housing crisis. Housing has not only been a constant headline in the media, but also the focus of virtually every political campaign in our city, state and country over the past decade.

Housing remains a hot topic in Toronto, where home prices and rents have risen to unsustainable levels for many, putting pressure on middle-class families and pushing first-time buyers to the sidelines. But while all three levels of government recognize the urgency of the crisis, their approaches to solving it vary considerably.

At the municipal level, Toronto City Council has introduced initiatives such as inclusionary zoning and accelerated development approvals to encourage the creation of more affordable housing. Their focus was largely on affordability in the rental market, where rents continued to rise.

Recently, the city has focused on combating “renovations,” which require landlords to obtain a rental renovation permit before issuing an N13 notice to tenants. Applicants must now prove the need for tenant relocation through approved permits and provide temporary housing or compensation plans.

Toronto is also completing the final phase of its new short-term rental (STR) bylaw. These rules reinforce previous regulations that required STR operators to register, pay higher operator fees and restrict advertising for the rental of partial units. The aim is to secure long-term rental availability by limiting STR activities to primary residences.

But as a recent article in The Economist entitled, “If you can’t find a place to rent, blame the government,” continued crusades against homeowners have exacerbated housing shortages.

“Many policies aimed at easing pressure on rental markets have addressed the symptoms of the problem rather than the cause, ultimately making things worse for the people they were designed to help.”

Making it harder for landlords to build and for investors to rent units is unlikely to solve the larger problem, which brings us to the provincial government’s focus.

Under Premier Doug Ford, the Ontario government has adopted a more aggressive strategy, including legislation to override municipal zoning and accelerate development through their Housing Supply Action Plans.

Examples of their recent efforts include approving mass timber buildings up to eighteen stories, an increase from the previous twelve-story limit. This change, effective January 1, 2025, aims to reduce construction costs and time while supporting local forestry and manufacturing jobs. This, along with further changes to the Ontario Building Code to eliminate more than 1,700 technical variations between provincial and national standards to reduce regulatory barriers for developers, is aimed at increasing housing supply.

The idea here is that more liberal construction policies will lead to more liberal housing markets, to everyone’s benefit.

At the federal level, the government has also made efforts to accelerate the construction of new homes, recently allocating billions in funding through the National Housing Strategy and the Housing Accelerator Fund to support local governments.

In March 2025, the federal government released final renderings and floor plans for the Housing Design Catalog, which includes approximately 50 standardized housing designs for townhomes, fourplexes, sixplexes and associated residential units. These designs are intended to simplify and accelerate home approvals and construction by providing customizable, energy-efficient and cost-effective options for builders and communities.

Each government clearly has its own perspective on the issue and of course its own agenda, but despite the varied policy instruments and often ideological divisions between our levels of government, they converge on a common refrain: need to increase the housing supply.

This seems rudimentary for most people to understand; if we have a growing population, we need more housing, and an increase in housing supply should have an inverse effect on the prices home buyers have to pay.

Shown below is the historical ratio of sales to new listings, a measure of supply versus demand (in blue), and the corresponding change in annual price growth (in yellow).

There is a clear correlation here, but as we have seen recently, an increase in the number of active and often vacant condos for sale in Toronto, while at the same time there has been an almost complete lack of interest in new pre-construction. It seems increasingly likely that increased supply alone cannot solve the housing crisis.

Recent Toronto market data shows a sharp increase in the number of active listings across the city.

Apartments in particular, once popular commodities, now remain unsold for extended periods. Investors who previously counted on these apartments for rapid appreciation and lucrative returns are retreating, spooked by rising interest rates, stagnant prices and new taxes targeting short-term rentals and vacant properties.

Additionally, as Urbanation, a leading source of condominium sales data, reported earlier this year, new construction condo sales have fallen dramatically and pre-construction unsold inventory stood at 23,918 units, up 6% from a year ago and 58% higher than the 10-year average.

Unsold inventory now equals 78 months of supply, based on the last twelve months’ sales pace, an all-time high that was about seven times greater than a balanced level of supply for 10 to 12 months.

Cancellations of high-profile projects, developer hesitations and declining pre-sales activity indicate a sector in distress.

This collapse is especially concerning because apartments are the backbone of Toronto’s new housing supply, especially in the downtown core.

Urbanation’s Shaun Hidlebrand puts it very clearly that “the new apartment market is currently experiencing its most challenging period yet, further impacted by uncertainty and cost escalations…”

Because there is virtually no demand for these new homes and many existing homes are without any supply of buyers, the question arises: is more supply really the answer to the housing crisis?

Although the main emphasis has been on stimulating supply, less attention has been paid to the nature of housing demand.

Who buys, who rents and who stays behind?

It’s all well and good to build as many homes as possible to increase supply, but many new homes are out of reach for people on average incomes. Investor-owned properties often prioritize returns over long-term affordability, leading to higher rents and less stable leases. At the same time, immigration-driven population growth and demographic shifts are driving demand in ways that pure supply-side solutions cannot fully absorb.

Affordability is further complicated by the financialization of housing, with houses being treated more as an investment vehicle than as living space. This dynamic drives up prices and decouples housing from local incomes. Without addressing demand-side pressures such as investor speculation and income inequality, increased supply alone will not lead to meaningful affordability.

Only the federal government has the resources to meaningfully address the demand side of the problem. And while they have increased the insured mortgage payment from $1 million to $1.5 million, making more Canadians eligible for mortgages with less than a 20% down payment, and also expanded the option for thirty-year repayments to all first-time homebuyers and new home buyers, with the goal of lowering monthly mortgage payments, they can and probably should do more here!

Toronto’s housing crisis is complex and multifaceted. The current surge in unsold apartments and the faltering construction market underscore a deeper truth: supply without affordability is an illusion of progress.

The policy must do more than just pave the way for new units; and they must ensure that these units meet the needs of residents.

What is needed is a coordinated approach that integrates supply-side initiatives with demand-side reforms.

This includes stronger protections for renters, support for nonprofit and cooperative housing, disincentives for speculative ownership, and measures to bring housing costs in line with local incomes.

All three levels of government are right to identify the need for more housing, but the data reveals a cautionary tale: more is not always better when housing is not accessible, affordable or tailored to real-world needs.

The increase in the number of active apartment listings and the decline of the pre-construction market are signals that supply alone will not solve the housing crisis.

A real solution requires more than just bricks. It requires an integrated, thoughtful strategy that balances supply with affordability, investor regulation with tenant security, and market incentives with social responsibility.

Only then can Toronto hope to build not only more housing, but a livable, inclusive city for all.

Thanks to Chris Cansick for sharing his thoughts, which I am told represent a “different voice” than mine.

I said to someone last week, “There’s nothing wrong with being optimisticas long as you are ultimately right. Otherwise it will later turn out that you were righteous naive.”

But Chris has been described as the ying to my yang, so a Jerry Maguire-esque moment that says ‘More housing isn’t always better’ is nothing short of refreshing.

Have a nice weekend, folks!