“So…what do you think is going to happen to the real estate market?” Of all of the questions I get as a mortgage broker working in Toronto, this is the one that I am increasingly hearing more and more. After each appointment discussing mortgage situations, clients would often end with this simple question. It’s the same question that I also see dominating news segments. I see it on the forums as people express their frustrations with housing and living conditions. As a mortgage broker, I also see what’s happening from the rental side to first time home buyers to investors and back again. It’s very difficult to ignore what’s going on as ‘normal business’ when we have seen home prices accelerate in appreciation at an alarming pace while the cost of living and inflation continue to rise. I have also seen the rhetoric’s used as ‘solutions’ to the ‘housing crisis’, such as the increase in interest rates to looking at penalizing foreign buyers. While increasing interest rates will help, I’m sure all of you are familiar with the term “band aid” solution, it does nothing to solve the underlying issue. Supply and demand. While supply and demand is more of an economic term, but when applied to the housing market, the tools that affect supply and demand are beyond just interest rates (monetary policy), and needs to account for the actual policies that govern how, what and where we build our cities.

Euclidean Zoning – Describes essentially how our entire “North American” cities are built and planned. It is a method of urban planning which divides land uses into each of their respective zones. This was done during the industrial period as to prevent houses to be built right next to industrial plants. For the most part this worked, and it helped build and develop communities. All of this changed during the introduction of the National Highway acts throughout the 1920’s, which lead to a new development phenomenon known as the “Urban Sprawl”. (Partially formed by the “American Dream” of being able to own a home with a white picket fence, with a car in every garage.)

Fast forward to today, and we have two very distinct type of cities. Ones that were built prior to the 1920’s which still allowed for dynamic zoning laws that have been “grandfathered” to allow for mixed use and higher density exceptions, vs cities and towns after 1920’s that adhered to the urban planning methods of focused zoning. More specifically single family homes. The detached single family home became an icon, that it dominates the zoning allowances for all ‘modern’ cities. However, doing this forces a few issues,

Single family home zoning forces other types of zoning away and are determined to be set at a certain distance. Sometimes knows as setbacks. (Ironic isn’t?) As such, if you have a commercial development, it would be situated outside of the single family zoned areas. This type of design is very typical of cities like Mississauga, London (Ontario) where you have many “strodes” (think of streets, but are actually roads for cars and not pedestrian friendly with wide intersections) Typical design cues will involve large parking lots that are typically bigger than the buildings themselves and a lot of 1 to 2 story buildings with higher density buildings around the core.