You don’t need to work inside Toronto’s startup scene to notice signs of a tech boom.
Across the city, new companies, incubators, AI centers and global tech conferences aren’t just suddenly appearing—they’re hiring in record numbers. In fact, Toronto’s tech ecosystem is so hot right now that it created more jobs in 2017 than the San Francisco Bay area, Seattle and Washington, D.C., combined.
Downtown, more than a third of office space is rented to tech firms. And that’s as Google’s parent company, Alphabet, lays the groundwork for a smart, connected neighbourhood along Toronto’s east waterfront, and as Canada courts Amazon in a bid to set up the company’s new North American headquarters in Toronto.
Political tea leaves in Ottawa and at Queen’s Park also point toward a tech-filled future. Ontario’s Progressive Conservative government is declaring the province “open for business” with plans to reduce corporate taxes from 11.5% to 10.5%. Meanwhile, Prime Minister Trudeau continues to double down on investments in tech and innovation virtually everywhere he goes.
But there’s a more troubling indicator of Toronto’s tech renaissance: housing affordability. Or, more precisely, the lack of it. The recent influx of tech workers into Toronto is bidding up prices in an already undersupplied housing market. Is “the six” the next San Francisco, where an annual salary of $82,200 is considered “low income” by the U.S. Department of Housing and Urban Development, and where median home prices shot up by a record $205,000 in the first half of 2018?
Toronto’s housing market is already ranked the 4thleast affordable in North America. If the city is going to harness global tech’s full economic potential—making room for the Amazons of the world without displacing the city’s middle class denizens—housing affordability must be a top priority. Here’s what experts say Toronto must do to support a thriving middle class and avoid a housing market like San Francisco’s.
Lift Zoning Restrictions
Toronto, unlike mountainous, sea bound Vancouver, isn’t short on land. Restrictive zoning rules are what drive developers to erect high rises in the city’s downtown core and drive low-density sprawl in the outer suburbs. But what about the inner suburbs?
“Here is a city protecting old neighbourhoods for whatever reason and it’s shutting out all of the people that we need to drive our economy,” says James McKellar, director of the Brookfield Centre in Real Estate and Infrastructure at York University’s Schulich School of Business.
McKellar says Toronto should allow more development in the inner suburbs to help absorb the influx of tech talent. This might seem counterintuitive, but building more houses in the outer suburbs is exactly the opposite of what a growing global city needs.
Build More Housing People Can Afford
Build more houses you say? Obvious as this solution may seem, San Francisco and New York have struggled for years to build affordable housing despite having the money and political will to do so. Jennifer Keesmaat, former chief city planner of Toronto, proposes building units aimed at people with median household incomes between $40,000 to $100,000. “These are teachers, nurses, journalists and web designers who live in the city and who in today’s market, would never be able to afford a house, but are critical to the ecosystem of the economy,” says Keesmaat.
To spur development of affordable housing—typically a low-margin business for property developers—the city and province must continue to provide incentives like tax breaks, reduced fees and quick approval times to meet growing demand and ensure a place for Toronto’s growing tech talent. But first, governments in Toronto, Queen’s Park and Ottawa must coordinate on a clear strategy.
Get Smart on Funding
Creative class hero Richard Florida understands better than most how critical affordable housing is to Toronto’s economic success. He believes the city should build more affordable housing, especially around transit, by repurposing existing land for new affordable rental units.
“Federal rental financing policies can be changed to end subsidizing the construction of luxury rentals in favour of units the middle-class can afford,” says Florida. He adds that funds from the National Housing Strategy should be dedicated to building affordable housing on a continuous basis to keep up with demand, instead of planning construction in 25-year increments.
As high-cost cities around the world compete for tech talent, one thing should become abundantly clear: creating affordable housing isn’t just a moral imperative, but a competitive advantage. Which is why, alongside now familiar arguments about how to “win the war on talent”, housing deserves a seat at the table. Solving the city’s housing woes while attracting and growing global tech businesses? Now there’s a story potential investors can’t ignore.