Author: Oliver Foote

How Under-Investment in Early Trades Education Contributed to Canada’s Housing Crisis

As they say, hindsight is 2020. Under-investment in skilled trades has been a serious problem in Ontario (and all of Canada) for quite some time now. Something that will make the problem worse is that 700,000 trades people across Canada will be retiring between 2019 and 2028. We will have to find ways to replace those workers and more if we want to hit our ambitious housing targets. The Ontario government has created a plan to build 1.5 million homes in the next decade with the federal number totaling 10.5 million homes. In recent times due to a lack of trades supply, the labour costs to build housing has absolutely skyrocketed, which is great for wages, but not so great for building houses efficiently, affordably, and at a large scale. If we take a look back at history, it’s not so hard to see how we ended up with the shortage of trades people we are currently experiencing.

In the mid to late 1990s the Ontario government eliminated mandatory grade 7 and 8 carpentry and home economics classes (e.g. sewing, culinary, etc.). This was at a time when there were many cuts being made to education and many changes in the way education was administered in Ontario. A greater amount of standardized testing was being put into place as well as a compulsory curriculum where all students would learn the same “core” concepts. This “streamlining” of education made it easier to administer education (and less expensive) since most students would be learning the same things, but it also meant reducing students options in middle school and high school. Students were no longer being introduced to skilled trades in middle school which meant that when those same students entered high school, they would often just stick to the things that were familiar to them. Attendance in grade 9 elective carpentry and shop courses began to decline and this lead to many of those courses being removed from schools entirely due to under enrollment.

To bring a personal example into this post. At my high school I remember seeing the garages and warehouses of the school building that would have in past years housed (auto) shop class or carpentry. They were at some point replaced with arts and drama studios. Not to say that we don’t need artists and performers, it would be a rather bland world without them. But as someone who did not have much interest in those things and found myself more interested in how things are put together and more recently learning about cars on my own time (with lots of help from YouTube). It would have been nice to have had the option to introduce myself to those things back in high school and I think I would have really enjoyed it.

The only mention of skilled trades I remember was during my high school graduation ceremony, the superintendent basically said, “think about a trades career, you’ll make lots of money.” This was in stark contrast to the amount of fairs and events we would have with every Canadian and American University, often times coming directly to our school to recruit students. In this regard I have to consider myself lucky that my mother worked in construction and building maintenance, because she had amassed a good amount of power tools from her various jobs and absolutely any questions I had about using power tools, or how to properly sketch and design something, she had answers for. This meant that I had the opportunity to learn how to design and build things and I built most of the furniture that I used during my university studies and I learned valuable skills in the process; I also learned about economies of scale (it was not cheaper to DIY). However, now I feel confident in repairing things and learning about other trades. If the house I grew up in wasn’t big enough, or my mom worked in a completely different industry, I likely would not have even thought to try to learn how to use a table saw.

By removing these types of courses from the curriculum it makes sense that university admissions would go up. As would the emphasis on grades and thus grade inflation as university became more competitive and trades school admissions did not keep pace. Students were all being steered towards a knowledge related education or entering the workforce immediately, there was not much in between anymore. I believe that this emphasis on universities also had a secondary effect; devaluing university education. Universities began to admit more and more students to meet the demand for their programs, and it was also around this time that the cost of university began to skyrocket as did student loan debt. Many student were attending university because they did not feel there was another option or didn’t have enough information about their options to make an alternative choice, and I’m not just speculating when I say that. This means many students taking on student debt and going to university for an additional 4 years because you feel like you “have to” and then ending up with a degree that can’t land you a job. We have spend decades wasting human capital and real capital by not creating opportunities to discover diverse career options in high school. We are also continuing to drive up university costs due to increase demand (domestic and international), so why compete on a cost level as an institution when students can just take out loans to fund education and people are practically begging you to take their money. The scales are extremely unbalanced and as the past 30 years of relatively slow housing construction have shown, it may not have been a good idea to stop investing in early education for trades.

I’ve painted a pretty bleak picture, but things aren’t all bad. The Ontario government, however unpopular they might be at times, have spent over $1 Billion in the past 3 years addressing the shortage of skills trades workers, and they are seeing results. In the 2023 apprenticeship registrations have increased from 21,971 to 27,319 a 24% increase from 2022. They also rebranded the Ontario College of Trades with Skilled Trades Ontario, breathing some new life into the corporation with the new injection of funding. Skilled Trades Ontario has been able to advertise more and provide more skilled trades fairs that high school students can attend. The government has also made a change to the Ontario curriculum mandating that all Grade 9 and 10 students starting in September 2024 will be required to take at least 1 Technological Education course, which focuses on opportunities in STEM related technician jobs or skilled trades. Prior to this 39 percent of students had enrolled in a tech ed course and 63 percent were male, making this course mandatory will also introduce women who are under-represented, like my mother was, to a skilled trades careers.

Writing this post I was happy to discover that the skills trade shortage is an issue that is being addressed as we speak, and changes to provide students more options to learn and discover are very welcome changes. I’m not certain that we will be able to accomplish the goal of building 1.5 million homes in the next 10 years. But there does appear to be a surprisingly well thought out and robust plan to at least somewhat improve the skilled trades situation in our province. It’s going to be difficult to undo decades of underinvestment in our future workforce, but one step at a time I think we can get there.

All the best,

Oliver

Rethinking Zoning Bylaws to Improve Canadian Cities

Last week I spoke about the supply crisis that is incoming in the Greater Toronto Area. This week I’m going to dive a bit deeper into how zoning continues to play a role in causing this crisis and how if we re-think the way we plan cities, we could solve not only our housing supply crisis, but also increase the sustainability, and enjoyability of our communities. By looking to examples of communities that are currently working very well and discussing where we went wrong with zoning and what needs to change. We might be able to reframe the way we look at this issue and kill multiple birds with one stone. (If you missed my last post you can get caught up here.)

Let’s dive right into a brief overview of zoning bylaws. Zoning relates to how cities plan the use of their land. In Ontario we use something called an “Official Plan” which each municipality has jurisdiction over and it outlines the general plan for how the city will change and evolve over the course of 30 years. Amendments are made to the plan every 5 years with larger overhauls happening in 10 year increments. A big part of these Official Plans relate to zoning. Zoning can vary from municipality to municipality, but the general idea was to separate different “land uses,” e.g. residential, agricultural, industrial, commercial. The overall idea was to prevent that a noisy industrial shop from open next door to your peaceful residential street, and since everyone had a car, you can just drive to work, and the store, and ironically, the fitness centre. The idea was to keep different categories of real estate separate. But these bylaws were introduced and heavily designed with the automobile in mind, meaning that everyone was assumed to have a car and car infrastructure was placed front and centre. Now we have these swaths of homes, miles away from any shops, recreation, or places of work.

In some cases the intended effects did occur. You often can find quiet streets in certain suburban pockets isolated from shops, places of work and industrial land uses. In my opinion this doesn’t build a sense of community, it doesn’t encourage sustainable living, walkability or cycling and effectively turns streets into “bedroom communities”. I was recently having a discussion with my family at the dinner table about this exact topic and some interesting points were brought up about how restrictive zoning can be. A fellow neighbour of my parents in Mississauga, Ontario had tried at some point to apply for a permit to operate a massage business/sole-proprietorship out of her home. The application was eventually turned down, because as the law requires, the neighbours were notified. They complained and noted concern about the increased traffic through their quiet residential neighbourhood. However, this particular home had ample parking and could accommodate a large number of potential clients, and she was applying as a sole-proprietor meaning that she would be the sole person working out of her clinic, how many people would really be there at one time? At most 2 or 3.

Additionally, we started pondering why we disallow minimally disturbing businesses to be operated out of garages? For example: boutique shops, novelty stores, used book stores, small bakeries, bicycle repairs shops, small fitness studios, video game or board game cafes. People in the neighbourhood could leave their cars at home and walk to their neighbours house pick up some bagels, do some yoga, grab drinks and play board games; talk about building a sense of community. We’ve effectively destroyed small business in our suburbs and newer cities due to these zoning restrictions and replaced them with big box stores, cars, and fast food chain restaurants. I do believe that the municipality can and should retain some rights to restrict things like a businesses operating hours. But the system of opening a small “residential” business should be flipped. Where there is a minimally restrictive list of allowable business types that do not require neighbour consent to open and is basically just a form you fill out. Flipping the system in reverse where opening is easy and closing down is challenging, changing the incentive structure, would really help re-invigorate our communities. If the business was truly becoming distributive or not in line with what the neighbours want, the neighbours should be the ones who have to go through a lengthy, challenging process to try and shut it down. I imagine if the business is well respected this would be an unpopular stance for a neighbourhood association to take.

It was also interesting to me that in certain countries in Europe, specifically, Poland,  where my family is from. The zoning bylaws are much less restrictive. They naturally have to be because of the densities involved and smaller land masses. The community decides how they want to use the land and governments or neighbours only tend to intervene if things are unsafe. For example, my uncle operates his furniture factory out of an old barn where there used to be horse stables. He employs about 6-7 local community members, including one of my other uncles, and is about a 30 second commute on foot from his home where his mother and family live and can visit during lunch breaks if he chooses. Uncle number 2 lives a 5 minute walk from the factory one street over. Uncle number 1 can have business meetings on his driveway or in a little office he’s built at the back of the shop. They have respectful business hours form about 8AM-6PM Monday to Saturday. Neighbours don’t hear air compressors and nail guns running all through the night and he’s built a great sense of community at the factory. Myself and my cousins would often congregate there as a meeting point before setting off on an adventure.

This factory is more of a rural village setting, and obviously I can understand that in a more dense area maybe operating a furniture factory wouldn’t be ideal, but it still proves a point that in this small rural town there is a greater sense of community than most suburbs in Canada, and that small local business plays a big role in employment as well as enjoyment of that community. It also enables convenience for both my uncles to be so close to work and their families, not to mention the local grocery store is a short 10 minute walk from the factory. This tiny village of 2000 people is more walkable than most of Mississauga! It’s more sustainable, builds community and allows you to be close to family in case of emergencies. Small adjustments to zoning bylaws could greatly improve the sense community in new cities and suburbs like Mississauga and bring us closer to the small town feel of places like Streetsville, Port Credit, Riverdale/Danforth, Harbord Village, or even smaller rural settings. Not to mention that well designed communities like the ones I mentioned tend to be places where many people desire to live and actually increase property values because of all the great amenities, convenience, and sense of community.

I would like to now shift a bit to talking about density. Until very recently, most suburban municipalities made it very difficult and time consuming to build a 2+ unit home where there was a pre-existing single family home, with our culprit again being zoning bylaws. However, due to new provincial laws, you can now build a second unit on a pre-existing lot pretty much anywhere in the province without having to apply for re-zoning; which is a process that requires public meetings and notifying all the neighbours which usually becomes a war against “developers” and nothing gets built, status quo almost always wins in these cases. However, these new laws mean that it will be possible to contribute a small amount to the large supply issue by creating 2 or 3 homes on 1 lot. We’ve also seen the addition of laneway suites become relatively easy to apply for in cities with laneways such as Toronto. This again adds some units to the overall supply. These are small changes, but anything will help to chip away at the problem.

While the improvements in reducing red tape are a welcome sign, the housing problem we are dealing with is a monolith and all this talk of Accessory Dwelling Units (ADU’s) and laneway suites is really a drop in the bucket compared to the grand reforms that need to happen to actually solve this looming issue. NIMBYism (Not in My Backyard) is still alive and well and changing zoning bylaws for larger developments can still be either next to impossible, or extremely time consuming. I do understand why some people feel that a large imposing apartment tower shouldn’t be built next to a community of smaller residences. Some common complaints are the building casting shadows, increased vehicle traffic, or strain on pre-existing services. I won’t get into the poor public transit of suburbs, but lets just say adding such large density, with little or no consistent public transit to serve it, makes more vehicle use inevitable and almost required if the new residents want to reach any local services or their places of employment. That is why I propose a more moderated, but equally impactful approach to increasing density and planning future developments.

If we look back at older communities like the ones I mentioned earlier in this article, or take notes from places like Quebec City and older European cities. With their non-imposing 3-6 storey row apartments with shops on the main level and base our future communities on these models with work, housing, and recreation in mind. We can not only contribute significant supply to the housing crisis, but this type of housing also accomplishes many things that we claim to care about. Such as reducing car use and overall carbon footprints, increasing density in a non-imposing way, and has the added benefit of increasing the “beauty” of our neighbourhoods making them places people actually want to live in. We’d be able to walk to all our errands right outside our doors. The various shops and restaurants would allow for a nice social environment to be had in what is technically a denser community and local business owners could operate their businesses close to home. While I do think I make some strong arguments for changing the way we think about housing, I am not the first to propose this type of housing. If you look up “the missing middle” on Google there are some great videos and articles about this type of housing and how it can be a great solution to our housing problem.

The moral of all of this is that I think we need to re-open the options for intermingling shop with homes, and rethinking our entire system of community planning. Changing bylaws to allow businesses operate out of people’s homes or garages is just one of the small things we can do to improve. We can try to get back some of that ”old city” community that has been lost with modern zoning bylaws whose goal it was to separate these things. Which had the unintended consequence of breaking down our sense of community while also being an inefficient use of land. If we plan to welcome cities worth of people into Canada every year, we need to think about building cities in a new (technically “old”) and sustainable way that will not only improve our communities and quality of life, but allow us to solve many problems at once.

All the best,

Oliver

Canada’s Supply Crisis Will Get Worse Before it Gets Better

It doesn’t take an evil genius to realize that the main thing driving housing costs so high in Canada around major economic centres is a lack of supply compared to the crazy demand we have. Last year we welcomed over 1,000,000 people to the country from immigration, international students, and most recently war refugees. Similar numbers are expected for 2023. The housing crunch will only continue to get worse because our pace of construction is not currently and likely cannot keep up with the demand anytime soon. There are a lot of things that caused these problems and continue to make it challenging to solve them, today I’ll discuss a few of them.

A study back in 2020 between Urbanation and the Federation of Rental Housing in Ontario was anticipating a rental unit shortfall of 200,000 units in the coming decade a new report published just 3 years later quotes the shortage at 300,000 units. The pandemic economy is one big factor that likely made these problems worse. The  momentum of building new housing slowed temporarily and construction costs exploded as inflation took hold. Followed shortly thereafter by the rapid increase in interest rates. This meant that simultaneously while costs were still high, the cost of money was also high. Causing many rental and condo projects to be outright cancelled or delayed. This means that around 3-5 years from now when construction was supposed to be completed on all these new pre-construction projects that didn’t sell this year, as well as rental housing projects that were stopped due to cost overruns. We will experience even tighter supply on the market due to the high interest rate environment we are currently experiencing.

Secondly, we stopped building rental housing through the 80’s and 90’s for a variety of reasons. Similar to today the 80’s were a period of very high inflation, construction costs exploded, and government policies were put into place which tried to transfer the construction of purpose built rental housing onto the private market. In 1968 the first condominium project was sold in Toronto. They were seen as a way for people to own the apartment they lived in rather than rent it. This aligned with the Canadian dream of “own your home” and made it easier for governments to justify slowing their investment in housing. As we’ve learned from decades of underinvestment and very exclusionary zoning bylaws. In a rapidly growing economy like ours turns out that solely relying on the private market to supply all the housing was not a great idea.

According to this report by the FRPO, Urbanation, BILD, and Finnegan Marshall published February 9, 2023. They state that purpose built rentals made up 9% of new rental housing supply in the GTA over the last 10 years and 90% of purpose built rentals were constructed between 1960-1979 (approx. 223,954 units). There is an interesting line in this report that bears quoting, “looking forward, more challenging investment economics should lead to a reduced share of condo investors who buy-and-hold and a lower level of new condo launches, placing more emphasis on the development of purpose-built rentals.” As is stands today around 59% of all condos in the GTA are purchased by investors. However, the report is essentially saying that as construction costs continue to climb, buying condos as investments will become a more and more challenging proposition as the number of units that cash flow positively on closing continues to decline. Construction costs quite sticky and often outpace inflation so it’s unlikely that there will be any relief to make condominiums affordable again.

One shocking and problematic statistic is that we are only on track to add 135,000 new rental units between condos and purpose built rentals, but we will still be short by 177,000 units. One of the biggest barriers to getting projects completed is the development timeline taking on average 100 months, which is about as long as it will take my to pay off my student loans. It will take a focused effort to shorten this timeline as a majority of the delays stem from paperwork, not actual construction. If a lot of red tape does get removed, I think there will be some very good opportunities for developers and people who understand how to re-develop properties into multi-units. They will be contributing to the rental housing supply, and it will likely become easier from a zoning standpoint to push these projects through.

Another interesting dynamic at play here is immigration. Canada was built on immigration, and we have an amazing culture and country that welcomes people from every part of the world to try and build a better life. Canada is a place where everyone should feel safe no matter where you’re from and everyone is connected by the fact that we are all Canadians despite our diverse and different cultures. From an economic standpoint without immigration we would have a declining population, which would mean fewer workers, and with baby boomers retiring the Canada Pension Plan would be somewhat screwed without new workers to replace the ones who are retiring and living longer than ever. So from a purely economic standpoint we need immigration. But one thing is clear, we’ve done a terrible job planning for it.

To be fair, some of it was unplanned, like the war in Ukraine. But even within the immigration which we control, we don’t seem to be managing it very well. There seems to be a consensus brewing that if we plan to welcome so many people, we have to have housing for them to live in. I’ve personally come across some crazy situations in my real estate work, one such situation being students who are living 7 people to a 1 bedroom apartment in Mississauga to keep their costs down while studying in Canada. I can hardly fault them for wanting to save money, but this is not what I would consider healthy living conditions and it is concerning that we are allowing people to live in those kinds of conditions.

There is no easy solution to this problem, but it is heartening to see all this data that is now coming out identifying real numbers on what needs to be done in order to correct course. It is also good to see many new government policies that are addressing difficult zoning restrictions and allowing up to 3 units on almost any pre-existing single family zoned lot, as well as easier application processes for “laneway suites”. We are also starting to see an emphasis on getting people to work in the trades, because even if we approve all these new construction projects, we need people to build them and surprise surprise, we don’t have enough. I could go on for hours about our trades problem as well as zoning bylaws. But for now I’ll leave the discussion here and you want to learn more about how these topics fit into this housing puzzle subscribe to my newsletter because that’s what I’ll be discussing in two weeks! Subscribe to newsletter here.

(Link to next post coming Dec 24, 2023…).

Thank you for reading and we’ll chat soon,

Oliver Foote