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Why Suburbs Will Stay in High Demand for Decades · The Missing Middle Podcast

• 0:00
  SPEAKER_02: There's an assumption among some planners that suburban living is going to one day be a thing of the past in Canada.
• 0:06
  SPEAKER_02: That people moving to Canada who tend to start out in urban centers are going to continue to want to live in urban areas.
• 0:12
  SPEAKER_02: And whatever demand there is for suburbia will be outweighed by all the supplies soon to hit the market from the aging of the baby boomers.
• 0:19
  SPEAKER_02: Today we're breaking down why the classic Canadian suburb isn't just surviving but likely to be in high demand for decades to come.
• 0:26
  SPEAKER_00: Demographics, hosted by Mike Moffat and Kara Stern.
• 0:30
  SPEAKER_01: In our previous episode, which we called Will Baby Boomers Crash Canada's Housing Markets, we talked about how the sheer number of newcomers will, in my view, ensure the strong demand for housing.
• 0:42
  SPEAKER_01: However, what we didn't cover is the type of homes that they'll live in.
• 0:46
  SPEAKER_01: Now, if it turns out that newcomers to Canada have no interest in living in a single detached home in the suburbs, then having robust immigration might not create a lot of demand for those suburban homes, at least not directly, though it could have an indirect effect.
• 1:01
  SPEAKER_02: Most immigrants arrive in Canada and settle in a handful of regions in the country, and they tend to start off as renters.
• 1:07
  SPEAKER_02: I mean, when you've got policies like the foreign buyer's ban, it makes it incredibly challenging, if not outright legally impossible for a newcomer to buy a piece of property the second they step off their plane.
• 1:18
  SPEAKER_02: So it takes time for them to settle in and for them to be confident about where they want to set roots.
• 1:24
  SPEAKER_01: But we actually have a lot of evidence that we can draw from to answer these questions.
• 1:28
  SPEAKER_01: A 2025 study from Statistics Canada that's called Housing Use of Immigrants and Non-Permanent Residence in Ownership and Rental Markets.
• 1:36
  SPEAKER_01: We'll link to that study in the show notes.
• 1:38
  SPEAKER_01: But it can help us answer these questions.
• 1:40
  SPEAKER_01: And it finds that for every 1,000 immigrants who just arrive in Canada, they occupy 320 homes.
• 1:47
  SPEAKER_01: And of those 320 homes, 270 are rentals, and only 50 are homes that they actually own.
• 1:54
  SPEAKER_01: So they uh don't occupy that many homes, and the homes that they do occupy are almost entirely rentals.
• 2:01
  SPEAKER_02: That makes a lot of sense because renting gives you a lot of flexibility.
• 2:04
  SPEAKER_02: So until you figure out where do you want to be for the long term, it does make sense to rent for a while.
• 2:11
  SPEAKER_01: Yeah, exactly.
• 2:12
  SPEAKER_01: Yeah, and uh qualifying for a mortgage can be incredibly difficult when someone first arrives, so of course they're going to rent.
• 2:18
  SPEAKER_01: But over time that changes.
• 2:20
  SPEAKER_01: As newcomers stay in Canada longer, they integrate into the economy, they build wealth, and they not only shift from rental to ownership, but they become less likely to live in overcrowded conditions.
• 2:32
  SPEAKER_01: So they occupy more homes.
• 2:34
  SPEAKER_01: So take those thousand immigrants.
• 2:36
  SPEAKER_01: Once they've been in Canada exactly 10 years, they occupy 370 homes instead of 320.
• 2:43
  SPEAKER_01: So it's more than before, but the breakdown changes a lot.
• 2:46
  SPEAKER_01: That it it shifts to 150 rentals and 220 ownership homes.
• 2:51
  SPEAKER_01: So there's a big shift from rental to ownership.
• 2:55
  SPEAKER_02: Yeah, that's a huge shift from the you know their first days in Canada to buying.
• 2:59
  SPEAKER_02: And yeah, that must be a big, I guess they've set up their lives here.
• 3:02
  SPEAKER_02: They've started working to make it easier to qualify for a mortgage.
• 3:06
  SPEAKER_02: So yeah, it makes sense that we'd see a big movement at that point.
• 3:09
  SPEAKER_01: And those changes don't stop after 10 years, they continue to get stronger.
• 3:13
  SPEAKER_01: So for immigrants that have been here for 15 years, they occupy an even greater proportion of homes per thousand.
• 3:20
  SPEAKER_01: In fact, they occupy more homes per thousand people than the Canadian-born population.
• 3:27
  SPEAKER_01: And they also occupy a greater proportion of ownership homes.
• 3:31
  SPEAKER_01: So there's by year 15, uh, there is a lot of demand uh and a lot of purchase of homes that they can own.
• 3:39
  SPEAKER_02: So they're actually more likely to own a home in Canada than someone born in Canada?
• 3:44
  SPEAKER_01: Yeah, and it's I I know that sounds strange, but it's largely a function of the age distribution of who immigrants to Canada because you think about it, children don't own homes.
• 3:53
  SPEAKER_01: Uh, they don't have their name on the lease.
• 3:55
  SPEAKER_01: And because there's a smaller proportion of children who arrive as newcomers relative to the general population, immigrants are more likely to be adults than the general population and therefore are more likely to own or rent a home.
• 4:09
  SPEAKER_01: And that's something that we often miss in the immigration discussion.
• 4:12
  SPEAKER_01: Like it sounds obvious, but it's really important when it comes to housing because when we look at immigration, it's not just a sheer numbers thing of you know 380,000 newcomers or so on.
• 4:23
  SPEAKER_01: But what's also important is the fact that those newcomers are disproportionately in their 30s or maybe in their late 20s.
• 4:30
  SPEAKER_01: So they're in their prime rental and ownership years, which impacts the overall demand for housing beyond just the sheer number of newcomers.
• 4:39
  SPEAKER_02: So ownership can mean a lot of different things.
• 4:41
  SPEAKER_02: That could be a 500 square foot one-bedroom condo in downtown Toronto or Vancouver.
• 4:46
  SPEAKER_02: It could be a five-bedroom home in the suburbs.
• 4:48
  SPEAKER_02: And those numbers about how many they own doesn't actually tell us what they own.
• 4:53
  SPEAKER_02: Do we know what they're buying compared to the Canadian-born population?
• 4:56
  SPEAKER_01: So, yeah, what we do know is that per 1,000 persons, immigrants are more than twice as likely to live in a condo apartment than they own than the Canadian-born population.
• 5:06
  SPEAKER_01: So it is true that uh they are, you know, more urban, more likely to be in a high-rise condo, but they're actually slightly more likely to also own a ground-oriented home, uh, think a single-dached, semi-detached, or town home, uh than the general population.
• 5:23
  SPEAKER_01: So it isn't true that newcomers largely stay downtown and largely live in apartments.
• 5:29
  SPEAKER_01: They might when they first arrive, but after five, 10, 15 years, that changes.
• 5:33
  SPEAKER_01: Now, it's also true that people who aren't born in Canada disproportionately live in certain parts of the country.
• 5:39
  SPEAKER_01: And those parts can include suburban towns like in the GTA or parts of suburban Vancouver like uh Surrey and Burnaby and so on, you know, places that are, you know, within these big metros and they have lots and lots of single-family homes.
• 5:55
  SPEAKER_02: That makes total sense if you look at the way immigrants have historically settled here and how cities like they've kind of expanded exactly that way.
• 6:03
  SPEAKER_02: You think about the post-war Italian waves in the 50s and 60s moving outward.
• 6:07
  SPEAKER_02: More recently, the massive growth of Asian communities across Peel and York regions, like a lot of them started downtown and then moved to the suburbs to establish their roots.
• 6:16
  SPEAKER_01: Exactly.
• 6:17
  SPEAKER_01: Yeah, and we're still seeing that today.
• 6:19
  SPEAKER_01: You know, I think when the next set census data comes out, so we have a census this year, a lot of that data is going to come out next year.
• 6:25
  SPEAKER_01: We're gonna see a number of communities that haven't historically been thought of as destinations for newcomers show very substantial increases in the population of people who weren't born in Canada.
• 6:37
  SPEAKER_01: Uh, ones that instantly come to mind are like Brantford and Woodstock in southwestern Ontario.
• 6:42
  SPEAKER_01: But I think there's going to be a lot, you know, kind of beyond the borders of the GTA that over the last five to 10 years have experienced a lot of folks who may have moved to Canada 10 or 15 years ago and are starting to settle in what have essentially become very distant suburbs of the GTA.
• 7:02
  SPEAKER_02: Even those distant suburbs have home prices that like they're not particularly cheap.
• 7:06
  SPEAKER_02: I suspect that most people who do move here, they have to have a certain amount of wealth to get approved to immigrate.
• 7:13
  SPEAKER_02: How much does that explain what's going on?
• 7:16
  SPEAKER_01: Yeah, so that immigration pathway that someone takes actually does make a big difference in the types of homes that get purchased and affordability and so on.
• 7:25
  SPEAKER_01: So there's a very recent study that came out a few weeks ago from Statistics Canada called the home ownership trajectories of recent immigrants.
• 7:32
  SPEAKER_01: We'll link to that in the show notes.
• 7:34
  SPEAKER_01: I think the show notes are going to be long for this one.
• 7:36
  SPEAKER_01: Uh, but if we look at it, that overall uh that study shows that home ownership rates for economic class immigrants, uh unlike the general population, are going up in Ontario, and that despite having lower incomes, recent immigrants on average buy more expensive homes than Canadian-born people.
• 7:56
  SPEAKER_01: But that's just economic uh class immigrants.
• 7:58
  SPEAKER_01: So it does mean that in the future, if immigration shifts more towards lower income, lower skilled workers, more towards resettlement of refugees, that could change the calculus somewhat.
• 8:10
  SPEAKER_01: And, you know, not you might not see as much demand uh for the suburbs.
• 8:16
  SPEAKER_01: But as it stands right now, if we add all of this together, I think the belief that the death of the baby boomers means the death of the suburbs is not just wrong, but actually dangerously wrong.
• 8:26
  SPEAKER_01: Now, I do think there's pockets of the country with low levels of immigration where this might hold.
• 8:32
  SPEAKER_01: You might see these towns depopulate, and you know, that's going to reduce the price of suburban homes in there.
• 8:39
  SPEAKER_01: But even there, I think that availability of homes might end up attracting families from other parts of Canada due to that relatively affordable housing.
• 8:48
  SPEAKER_01: So even in those communities that seem like they're set to depopulate, even there, I don't think it's a given.
• 8:54
  SPEAKER_02: Well, one thing that you're insistent on here at the Missing Middle is that if we make a prediction, we should think through all the reasons why that might be wrong and then think about how plausible those reasons are so we can adjust our predictions accordingly.
• 9:06
  SPEAKER_02: So I'm going to give you some scenarios that would cause your prediction that large suburban family homes will still be in demand.
• 9:13
  SPEAKER_02: Let's see how that could end up being wrong, and then you can tell me how plausible you believe that to be.
• 9:18
  SPEAKER_01: Okay.
• 9:18
  SPEAKER_01: Yeah, I'm absolutely game.
• 9:20
  SPEAKER_02: So let's start with the most obvious lever.
• 9:22
  SPEAKER_02: That's just like the overall numbers.
• 9:24
  SPEAKER_02: So what happens if our immigration rates drop significantly, or if Canada simply can't hit its targets moving forward as the whole world starts trying to attract people, as they all deal with aging populations?
• 9:35
  SPEAKER_02: That could change things, right?
• 9:37
  SPEAKER_01: Yeah, that would make it make a difference.
• 9:39
  SPEAKER_01: Now, I don't think Canada's gonna have any trouble hitting immigration targets for the next few decades.
• 9:44
  SPEAKER_01: That I think there's still a lot of folks out there.
• 9:47
  SPEAKER_01: Yes, we are seeing reduced births in a lot of countries, but keep in mind the people who uh come over to Canada, you know, tend to be in their late 20s and early 30s.
• 9:57
  SPEAKER_01: So really, yeah, there's kind of a 30-year lag between reduced births and reduced global immigration.
• 10:04
  SPEAKER_01: You know, so that could have an effect, say 30 years from now.
• 10:08
  SPEAKER_01: I don't think it's going to be an issue today.
• 10:10
  SPEAKER_01: But I could absolutely see a scenario where Canadians demand further cuts to immigration targets because of concerns around housing or healthcare or something like that, and governments respond to it.
• 10:21
  SPEAKER_01: So currently Canada brings in about 380,000 permanent residents a year.
• 10:26
  SPEAKER_01: If that was to drop to like 80,000 or even 180,000, yeah, I would be a whole lot less bullish on the for uh future of suburbs.
• 10:34
  SPEAKER_02: Okay, so scenario two.
• 10:36
  SPEAKER_02: What if our cities like actually get their act together and start building large family-sized homes within existing urban boundaries?
• 10:43
  SPEAKER_02: So I'm talking about that high-density infill, multiplexes, townhouses, those European-style courtyard apartments where kids can actually play in a safe area in the in a shared backyard.
• 10:53
  SPEAKER_02: Like if young families and newcomers can get three or four bedrooms downtown, do they still choose the suburbs?
• 10:59
  SPEAKER_01: Yeah, well, I certainly hope that governments will allow for more infill housing.
• 11:03
  SPEAKER_01: Like a lot of the work we do at the Missing Middle Initiative is writing reports, you know, talking about uh policy changes to advance that in a way that doesn't get too much local opposition.
• 11:15
  SPEAKER_01: So, you know, we're really trying here at the missing middle to make that happen.
• 11:20
  SPEAKER_01: But I'm also skeptical that governments will allow for enough of that infill at scale to have a measurable impact on existing suburbs.
• 11:28
  SPEAKER_01: So we're trying our best, but you know, I'm also aware of how difficult this is going to be.
• 11:34
  SPEAKER_01: Again, as somebody who works on these policies every single day.
• 11:37
  SPEAKER_01: Now, of course, it's also possible that governments change course, and instead of allowing for more infill, they basically allow cities to build out more.
• 11:46
  SPEAKER_01: They significantly expand urban growth boundaries and allow for a lot of new suburbs to be created, which could make existing ones far less attractive.
• 11:55
  SPEAKER_01: I'm skeptical that's going to happen in particularly in lower mainland BC and southern Ontario, but that's certainly possible as well.
• 12:03
  SPEAKER_01: And that would put downward pressure on, you know, the the prices and the shortage of suburban homes in those areas.
• 12:10
  SPEAKER_02: Okay, so here's a third scenario.
• 12:12
  SPEAKER_02: What if that pent-up demand from young Canadian-born people that we're counting on for this prediction just evaporates?
• 12:19
  SPEAKER_02: Maybe they're going to just resign themselves to the fact that they're never going to be able to afford to live in a house, so they're going to live in their apartment forever.
• 12:25
  SPEAKER_02: Or maybe worse, we see a major brain drain where a youngest, brightest talent looks at Canadian real estate prices and decides that they should just leave the country.
• 12:33
  SPEAKER_01: So I worry about that emigration scenario a lot.
• 12:36
  SPEAKER_01: In fact, I recently had a piece in the Globe and Mail that talked about this.
• 12:40
  SPEAKER_01: So I think if the suburbs do end up dying, I think it's actually going to be for emigration reasons, not immigration ones.
• 12:47
  SPEAKER_01: Emigration out of Canada is on the rise.
• 12:50
  SPEAKER_01: And I do think the conditions are right for a small-scale exodus of young people out of the country, not just to the United States, but places that are much less expensive: Vietnam, Thailand, Costa Rica, and so on.
• 13:07
  SPEAKER_01: And if we saw that exodus of young people, that absolutely would put downward pressure on the demand for homes in the suburbs.
• 13:15
  SPEAKER_02: Okay, the fourth and final scenario, what if housing tastes are really just changing?
• 13:20
  SPEAKER_02: Like what if both newcomers, young Canadians, they decide they actually prefer smaller, low maintenance urban units and they choose to just not have kids altogether because maybe it's just too expensive.
• 13:30
  SPEAKER_02: Maybe they just don't want to.
• 13:31
  SPEAKER_02: If the cultural desire for the suburban dream dies, then so does the demand.
• 13:36
  SPEAKER_01: Yeah, I'm skeptical of this one.
• 13:38
  SPEAKER_01: You know, part of what newcomers to Canada are chasing is the North American dream.
• 13:42
  SPEAKER_01: And that involves ownership of a larger home with a backyard.
• 13:46
  SPEAKER_01: We've seen this for generations.
• 13:47
  SPEAKER_01: So it doesn't strike me as particularly likely that their preferences would all of a sudden change.
• 13:52
  SPEAKER_01: But I think if those preferences do change and newcomers en masse decided that they weren't interested in suburban homes or that those suburban homes would be perpetually out of reach, I don't think they would settle in apartments.
• 14:04
  SPEAKER_01: I think they just stopped coming to Canada altogether.
• 14:07
  SPEAKER_01: So, you know, that starts to go back to your immigration scenario where maybe we can't uh hit our targets.
• 14:14
  SPEAKER_01: But overall, I see that as unlikely.
• 14:17
  SPEAKER_01: I think we've had uh decades of folks coming to Canada, wanting to chase that kind of North American dream of a larger home with a backyard.
• 14:26
  SPEAKER_01: I don't see that changing.
• 14:28
  SPEAKER_02: Okay, I just thought of a bonus scenario.
• 14:29
  SPEAKER_02: Got one more to throw at you, which is all the data you're basing this on is looking at how immigrants have acted once they've come here, like what their actions have been, where they settle, all of that.
• 14:40
  SPEAKER_02: And that's looking in the past when there's been a real estate market that's been like a really good place to invest.
• 14:45
  SPEAKER_02: So I suspect there's a lot of people who came here or were like, I'm gonna get into real estate.
• 14:49
  SPEAKER_02: This is how I'm gonna build my wealth in Canada.
• 14:51
  SPEAKER_02: And what I wonder is, is this going to hold like if people are coming here now and they're looking at the market?
• 14:56
  SPEAKER_02: It's not the best market right now.
• 14:58
  SPEAKER_02: It doesn't seem like the best place to make your money, at least not in the short term.
• 15:01
  SPEAKER_02: Who knows in the long term?
• 15:02
  SPEAKER_02: Do we know that this data will hold up in the long run?
• 15:05
  SPEAKER_01: Remember, we only know in retrospect that it was a good market, but go back to the 1990s and go back to the first episode of the show we had, Boom Bust Echo.
• 15:14
  SPEAKER_01: Everybody was saying in the late 90s, like you you would be out of your mind to buy suburban real estate.
• 15:19
  SPEAKER_01: That would be like the worst thing you could possibly do.
• 15:22
  SPEAKER_01: The bottom was going to fall out of it.
• 15:24
  SPEAKER_01: So obviously nobody was going to do that.
• 15:27
  SPEAKER_01: And of course, they did.
• 15:29
  SPEAKER_02: Of course, we only know in hindsight for sure what's going to happen, but you know, there was a long period of time, especially in the GTA where a lot of immigrants settle, like, and in Vancouver, frankly, there was the narrative that real estate's going up.
• 15:42
  SPEAKER_02: It's a really great market, put your money in there.
• 15:44
  SPEAKER_02: And I I don't know, I see that the narrative seems to have changed right now, especially with condos.
• 15:49
  SPEAKER_02: But in general, it seems like it's not that same sort of like bullish party that people were having before where they're like, this is I'm gonna make so much money on this, even though obviously we don't know for sure until hindsight.
• 15:58
  SPEAKER_02: But I think narratives play a large role in people's decisions.
• 16:02
  SPEAKER_01: Well, they do, but but keep in mind that we could have said the same thing in 1997 that you know home prices were lower than they were a decade ago.
• 16:12
  SPEAKER_01: All of these pointy-headed academic experts said that that home prices uh would never go up again.
• 16:20
  SPEAKER_01: And people believed that, but what changed was that prices started going up, right?
• 16:25
  SPEAKER_01: So I I I think there's a chicken and egg problem here where we tend to think that prices go up after people believe they go up, but it tends to be the opposite.
• 16:35
  SPEAKER_01: Prices go up first, and then people believe, okay, they we can make money here.
• 16:40
  SPEAKER_01: So I just don't buy like you the the real estate market, you know, since the end of World War II, it's had its ups, it's had its downs.
• 16:47
  SPEAKER_01: But the one consistent thing is that people want a place to live.
• 16:52
  SPEAKER_01: And you know, I I think at the end of the day, they're they're they're looking for that, they're looking for that security.
• 16:58
  SPEAKER_01: And if you are a newcomer to Canada, you want this home at some level, like, yeah, you want the price to go up, but at some level, regardless of what happens to that price over 10, 20, 30 years, you still have the house, you can still live there.
• 17:14
  SPEAKER_01: Like, you know, if the asset devalues, it still has the same usefulness to house your family.
• 17:20
  SPEAKER_01: So I just don't buy it.
• 17:22
  SPEAKER_01: I think people have to live somewhere.
• 17:25
  SPEAKER_01: And I'm old enough to have lived through several cycles where people believe that home prices always go up and then they fall, and people go, Oh my god, we were so naive.
• 17:38
  SPEAKER_01: We'll never make that mistake again, and then we make that mistake again.
• 17:42
  SPEAKER_01: So I just don't see it being all that likely that uh people are going to avoid moving to suburban homes because they think you know they're not going to appreciate in value over 10, 20, 30 years.
• 17:55
  SPEAKER_01: It's possible.
• 17:56
  SPEAKER_01: I don't want to rule it out entirely.
• 17:58
  SPEAKER_01: I just don't see it as particularly likely.
• 18:00
  SPEAKER_02: I guess the thing we can count on is that people will continue to not necessarily be logical or rational about their investment decisions, especially when it involves a house.
• 18:08
  SPEAKER_02: That's that's I guess people come into it in a way where they're like, you can you can look at all the logic, you can look at the fundamentals, but in the end, there's a big part of it that's just an emotional decision.
• 18:17
  SPEAKER_01: Well, and on top of that, like I feel like we talk out of both of the sides of our, I don't mean you and I, but I mean the general public, right?
• 18:25
  SPEAKER_01: This is like you we go, well, housing shouldn't be an investment.
• 18:28
  SPEAKER_01: And then when people make a decision that is not investment-based, like a decision that, like, I well, I just want the suburban home because I want to my kids to be close to a school and I want a backyard, we'll say, haha, that is a foolish investment, you foolish person, right?
• 18:46
  SPEAKER_01: So it's like you know, I feel like it's sometimes we we can't win, right?
• 18:50
  SPEAKER_01: We don't want people to treat housing as an investment, and then when they decide to not do that, we kind of mock them for their decisions.
• 18:58
  SPEAKER_01: So yeah, I I think overall, you know, I wouldn't say it's rational or irrational, you know.
• 19:04
  SPEAKER_01: I I would say that the heart wants what it wants.
• 19:07
  SPEAKER_01: And if somebody wants a suburban home, they're probably gonna go out and get it, regardless of whether or not they think it's going to go up eight percent a year over the next 20 years or 2% a year.
• 19:19
  SPEAKER_01: If that's what they want, they're gonna go out and get it.
• 19:21
  SPEAKER_02: I think the message from this episode is it's all gonna come down to people's desires.
• 19:25
  SPEAKER_02: So planners and policymakers, what they should be doing is not looking at where people are living right now, look at where people aspire to live and then plan accordingly.
• 19:33
  SPEAKER_02: Thank you so much for watching and listening.
• 19:35
  SPEAKER_02: Our producer is Meredith Martin and our editor is Sean Foreman.
• 19:39
  SPEAKER_01: And if you have any thoughts or questions about past generations learning that home prices don't always go up, please send us an email to missing middle podcast at gmail.com.
• 19:48
  SPEAKER_02: And we'll see you next time.