Additional insights on the Housing Crisis beyond Waterloo Region’s 2023 Vital Signs® Report
Written by Steven Ayer, Common Good Strategies
Date: January 17, 2024
Summary
Waterloo Region’s 2023 Vital Signs® Report, created by Waterloo Region Community Foundation (WRCF), focuses on Affordable Housing in Waterloo Region by exploring a variety of themes and the impacts across different communities. This article highlights these variations, particularly across the three cities and four townships, and then discusses the trends over the past year, underscoring how recent declines in home prices are not improving affordability for housing.
Article
In the shadow of skyrocketing housing prices, Waterloo Region stands as a stark example of the volatility in Canada's real estate markets.
The region has witnessed a dramatic escalation in home prices since 2005. A key theme of our 2023 Waterloo Region Vital Signs® Report is how this home price escalation is among the highest in the world. This increase in home prices has propelled Waterloo Region's housing market into the realm of the extremely unaffordable for huge swaths of the population.
Decreasing prices have not led to increased affordability
However, the real estate market in the region has recently experienced a significant downturn, with the MLS Home Price Index benchmark home price falling by $240,000 from its peak in February 2022 to $708,600 in December 2023, with the number of home sales tumbling in 2023.
Amid unprecedented decreases in home prices, is it tempting to assume that this has been some sort of a boon for affordability?
The reality is much harsher. In the third quarter of 2023, the average scheduled payment for a new mortgage in the Region was $2,420, up $669 from when home prices peaked in Q1 2020 and up $948 versus the last quarter before the pandemic.
Source: CMHC via Equifax Canada.
Rents have likewise skyrocketed versus before the pandemic, though they have declined ever so slightly in the last year. Rentals.ca shows the asking rent for a 1-bedroom apartment in Kitchener at $1,917 per month, up $775 from January 2019, and down by about $50 over the course of 2023. Unfortunately, comparable data is not available through the rest of the municipalities in the region.
This ongoing affordability crisis plays a key role in explaining why despite these price decreases for homes 2023 was a horrible year for home sales.
Exploring the affordability crisis across Waterloo Region communities
Our 2023 report focused on a few key trends including skyrocketing prices and rents, huge population growth unmatched by supply of new housing, and households getting larger as new homes are getting smaller. All of this has led to the continued affordability crisis and further overcrowding.
From 2015 to 2022, Waterloo Region was growing faster than nearly any other medium or large sized metropolitan area on the continent.[1]
With Canadian population growth hitting record highs in 2023 – growing by more than a million people, surpassing the previous record in 2022 by a sizeable margin – the mismatch of unprecedented population growth with inadequate supply of new housing has only become more strained.
In short, the trends we talked about in the 2023 Waterloo Region’s Vital Signs® Report are as pressing as ever, and further understanding them is essential to each of the communities in the region.
This post explores several of our key trends and highlights consistencies and disparities within our communities, looking at each of the 7 areas within the region:
Cambridge
Kitchener
North Dumfries
Waterloo
Wellesley
Wilmot
Woolwich
Starting off with pricing, none of the municipalities across Waterloo Region are particularly affordable. Across the cities, composite prices are hovering between $679,000 and $707,000 in December 2023. A note on composite prices, this merges together single-family homes with condos and other housing structures into a single indicator and comparisons should be interpreted with this in mind. As a contrast, most of these municipalities had composite prices generally across the $200,000 range back in 2005. The townships all have higher composite prices than the prices of the cities in the region.
Stunning population growth – in parts of the region
Between 2015 and 2022, Waterloo Region witnessed a remarkable population boom, growing at twice the national average (19% versus 9%), and about eight times faster than the average G7 country. The growth was primarily centered in the cities of Waterloo (22% growth) and Kitchener (19%), while Cambridge (10%) was much more in line with the growth of the country overall (9%). Alongside this significant urban surge, North Dumfries also experienced notable growth (18%), contributing to the region’s overall demographic upswing, while Wellesley, Wilmot, and Woolwich all grew much more in line with Canada as a whole.
The unprecedented growth across the region, but in the cities of Waterloo and Kitchener, and in North Dumfries in particular, extends far beyond mere population increase; it fundamentally challenges the cities to scale up essential services like childcare, healthcare, cultural spaces, settlement support services, social services, and recreational programs.
Source: Statistics Canada via Waterloo Region 2023 Vital Signs® Report with additional analysis by author from the same sources.
Perhaps most critically, this rate of growth necessitates places for people to live.
This rapid and substantial population increase has inevitably led to a pronounced imbalance between housing supply and demand. The rate of new housing developments has struggled to keep pace with the burgeoning population, creating a challenging scenario for the region's housing market. As a result, Waterloo Region is grappling with the complexities of accommodating this swift demographic shift, underlining the urgent need for innovative housing solutions and strategies.
On the supply side, Waterloo Region’s housing starts declined by 23% over the first 11 months of 2023,[2] making the huge mismatch between population growth and housing starts all the more critical. However, housing completions were up significantly over the same period versus previous years as more previous projects came to a conclusion.
Large households are growing at staggering rates in some places in the region
In Waterloo Region’s 2023 Vital Signs® Report, one trend we spent some time on is the growth in larger households, driven by trends like more multigenerational households, more roommates, more families living together, as well as renting rooms to unrelated household members.
Overall, five or more person households grew by 16% across the region, while one-person households grew by 9%.
But that disguises a lot of variation in terms of changing households.
In Cambridge and Kitchener, growth was disproportionately driven by increases in these larger households. In Kitchener, for example, between the 2016 and 2021 Census, households grew by 8% while 5 or more person households grew by 21%.[3] In Waterloo, population growth was much more evenly distributed across household sizes (with households growing by 16% and 5 or more person households growing by 14%). Throughout the townships, there was no similar pattern of households getting much larger as we saw in the cities within the region.
Given that growth in large household sizes has also corresponded with shrinking square footage of new builds (from 2,100 square feet of living space on average between 2001 to 2005 to 1,660 square feet in 2016 to 2020), it should come as no surprise that this growth in large households amid an affordability crisis also corresponds with very rapidly growing overcrowding.
About one in three newcomers (34%) arriving between 2016 and 2021 live in overcrowded conditions.[4]
Source: Statistics Canada via Waterloo Region 2023 Vital Signs® Report with additional analysis by author from the same sources.
Nowhere in the region has enough subsidized housing units
Waterloo Region’s 2023 Vital Signs® Report also highlights a dire shortage of community housing in Waterloo Region, noting there are about 28 times more households on the waitlist than were housed in 2022.[5]
Recent reports have advocated for Canada to align with the Organisation for Economic Co-operation and Development (OECD) average for social housing, suggesting that 7% of households should be accommodated in social housing. While direct data on social housing is not readily available locally, we do possess a broader dataset on subsidized housing, which encompasses both social housing and other forms of subsidies, which is somewhat reasonably similar for comparisons sake.
None of the communities in Waterloo Region come close to 7% of households living in subsidized housing.
In Cambridge and Kitchener, 4% to 4.5% of residents live in subsidized housing, a notable contrast to the 2.6% in Waterloo. This disparity becomes even more pronounced when looking at the townships, where the percentage ranges from 1.7% in Woolwich to a mere 0.4% in North Dumfries.[6]
However, initiatives are in progress to modestly increase access to subsidized spaces, as detailed in our report, though all of these are inadequate in the face of rapid population growth and the other trends described in our report.
Especially with aging populations, growing households, and increasing homelessness, far more community housing is needed in each corner of the region to make a real difference in terms of meeting the needs of our communities.
Source: Statistics Canada via Waterloo Region 2023 Vital Signs® Report with additional analysis by author from the same sources.
Wide variation in creation of new rental units across the region
Rental housing has been proposed as one potential solution for parts of the affordability crisis in Canada. Construction of primary rental housing – apartments being built specifically to be rented out as opposed to condos for example – that are purchased by investors and then rented, has been negligible across the country for some time, with a slight uptick in recent years.
We can see some signs of progress within both Waterloo and Kitchener, which have seen an increase of approximately 1,000 new rental units from 2019 to 2022 each. Compared to recent history, this does reflect a considerable increase in rental units, though one that is obviously greatly inadequate when the population of the region grew by almost 23,000 people in 2022 alone. The townships have seen some increase in rental units as well, especially in comparison to population levels.
In stark contrast to the progress in new rental units in some areas of the region, Cambridge has barely increased primary rental units at all, adding only 5 units in the same period. This brief exploration doesn't delve into the underlying reasons for Cambridge's significantly lower number of rental units compared to its counterparts. Nonetheless, it raises important questions and highlights a need for further investigation into the factors influencing these divergent trends in rental unit development.
Includes primary rental units only, excluding rentals on the secondary market like condos. Source: CMHC Rental Market Survey. Note: The "Three Townships" in this chart refer to North Dumfries, Woolwich, and Wilmot. Data for Wellesley is not available from the Kitchener-Cambridge-Waterloo CMA Rental Market.
Conclusion
In conclusion, Waterloo Region's housing scenario is a vivid illustration of the complex interplay between rapid growth, evolving demographics, and the pressing need for affordable housing. The region's cities and townships, each with its unique challenges and growth patterns, reflect a broader narrative of change that is not just local but also national in scope. Addressing these housing challenges requires a multifaceted approach, one that not only acknowledges the diversity of the region's needs but also actively seeks to harmonize development with sustainable and inclusive living solutions.
Moving forward it is imperative that those working across various sectors – government, private developers, non-profit organizations, and community groups – work in unison towards a common goal. The journey towards achieving balanced and accessible housing in Waterloo Region is ongoing, and it is through combined efforts and shared insights that the most effective and enduring solutions will emerge.
We invite those addressing these housing issues to contact lynne@wrcf.ca if you would like to discuss the data we have collected, and/or opportunities to dig deeper on an area of focus in this article or the report. Together, we can make a meaningful difference.
[1] See Waterloo Region Vital Signs® Report section “Supply and Demand: Navigating housing in one of the OECD’s fastest-growing regions” for more details and sources.
[2]Both of these are from Canada Mortgage and Housing Corporation’s Housing Information portal and calculated by the author.
[3]See full sourcing and notes in Waterloo Region 2023 Vital Signs® Report section “Expanding households, shrinking spaces” for more details on unsourced data in this section.
[4]We use overcrowded here to refer to what Statistics Canada refers to as unsuitable housing. See full sourcing and notes in Waterloo Region 2023 Vital Signs® Report section “Expanding households, shrinking spaces” for more details on unsourced data in this section.
[5]See Waterloo Region 2023 Vital Signs® Report section “Pricing Out Prosperity” for more details and sourcing.
[6]See Waterloo Region 2023 Vital Signs® Report section “Unified action needed: From national to local solutions to the housing crisis” for more details and sourcing.
