It’s no secret that Toronto’s housing market is expensive. So expensive, in fact, that it causes property prices to rise in communities far beyond that.
This is a bit of a problem for a city that expects to grow by 700,000 inhabitants over the next 30 years, which The agenda discussed Wednesday.
Agenda June 30, 2021: Toronto Growth Plan
You could say that is the cost of being in a big city. Many large global economic centers are expensive. Think London or New York.
But big does not always mean expensive. Tag Chicago.
Both Great Lakes cities, Chicago and Toronto, each have a population approaching 3 million. They are also financial centers and home to many large companies.
But in Windy City, the average price of a home in the city is around US $ 350,000. In Toronto, the average price of a home is around US $ 890,000 ($ 1.1 million Canadian).
No two cities are the same, of course. But the gap between Chicago and Toronto prices is still somewhat spectacular.
To understand why Chicago is so much more affordable than Toronto, TVO.org talks to Janet L. Smith, a professor of urban planning at the University of Illinois at Chicago.
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TVO.org: What accounts for the huge gap between house prices in Toronto and Chicago?
Janet L. Smith: We are dealing with different countries, but we are also dealing with different cities in terms of tax policy, incentives: things that encourage both demand and supply. I’m always wary of that when trying to standardize, if you will, for comparison purposes.
But I would say that Chicago has a really two-part housing market. So this median price reflects very high prices and some very low prices. In some parts of Chicago, you can still find things under $ 100,000 – not good quality, but also probably because it’s in a neighborhood considered less desirable by a market. I also know Toronto has it, but I feel like it’s probably a little flatter, which means the highs are not that high and the downs are not that low.
TVO.org: What do you think is due to the fact that Chicago’s market is more divided than Toronto’s?
Smith: Racial segregation. Hands down. Our comparative knowledge of Toronto and Chicago is work that we did with David Hulchanski at the University of Toronto on what he calls “the three cities.” And we did the same analysis in Chicago. I would argue that racial segregation without problems has contributed tremendously. It changes in certain neighborhoods because the shrinking center – that is [people who are] middle income – they have two choices: they can spend a lot of money moving up the ladder to affordable housing but perhaps desirable by location or school district, or they can look to neighborhoods that are on the margin low about. Whether you call it gentrification or just finding affordable housing in the city, we have neighborhoods that are changing racistly – but also economically.
TVO.org: Why has this apparently been more entrenched in Chicago?
Smith: In the 60s, we experienced a huge racial change and a practice in the real estate industry called blockbusting, where blacks were not shown certain neighborhoods to look for housing themselves. And if the neighborhood became too non-white, rental and housing prices began to fall.
TVO.org: One reason for the high prices of the Canadian housing market is that our urban properties are seen as a great place for wealthy international buyers to put their money. Is that a problem in Chicago?
Smith: I would argue that Chicago had the potential for that and maybe still has it now. But I think we do not have it like New York, where you have Russian oligarchs who buy Trump Tower properties and see it as a place to land a few times a year for shopping or just as an investment. I do not think we have become so international.
TVO.org: I’m surprised there would not be a large number of international buyers who said, “Chicago is a cool place. Why am I not buying an apartment there? ”
Smith: But I think we would be considered second class compared to a New York City, for example.
Although we have our stock exchange and market, we have a lot of incredible architecture, drawn to international business, I would argue, is still on the coast: San Francisco, Los Angeles, New York, Miami. Research has shown that investors, especially Chinese investors, are pulling to the shores.
TVO.org: Many critics of Toronto’s high housing prices blame municipal, provincial, and federal policies. Can some of Chicago’s lower housing costs be attributed to better policies?
Smith: I would hesitate to say that it is due to politics, because the local practice with local authorities in Chicago, specifically with the former mayors and even probably still, must be very encouraging for advanced investment. As someone who has worked in Chicago for nearly 25 years – as an academic but also as a lawyer – it’s a big struggle to get affordable housing. It took years to fight the city of Chicago to get some sort of agreement to ensure that there would be conservation and production of affordable housing around the Obama Center to be built on the south side of Chicago. A huge battle. Grim camp. And Obama was on the side of the city, not on the side of society.
This interview has been condensed and edited for length and clarity.