Where Did All the Family Homes Go?

Canada's housing targets count every unit equally, even though a studio condo and a three-bedroom townhouse serve very different needs.

For years, Canada’s housing strategy focused on increasing the number of housing units built. But even during periods of record apartment construction, family-sized homes became increasingly scarce.

In this episode of the DemograFix, Mike Moffatt and Cara Stern unpack a major problem hidden inside Canada’s housing statistics: the country is building fewer family-sized homes than it did 20 years ago.

Why are three-bedroom homes becoming so difficult to find? Why are developers building more small condos instead of homes for families? And how do zoning rules, development charges, land shortages, and housing policies shape what gets built?

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Below is an AI-generated transcript of the Missing Middle podcast, lightly edited.

Cara Stern: Housing starts across Canada over the last decade have been relatively high compared to historical averages, but it’s still much harder to find a family-sized home to raise children in than it was a generation ago.

A lot of that shortage does have to do with unusually rapid population growth, which we’ve discussed on a number of episodes, but that’s actually only part of the story. Our housing start data masks a dramatic shift in the type of homes that get built in this country, and it’s a big shift away from building homes that work for families with kids.

Mike Moffatt: So, Cara, you’re a mom of two kids, so let’s say your family needed to move for whatever reason. You’re out there, you’re looking for a new home. What kind of features do you picture in your mind that would suit you and your family?

Cara Stern: It’s somewhere that definitely has enough room for the kids; they need space indoors to be able to play. They need some sort of outdoor area, I don’t care if it’s a backyard, it could be a local park, it just has to be somewhere they can go and be in green space. And they definitely need to have three bedrooms because I’m going a little bit bananas with my kids sharing a room and waking each other up all the time.

Mike Moffatt: We could ask a lot of parents that question, and they’re all going to have different lists. They might want to be within walkable distance to a school, this, that, or the other. I think, though, you’re going to find with most parents of kids that the three-bedroom thing is a must-have. If you have to have three or more bedrooms, then you are almost certainly going to be looking at either a single-detached, semi-detached, or maybe a townhouse unit. You’re going to be kind of limited to those housing options.

If we go back to Census 2021, over 80% of all single- and semi-detached homes had three or more bedrooms. Over 70% of townhomes had three or more bedrooms. If you’re just looking at the listings and saying, “Okay, I’m looking for these three housing types,” most of what the algorithm is going to send you is going to be three or more bedroom homes.

But if you start to look at apartment units, and that could be rentals or condos, only about 16% of low-rise apartment buildings or apartment units (those with five or fewer stories) are going to be three plus bedrooms. And if you start looking at high-rises, only 7% of those have three bedrooms or more.

If you’re looking at apartments, you’re going to have a really tough time finding a place that meets your needs, particularly if those needs are more bedrooms. That is doubly true if you’re looking at newer buildings and big cities, because new builds, particularly in high-rises, have been shrinking all the time. Really, if you want three bedrooms, you’re kind of limited to single-detached, semi-detached, and townhomes.

Cara Stern: I’m actually surprised that 7% of high-rise units have three bedrooms or more. I would have guessed it was even less because it seems so rare. You see one-bedroom, two-bedroom, and studio units, but you almost never see three bedrooms, especially in the rental market.

Mike Moffatt: Absolutely. I think many of those are older, and many of those are catering to folks who aren’t in the middle class. Think of the 62nd-story penthouse units and that kind of thing. It’s not the type of home you would think of when you’re running around with two small children, like, “I’ve got a $3 million penthouse.” I like to think we pay well at Missing Middle, but not $3 million penthouse well.

Cara Stern: Yeah. And when you talk about the apartment sizes shrinking over time, that’s a huge part of it, too. I remember looking at condos when I was looking to buy a place, wondering whether we should move into a house or a condo. I was totally fine with the idea of a condo because I actually like that lifestyle and I like having a lot of people in the building where you can get to know them. You don’t have to go outside to see them, which was kind of nice when I had a very young child on a winter day when we were in a high-rise.

But when we started looking at them, the prices of even the two-bedrooms that were 800 square feet, or even 600 square feet, were considered pretty big units because a lot of them were much smaller than that. Very quickly we realized that if you want 800 square feet, you could spend, at the time, probably around $1.2 million on a two-bedroom condo. Then we noticed that houses were less than that for about that same size, and you often get a basement or some sort of extra space. It didn’t make any sense to get one of those condos if you want space for kids.

Mike Moffatt: Absolutely. If you have a limited budget, and by limited I mean not multi-millions of dollars, since if you’re rich enough you can find whatever you want, but if you have a middle-class lifestyle, don’t come from massive amounts of family wealth, and you want something with three or more bedrooms, you really are limited to what I and many other people call ground-oriented homes. Those are the single-detached, semi-detached, and townhomes. You’re not going to be able to find those kinds of apartment unit condos.

What’s important here is that those housing types—the single-detached, semi-detached, and row homes—are actually getting increasingly harder to find. We’re building fewer of them. If we go all the way back to the year 2000—which I can’t believe was about 26 years ago because I remember it well—we were building at the beginning of the century somewhere between about 100,000 and 140,000 of these ground-oriented homes each year. That was between 2000 and the start of the financial crisis. But we were only building about 30,000 to 70,000 apartment units. What that really means is, for each apartment unit, we were building two or three of these ground-oriented homes which suit families.

The low supply of those apartments was a real problem—we needed to get those numbers up. Thanks to two decades’ worth of government reforms, apartment starts are on the way up, and I mean way, way up. Last year, we had about 165,000 housing unit starts in Canada. That’s an all-time record, and that’s absolutely worth celebrating.

But the problem is ground-oriented housing starts went in the other direction; they have fallen quite a bit. Last year across Canada, we only had about 76,000, which is a 40% drop from what we were doing 20 years ago. When we look at the data, the type of really small units looks like a hockey stick—we’re building a lot of them. But when it comes to things that suit a family with two children, we’re building less and less, and fewer and fewer of those types of units.

Cara Stern: It’s really frustrating the way that politicians talk about this because they talk about “housing units,” not “homes.” When you think about it, what makes a suitable home for one family doesn’t necessarily work for another. We’ve said it before: they look at it as if a unit is a unit is a unit, and that’s not how people look at it. It’s just how politicians and people trying to count housing starts look at it.

If you build a 40-story tower with 400 shoebox condos, yes, you’ve added 400 units and are getting closer to hitting your target. The mayor might get to hold a press conference and talk about all the progress they’ve made towards their targets, but none of those units accommodate a growing family. Those 400 units are basically useless for a couple trying to transition out of the roommate phase of their lives and start a family. Those 400 shoeboxes have a lot fewer bedrooms than houses used to, or the kind of ground-oriented housing that you’ve been talking about, so they fit a lot fewer people than 300 townhomes.

Mike Moffatt: Exactly. Our housing start data is really misleading because of this “a unit is a unit is a unit” mindset. If we look at the number of bedrooms, it’s actually fallen quite a bit. Don’t get me wrong, small apartment units have their uses; there is a market for that. It’s not about saying, “Okay, stop doing that thing,” but we have to be looking at the entire universe of housing that we’re building, and that universe contains fewer and fewer family-sized homes. That is a real problem.

As long as governments, whether it be the federal government, provincial government, or municipal governments, simply think in terms of units and set targets in terms of units, we’re not going to be building the types of homes that work for all families. We’re going to bias the system toward building a lot of shoebox condos and not much of anything else.

Cara Stern: And we do need those shoebox condos. I sometimes get my back up a little bit when people say no one wants to live in them or they’re unlivable. There are a lot of people who would be very happy with them. Think about people who are living with a roommate and would love to live on their own; that gives them an option of a less expensive way to live on their own. I think about the homelessness crisis and how many people would be happy with those teeny-tiny micro-units—there is a market for that at the right price, maybe in cases where the government would make social housing out of them. We do need them. The fact that they’re still so expensive tells me that there still isn’t enough of them.

But we really, really need three-bedroom homes. There are so many millennials out there looking for homes to raise kids, and even if they don’t want kids, they want to live in a place where they can have a partner and maybe have a little home office because a lot of people are working from home, too. The number of bedrooms that they need is actually higher than what people would expect. I don’t really understand why developers aren’t building them, because when there is so much demand, you’d think they would want to respond to that and actually build those homes, right?

Mike Moffatt: You’re absolutely right that it’s not a lack of demand that’s the issue. It’s fair to ask that question because tastes for anything change over time, and when things become less popular, all else being equal, companies are going to start producing less of it. But something else happens when things become less popular, all else being equal, and that’s that the price goes down, particularly for resale items.

Let’s say people decide that they don’t want Beanie Babies, early 1990s baseball cards, or Nickelback CDs; the market gets flooded with them, nobody buys them, and the price collapses to nothing. That didn’t happen with three-bedroom homes. Prices didn’t go down; they went up. And not only did they go up, they grew much faster than incomes. Those homes became incredibly valuable, not something that you could get for a dollar at a garage sale.

Cara Stern: And they haven’t dropped as much as some of these other places have. I know lots of people right now looking to buy a home, and a lot of them are looking for that family-sized home. They haven’t dropped the same way you hear in the news, like, “Oh, real estate, there’s been a crash.” Yes, they’ve gone down since 2022, but they are so far from affordable right now.

Mike Moffatt: Absolutely. In many provinces, they’re at all-time highs right now. Yes, there has been some decline in the GTA, Southern Ontario, and the Lower Mainland in B.C., but in other places, prices have gone up. There’s a lot of demand out there. I occasionally hear things from older people suggesting that it is a demand problem. They’ll say things like, “Well, those homes aren’t getting built anymore because millennials decided that they don’t want to have to mow the lawn.” If that was truly the issue, again, we would be seeing a massive collapse in the price of those ground-oriented homes. That just hasn’t happened.

Cara Stern: Yeah, people definitely still want to live in these kinds of homes, and it’s really frustrating to see that they just aren’t building them at the rate that we need. You’d think that builders would respond to those higher resale prices by building more because when prices go up, they can make more money off of it. Instead of building more, they actually did the opposite—they’re not building them at anywhere near the rates they used to. What’s going on there?

Mike Moffatt: There’s a few different ways we can answer that question. I think the most straightforward is comparing two types of communities. In the first type, over the last 20 years—I would think of places like Alberta, Southwestern Ontario (shout out to Tillsonburg), Atlantic Canada, and so on—we continued to build those homes and, in some cases, actually increased the rate of building them over the last 20 years.

In other parts of the country, obviously the GTA, and I would actually say in particular the 905 belt around Toronto, you saw a massive decline in the building of family-friendly homes.

So you go, “Okay, well, what’s the difference between those two buckets of communities?” There’s a bunch of different factors. In places in the 905, approval times can be much slower than in, say, Southwestern Ontario, and zoning can be much more restrictive. There’s a number of reasons, and I’m sure I’m going to miss some. If I missed your favorite reason, please leave us a comment in the comment section; we’d love to hear from you.

But there are two in my mind that really jump out. The first one is land costs and scarcity.

In places where we stopped building single-family homes, what we saw were massive spikes in land prices, and that was due to land scarcity. Also, when land gets scarce, that attracts speculators. Price goes up, speculators come in, and they cause the price to go up further. Land got really, really expensive. In some places, that development land got scarce simply because we used most of it. You look at parts of the Lower Mainland in B.C. and it’s like, okay, you’ve got mountains, you’ve got the ocean, you’ve got the U.S. border, you’re kind of running out of land. But a lot of the 905 actually became artificially scarce due to tight urban growth boundaries and the Greenbelt.

Cara Stern: For a while, growing up in the suburbs, I would see the expansion of subdivisions farther and farther away from the city, and I kept thinking to myself that at some point it’s going to be too far to commute. There is that kind of limit, even if you don’t put the Greenbelt in there; there is a reasonable amount of commuting time that people are going to accept. I wonder how much that plays a role in this as well.

Mike Moffatt: I’d actually say it’s the opposite because what happened was a lot of those families moved to Southwestern Ontario and still continue moving into the GTA. We made a number of policy decisions to say, “Well, we don’t want people doing 30 or 40 mile commutes to their jobs on Bay Street.” We put in a bunch of policies, and now they’re doing 80 or 90 mile commutes to their jobs. Instead of living in the 905, they’re living in Oxford County and still driving in. In fact, we tended to make sprawl worse because of these land-use issues, but I think that’s a topic for another episode.

Cara Stern: And at the same time, while restricting those urban growth boundaries, we of course didn’t allow multiplexes in cities, so you couldn’t actually build up. You’re limiting it in all directions.

Mike Moffatt: Exactly, because we didn’t allow for infill development, it got really hard to build family-sized homes in the GTA. On top of that, you start to add taxes, and with taxes, I would include fees like development charges. They absolutely went through the roof in both the City of Toronto and the GTA writ large, which made building middle-class, family-sized homes prohibitively expensive in the few places that they were allowed.

Ironically, it economically favoured McMansions, because the development charges on a small 1,200-square-foot detached home and a 12,000-square-foot McMansion are exactly the same. This would be like if the government put a $5 tax on pizza, but that tax is the same whether you bought a small pizza, an extra-large pizza, or even just a single slice of pizza—you buy any amount of pizza, you pay a flat $5 tax. Under that scenario, who on earth is going to pay by the slice? Or in this case, who on earth is going to buy and build a small single-family home when you get taxed through the nose for it?

Cara Stern: No one would want to get the smallest amount of pizza if they can get the entire pizza for the same price, although I guess there’s a land cost, so maybe the base price of the pizza before the taxes would be different. At the same time, yeah, that makes a lot of sense. That’s just a logical thing that developers would do. But then why didn’t they shift to building family-sized apartment units when they realized that there was a shortage of family-sized homes and people were going to want them?

Mike Moffatt: The reason is project cost. The cost of construction for a high-rise is much, much higher per square foot than for ground-oriented buildings because of their complexity.

The other day I was looking at a Bloomberg Associates report for the City of Ottawa. It showed for the Ottawa region pure construction costs. This doesn’t count land, taxes, marketing, finance costs, or anything else; just drywall, electricians’ time, and so on. If you look at those construction costs, if you’re building single-detached, it’s about 205 bucks a square foot. It’s about the same for townhomes. But if you’re building high-rises, it’s about 320 bucks a square foot. It’s roughly 50% higher.

It’s so much more expensive per square foot in order to build high-rise units. But the costs are even worse than that when I say it’s about 50% higher because, for a single-detached home, if you’re a developer and you’re selling it, you’re selling 100% of the space. It’s really efficient. But for a high-rise, that figure drops to about 80% because you are selling the units themselves—you’re not selling the hallways, the elevator, or the lobby. That doesn’t go into the purchase price. There’s this efficiency loss just because you need all of these other components.

The project’s economics are brutal, particularly in the GTA. No middle-class family with kids is going to pay over $1 million to live on the 56th floor of a high-rise to get enough space; it just doesn’t make any sense.

Cara Stern: And if they’re trying to prepare their life for having a kid, they might not even have that kid because they would say they don’t have the room for it. It’s really tough for people trying to have a family if they’re looking at the options, like, “Where am I going to raise them? What kind of home can I have for them?”

If they find that they can’t afford something that’s big enough for their family that they can actually feel good about raising their kids in, then they’re just going to not have kids, and people are making that choice all the time.

We know our fertility rate is at the lowest it’s ever been—it’s at 1.25, and that is considered ultra-low. We’re seeing this affect what people are able to do with their families, how many kids they are able to have, and where they’re able to start families. We’re seeing a lot of people leaving cities because there are just no options for them within the cities.

Mike Moffatt: Absolutely. That’s the big issue—that we are creating cities without children because the individuals or the couples in that city are going, “Okay, well, I’m just not going to have kids because I just can’t make the numbers work.” Not that most millennials think like economists and accountants, but enough of them do.

Cara Stern: No, but they’re looking at their budget and going, “The numbers just don’t work. There’s just no way to make this happen.”

Mike Moffatt: Exactly. They can figure it out without the use of an Excel spreadsheet, doing calculus, or anything. If they really want to have kids, they’re moving out. They’re moving to the 519, they’re moving to smaller communities outside of the GTA, and in some cases, they’re leaving Ontario or leaving Canada. You get this big out-migration, and you actually weirdly get sprawl on steroids because you get people who are going far away from the city but still commuting back to work every day. It doesn’t make for a strong, inclusive economy when you basically price out middle-class families from having kids and also living next to, near, or in a city.

Cara Stern: When you say inclusivity, it sounds like saying it’s a goodwill thing to be able to do this, but it’s actually just looking at the economics of it. If you have all these parents who are basically the ages of people who are in their prime working years moving out of the city, that’s going to have an impact on what kind of jobs people can work in the city.

We need people to work in the city. There are lots of jobs; they can’t all be super high-paying jobs that are only for the most senior people and then the lowest entry-level ones. You need to have some of those people with experience in all different kinds of careers, and there are a lot of jobs where it’s impossible to find people in the cities.

Of course, if they’re not highly paid and they can’t afford to live in the city, then they’re not going to be there to work those jobs, so it’s actually a big economic problem for our urban areas.

Mike Moffatt: Yeah, absolutely. I often hear from particularly older folks saying, “Well, why don’t young people just move somewhere cheaper?”

Cara Stern: “Just move to Alberta if you’re in Toronto. It’s so much cheaper.”

Mike Moffatt: Exactly. But think about the logic there. We’re basically saying we’re going to have all the seniors live in Toronto and all the nurses and physical therapists living in North Bay. How is that going to work?

Cara Stern: They’ll just commute from North Bay to Toronto. A very good commute. It’s lovely, a beautiful thing driving through Ontario.

Mike Moffatt: Exactly. So I just go, “Okay, how is this going to work where you have a community of all old people and no middle-class people there to actually do the work?” It doesn’t work. You have to have cities that work for young middle-class families; there’s no way around that.

Cara Stern: So how do you actually go about fixing this?

Mike Moffatt: There are a few things that we can do, so I’ll give a list here. Again, it won’t be exhaustive. If I missed your favourite policy prescription, please let us know in the comments.

First, we have to fix development charges. They’re not only too high, but as I mentioned, for ground-oriented homes, the system is designed to favour McMansions. You hear this complaint, “Okay, well, why don’t developers build smaller homes? Why do they only build McMansions?” It’s because that’s what the tax system incentivizes.

Second, we need to be realistic about how much land we need, and that’s going to mean tough decisions about urban growth boundaries.

Third, we need to build a diversity of low-rise housing types, including multiplexes and European-style apartments, so that’s going to require both zoning and building code reform.

And finally, we need to reform condo regulations to make it much easier to be able to purchase a home in a multiplex and not just rent one. We had a report a few months ago called A Roadmap for Gentle Density. It mapped out the issue and provided recommendations on how to make it possible to own, and not just rent, a multiplex unit or other form of family-friendly, gentle density housing. There are four ideas right there. I’m sure there’s more that we could discuss, but this is a solvable problem.

Cara Stern: The idea that people could buy multiplex units is a good one, because right now it seems like a lot of people who build multiplex units live in one and rent out the others potentially, or maybe they just rent them all out. The system is designed for that. But there are a lot of people who still want to own their home, and if they can afford it, they’re going to make that choice. Once again, if the family-sized units are not available in the cities, even in these gentle density builds, then they’re not going to live there—they’re going to move away.

Mike Moffatt: For a lot of families, they want to be able to own a home. If our solution is gentle density and multiplexes, then we absolutely have to reform the system to allow middle-class families to own individual units and not have some rich person own the entire building, own all eight units, and rent out the other seven. That just doesn’t work.

Cara Stern: Thanks, everyone, for watching and listening. Our producer is Meredith Martin, and our editor is Sean Foreman.

Mike Moffatt: And if you have any thoughts or questions about stuff that you can find cheap at a garage sale, please send us an email to [email protected].

Cara Stern: And we’ll see you next time.

Additional Reading/Listening that Helped Inform the Episode:

From Policy Gridlock to Housing Growth: A Roadmap for Gentle Density

Brought to you by the Missing Middle Initiative