Housing Market Insight — Toronto

Home prices in the Greater Toronto Area (GTA) have increased rapidly in recent years. This has prompted the phenomenon known as “drive until you qualify.” Households, being priced out of the Toronto market, move further and further into the suburbs until they find housing they can afford (and a mortgage they can qualify for).

A move to the suburbs can bring savings on housing. However, living far from work increases commuting time and costs. A new CMHC study explores the trade-off between location affordability and commuting costs in the GTA. Some highlights:

  • Many GTA households migrated to municipalities that offered more affordable single-detached homes, but also longer commutes.
  • Often, the cost of longer commutes can completely offset the savings from moving to more affordable municipalities.
  • Using public transit to commute can maintain housing cost savings, but does further increase commute times.

Locations with lower home prices have higher commuting costs

For this study, CMHC looked at the single-detached home market. We found that, in 2016, single-detached homes were less expensive in 16 of the 21 GTA municipalities studied compared to Toronto. In general, house prices fell as their distance from Toronto increased.

We then estimated the monthly cost of commuting to a place of work in the city of Toronto from each GTA municipality. As expected, the cost of commuting increased as the distance from the city of Toronto increased.

What became apparent is that the cost of commuting from the suburbs eats into savings on housing. In fact, for some suburbs, commuting costs make living there more expensive than living in the city of Toronto.

Commute times are also costly

Many of the GTA suburbs with lower home prices had one-way commute times of almost 60 minutes. Such commutes can add up to the equivalent of an additional workday per week for the typical worker. Now, according to data from Statistics Canada, the average hourly wage in the GTA is $26.74. If individuals value their time at its market rate, then it’s clear that commute times represent a significant cost.

Looking at both commuting and housing costs can provide a more detailed picture of the cost of location choices. The trade-offs between location affordability and commuting costs could have important implications for housing choices and policy. However, for many people, personal preferences and other factors also play an important role in location decisions.

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Date Published:: November 13, 2018