The End of the Urban Renaissance
Updated: Apr 30
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By: Diego Hidalgo-Saa | @diego_suah
My futile love affair with Toronto may be coming to an end. In the beginning, I was completely and utterly in love. A few years later, however, I found myself making up excuses to justify our relationship’s numerous shortcomings, and in the last couple of years, I have simply been too disillusioned to be able to see a future for us together. This pandemic has just made it abundantly clear to me.
Let me start by saying that ever since I was a kid, I have loved big-city life. I was never much of a country boy; I like nature, but just in small doses. I would take a loud and crowded cocktail bar over a peaceful yoga retreat in a beautiful lake-front cottage, any day! My domain is the city. I like to be in the centre of all the action where the most important decisions are made and the most innovative ideas are created, but not at any price. If the balance between what you get for living in the city and what you give in return is getting tipped off, it’s time to reconsider other options.
In spite of being one of the biggest advocates for urban living and densification as a means for building stronger, more diverse, and more sustainable economies, I have to admit that living the way most people live in a city like Toronto is not something I can support anymore. ‘The rent is just too damn high!’ (for those of you who get the reference).
People shouldn’t have to pay $1,500 every month for a basement apartment, if they want to stay in the city they love, when the minimum wage is about $2,300. However, the high cost of living doesn’t only affect low-income people—it also impacts middle-class families that want to save to buy a home where they can raise a family comfortably, elderly people who are living on a fixed income, and small-business owners who see their margins thin out as property costs go up, not to mention the most severely affected of them all, the homeless.
The balance has been tipped off for most of us a long time ago. It’s no longer a good option to plan a future in a place where you're uncertain you’ll be able to afford a decent life—It’s simply a bet not worth making anymore.
The current COVID-19 crisis has simply made it even more evident as we are not prepared to face this kind of financial hardship with the current costs of living. If people can’t save, can’t get out of debt, and can’t move up the economic ladder because their cost of living rises exponentially while salaries remain stagnant, then how are we supposed to expect that they weather a recession of this magnitude?
Now, I’m not one to promote victimization, nor do I have any confidence in the government's ability to find a solution to the housing affordability crisis anytime soon. Mainly, because I do not wish to minimize the complexity of this issue, which for those of you who are not well-versed on land-use policy, is extremely complicated. However, I do think that in the absence of real and lasting solutions that can be implemented quickly, people will take drastic measures in response. I believe these radical measures will materialize in the form of a digital exodus: a new relocation trend led by highly mobile, adaptable, and young workers.
I see this possibility as a result of the opportune convergence of several interrelated events:
A global crisis creating unprecedented challenges and opportunities
A population under existing severe financial stress
The consolidation of various technologies that could revolutionize the way we work and ignite entire new industries.
This convergence will, in turn, create the right incentives to power the economic engine that could move the wheels of society in a new direction. The incentives are the fuel, the virus is the spark, and the world post COVID is the new road ahead. Put differently, citing a phrase often used by Ray Dalio, “everything that happens is the result of many cause-effect relationships repeating over time”.
I am not predicting something completely unprecedented here as individuals have been relocating in response to the cost of living in recent years, to the point where they flood nearby housing markets with excess demand forcing prices to rise even outside the city. In the Toronto metro area, this is most clearly evident in the nearby city of Hamilton where many young people who couldn’t afford Toronto found a new home.
What I suspect may happen is a much more massive relocation of people.
The other important distinction of my prediction is that I am not suggesting that people will simply move a bit farther away from the city centre; the affordability crisis often extends to adjacent municipalities. What I predict is a much more drastic relocation outside of the region or even outside of the province.
It is also important to note that this is a generalized phenomenon, the affordability crisis is definitely not exclusive to Toronto. The majority of the big, thriving cities around the developed world face the same issue, and so far, there is no magic wand to deal with this problem. For the sake of the fluidity of this article, I won’t go into detail on the findings of the 16th Annual Demographia International Housing Affordability Survey, but they clearly illustrate this reality.
We may start to see this exodus first in places where the situation is most critical, such as cities like Toronto, LA, Vancouver, Sidney, and San Francisco.
In normal times, the demand for housing tends to be more inelastic, so, if prices go up people will often tend to sacrifice other expenses over rent. The lack of elasticity in the demand for housing is rather obvious, everyone needs a place to live and most are not willing to move very far from their current dwelling or from their place of work. At one point, the money you save in rent by moving farther away is offset by the cost of transportation or by the inconvenience of a long commute.
However, as the impacts of the COVID crisis start to yield more unemployment and small business bankruptcies, many people will suddenly feel more open to leaving the region entirely.
If you’ve lost your job or small business, the decision to relocate to a smaller and much more affordable community suddenly becomes a lot more attractive from an economic point of view. In general, crises tend to cause people to be more open to change as the situation in which they may have found comfort is suddenly shaken. As a result, the scale of this crisis could bring about an openness to change that we have not seen, conceivably, in our lifetime.
Finally, and perhaps most importantly, in a world post-COVID, geographical location may not be such an important factor to determine employment opportunities due to technological innovation and company culture shifts. First, the massive work-from-home experiment we are currently experiencing will inevitably make companies significantly more receptive to hiring remote workers. Secondly, the heavy financial stress many companies will be under after the dust of the health crisis settles will push them to look for money-saving opportunities such as closing office space and hiring lower-cost talent in other markets. Lastly, as the demand for remote work continues to rise, the push for technology to provide better solutions for teams to connect and for workers to execute their work from home could yield remarkable innovations.
The uniqueness and magnitude of the situation we are currently living will, most definitely, have lasting impacts on the way we live and work. And, if anyone else out there is feeling as disillusioned and hopeless as I am about the prospect of building a life in a thriving city such as Toronto, I would presume they too would be open to looking for viable alternatives to settle in other regions or provinces. Perhaps this shift moves the needle in favour of a more distributed population, as well as being the turning point of the massive urbanization trend we have seen in the past few decades, at least in the developed west.