City or suburbs: The costs are closer than you think

What people want in a home may differ depending on who you ask. But for most, where they'd like their home to be located is consistent: homebuyers want to live in a transit-connected, walkable and mixed-use ("location-efficient") neighbourhood where they can benefit from a live-work-play lifestyle. These location-efficient neighbourhoods are typically in a city's downtown core or major suburban hubs and tend to be high in cost and out of reach for many.

As a result, homeowners are required to make a trade-off – they can opt for a large home in a city where a car is a must, or a modestly sized home within a location-efficient city. In the end, they typically settle for a neighbourhood they can afford, versus a neighbourhood they desire. However, what many people don't take into account when choosing a home are the costs associated with car-dependent areas. When factoring in such expenses, a home in a car-dependent suburb isn't as affordable as you think, regardless of the lower price tag.

Case in point: Toronto

Pembina Institute and RBC conducted a survey to determine what exactly GTA homebuyers want in a home and a neighbourhood. The results showed that 81 per cent of people across the GTA prefer to live in a walkable, transit-friendly neighbourhood over a car-dependent location. This attribute has become so pertinent that many respondents stated that they would be willing to compromise a large house with a yard if it meant being in a more walkable neighbourhood. And this desire for location-efficient areas is pervasive; respondents, regardless of age and marital status, stated that they prefer to be in these kinds of communities.

Although it's true that walkable neighbourhoods with access to transit are typically more expensive, Pembina Institute and RBC crunched the numbers and found that residents spend an average of $10,000 a year on car ownership. If homeowners moved to a location-efficient neighbourhood, rid themselves of vehicle and instead walked, biked or took transit, they would save a minimum of $200,000 over 25 years. This could potentially cover the costs of living in a more expensive location-efficient community.

A new report by Pembina Institute and the Royal Bank of Canada (RBC) examines homebuyers’ preferences for home location attributes in the GTA

Creating suburbs that embody city living

So, what does this mean for the real estate industry? It's important to plan and modify suburban areas that will provide the work-live-play lifestyle people desire. The report noted that "42 per cent of respondents would choose a modest house, townhouse or condo in a suburb that is walkable, and where it is possible to commute on rapid transit." Furthermore, 31 per cent of respondents claimed that they want to live suburban neighbourhood with a mix of houses, shops and businesses and 31 per cent of respondents claimed they would like to live in the city, but in a more residential area. These findings show that a large portion of homeowners do, in fact, want to remain in residential areas, they just wish to have access to some of the benefits city living offers. In a nutshell – homeowners want the best of both worlds. They not only want the perfect home, they want the perfect neighbourhood.

While location-efficient neighbourhoods are typically associated with city living, they are increasingly becoming more popular throughout the GTA. Suburbs are slowly starting to mirror the efficiency found in downtown neighbourhoods. For example, Markham, a suburban city in the GTA, has put a lot of emphasis on creating a more urban atmosphere. The development of downtown Markham will be a mix-use community offering a retail complex, condominiums, office space, advanced transit and a wide selection of restaurants and entertainment.

Pembina Institute and RBC suggest that Canadian home builders need to build developments that are emblematic of the current and future needs and desires of Canadians. It's not a question of city or suburbs but more so about about the preferable attributes offered in each location. And as it turns out, the attributes that people most desire are neighbourhoods that are transit-connected, walkable and mixed-used.