In recent months, a familiar chorus has returned to the Toronto housing debate. As the new condominium market undergoes a correction, critics – many of whom have long declared its demise – have resurfaced, dancing on the proverbial grave. With a “told-you-so” tone, they proclaim that the investor-led model is finally crumbling under its own weight, cheering what they believe will be a renaissance in housing policy and delivery. But this perspective, although emotionally satisfying for some, dangerously misreads the complex realities behind development and ignores the essential function that investors have played in delivering supply in the Greater Toronto Area.

If you’ve followed the Toronto Under Construction podcast, you’ve heard this nuance unpacked in detail. In Episode 84, I hosted a panel of some of the smartest young executives in the industry, developers Adam Sheffer (Originate Developments), Ty Diamond (Diamond Kilmer Developments), and Pouyan Safapour (Devron Developments). Through candid hypotheticals, the episode dismantles the simplistic narratives popular in political circles and social media echo chambers. We discussed real solutions and potential pivots, not “pie in the sky” outcomes typically brought forward by industry outsiders.

Development economics

Much of the current discourse has hinged on the idea that the condo market “wasn’t delivering what people wanted.” This argument, often advanced by left-leaning commentators, critiques the size, price and security of tenure of typical new units. In a recent X thread, I concluded that this interpretation overlooks the very structure of development economics. Condominiums aren’t built because developers prefer smaller suites at higher prices – they’re built because zoning constraints, cost inputs and financing requirements dictate what is feasible, and how the unit mix is ultimately programmed.

Critics rarely account for the essential role that pre-construction investors play in de-risking projects. Without those early purchasers – many of whom never intend to live in the units – projects would not receive the financing needed to move forward. It is not enough to say “just sell to end-users.” Without investors acting as the crowd-funded equity layer, many GTA projects would never break ground.

Risk profiles

The myth that “every site can just be rental now” is a common fallacy. Rental development is structurally different, requiring longer timelines, more patient capital and entirely different risk profiles. Those urging mass conversion to rental often underestimate the challenge of securing financing, underwriting lease-up periods, managing operations and achieving viable long-term returns. Just because a site was viable for condo in 2021 doesn’t mean it can be flipped to rental in 2025 with the wave of a bureaucratic wand. To put it succinctly: Rental development requires a big upfront cheque.

What rises from the ashes of this correction is not going to be a utopian village of affordable three-bedroom rentals priced at $900 per month. It is more likely to be a prolonged period of undersupply. With investors on the sidelines and lenders wary, housing starts are expected to fall sharply – by as much as 50 to 70 per cent from peak levels. This will have cascading effects: Higher rents, reduced population inflows, lost jobs and diminished neighbourhood vibrancy.

Grounded in pragmatism

The notion that “being right” about a market correction equates to winning a policy argument is a dangerous fallacy. This isn’t just about who got the forecast correct – it’s about what happens next. As supply tightens and ownership opportunities decline, the same voices celebrating today’s downturn may soon find themselves lamenting tomorrow’s affordability crisis. And the irony? The very investor model they criticized may have been the only mechanism keeping prices remotely tethered to reality by ensuring enough homes got built in the first place.

If you’re a buyer, a prospective investor or just someone trying to understand why housing is so hard to come by, don’t buy into the funeral march just yet. The condo market isn’t dead – it’s evolving. But to meet the needs of the next generation of Torontonians, we need policy grounded in pragmatism, not idealism.