TORONTO -- A new policy allowing single family homes to be converted into low-rise multiplexes in Toronto is being hailed by observers as a welcome move, although experts warn it won't make housing more affordable in Canada's most populous city right away.

Toronto councillors voted in May to amend a zoning bylaw to allow up to four residential units in a multiplex with the aim of increasing housing supply to meet skyrocketing demand.

The move could transform up to 70 per cent of what's known as the city's "yellowbelt," where only one single family dwelling per lot was previously permitted.

Experts say the change has the potential to address a severe housing shortage but caution that it may not tackle housing unaffordability -- at least in the short term.

"Increasing density is good but it isn't definitely the answer to everything," said Penelope Gurstein, the co-director at the Housing Research Collaborative, which studies affordable housing strategies.

The new multiplex policy will increase land values, she said, and steps must be taken to ensure some level of affordability.

Gurstein, who is also a professorat the University of British Columbia, suggests allocating at least one unit as affordable housing in new multiplexes. She also said the city should work to expand availability of social housing and purpose-built rentals.

Toronto has long made headlines for its high housing costs.

April statistics from the Toronto Regional Real Estate Board show the average price of a home in the city was $1,153,269, roughly four per cent higher than the $1,108,499 the average buyer paid in March.

April's supply level was much lower than the city has seen in the past, TREB said. New listings for the month totalled 11,364, down 38.3 per cent from a year ago.

Karen Chapple, the director of the school of cities at the University of Toronto, said the new multiplex policy follows similar moves by cities that include Vancouver, Minneapolis and Portland.

"Every city that has done this ... has been really happy with the results," she said, noting that more work is still needed to make a multiplex policy a success.

"It is just a start," Chapple said, explaining that the policy alone isn't enough if developers and the labour market aren't ready to take advantage of it.

Chapple suggested making it easier for individual homeowners to become what she called "citizen developers."

Giving those individuals access to capital, pre-approved templates for plans and education on how to convert homes to multiplexes could help, she said.

"To make it affordable by design, to make it so cheap to construct that people will charge less rent ... that is what has happened in other areas of the world, and that has worked pretty well," she said.

"The other thing to do is to make loans available to low-income homeowners."

Prime Minister Justin Trudeau took note of the new policy during a recent speech in Toronto.

"Innovations like this unlock supply and keep our neighborhoods dynamic but most importantly, they create the homes the Canadians need," he told a gathering of municipal leaders last week.

David Amborski, an urban planning professor at Toronto Metropolitan University, said the policy will have a "positive effect" on the housing market in the long run by increasing supply and providing more choice in housing type and location.

Prices, however, will still be based on market conditions, he noted.

"People are going to price their product at the market price," he said.

Population in parts of the "yellowbelt" have been dwindling for years, Amborski added, and increasing density in some neighbourhoods could revive them while employing underutilized infrastructure.

But not everyone is thrilled with the multiplex move.

Coun. Stephen Holyday, who voted against the policy, said new multiplexes will create tensions within neighborhoods and drive away the dream of owning a detached home for some -- without making housing affordable for others.

"If you look deeply into the proposals, you will find out that you can build a very, very large multiplex unit, next to a detached home … that is going to create friction within neighborhoods," he said.

The policy could put individual homebuyers at disadvantage against investors and developers who may outbid families to buy detached homes and make sizeable profits by converting them into multiplexes, Holyday said.

"The cost will become higher to have a detached home because the intrinsic value of the land is higher because of its rental potential," he said, noting that developers building multiplexes could also charge "handsome" rents.

Industry insiders say Toronto's need for more housing outweighs those concerns.

Anu Joshi, a Toronto realtor, said the policy is a good move because it targets housing supply.

While many homeowners may not want to construct a multiplex right away, or have the financial means to do so, there are no longer any legal barriers for those interested in expanding their properties, she said.

"The bottom line is that there are too many people and not enough housing," she said. "This is definitely a welcome measure."

This report by The Canadian Press was first published June 1, 2023.