Transit access has long been one of the biggest drivers of Canadian real estate value, but does that always make sense? Statistics Canada (StatCan) data shows public transit revenues have recovered to 2019 levels, but ridership hasn’t. Most experts dismiss this as a temporary dip that will resolve in the near future. However, what they’re missing is how soaring home prices have destabilized core transit users—just as the country nears the end of a long-wave cycle that could leave this premium misaligned for years.
How Access To Transit Influences Canadian Real Estate Values
If location, location, location is the biggest driver of real estate values, transportation is what makes that location usable. Suburbs connected to major cities by a quick train ride command a premium; homes at the end of a dirt road don’t. In cities, proximity to subways or light rail helps to boost prices, while properties technically in the city but disconnected from transit tend to trade at a discount. The relationship is fairly straightforward: public transit isn’t just an amenity—it’s the system that connects other amenities.
Makes sense, right? It comes down to a fundamental economic concept: time value of money (TVM). In this context, time is worth money, so people pay a premium for public transit because it saves them time. Developers build around this demand driver, promoting densification around transit hubs—with some going as far as speculating on future transit lines. Policymakers follow a similar playbook, providing funding and incentives for densification around these areas. This stimulates further demand in these areas, driving this premium even higher.
With so much effort poured into boosting transit demand, ridership must be surging—right?
Canadian Transit Revenue Is Back—Riders Aren’t
Canadian Urban Transit Revenues (Excluding Subsidies) v. Trips.
Source: Statistics Canada; Better Dwelling.
Canadian cities saw public transit pull in $352.8 million in September, up 1.7% (+$6.71 million) from last year. That’s the highest monthly revenue since January 2020, and just 4.4% below the pre-pandemic peak in September 2019. It was also the third-highest September on record. Revenues have nearly recovered from the pandemic—a promising sign, at first glance.
Ridership isn’t following revenue. Canadians took 134.5 million public transit trips in September, down 4.8% (-6.8 million) from last year and still 18.0% (-29.5 million) below September 2019. Transit made some gains since 2020, but the recovery has stalled—ridership is now sliding into a second decline.
That’s remarkable given Canada’s population surge. The country added 3.85 million people between September 2019 and 2025. If just half of them took transit twice per weekday, it would have added an average of 83 million trips per month. Instead, ridership is still down by 29 million trips compared to before the pandemic.
It’s easy to appreciate the argument that transit is underfunded and strained by capacity issues. But that’s not what the data shows—revenues are up, riders are down. It’s not just remote work either, with policymakers recently ordering government workers back to the office last year to support real estate prices. What’s happening isn’t a funding problem, but a sign of a structural shift in how people move—and what they value.
How Canadian Real Estate’s Transit Premium Undermines Ridership
Let’s revisit TVM. People pay a premium to live near quality public transit—but that premium has a ceiling. When home prices rise too quickly, the value proposition breaks. One UK study found new transit lines front-loaded value, with prices stagnating for 15 years after opening. These homes may still be well-located, but the premium eventually outweighs the benefit. Households with modest incomes, who rely on transit, have greater incentive to move further out—often to car dependent suburbs, and trade time for affordability and space.
The pandemic-era suburban shift is often attributed to remote work, but this also happened during the 1990s and 1980s bubbles. This isn’t new—it’s a classic response to urban pricing. It isn’t just suburban flight either, with Ontario’s young adults migrating to Alberta in record volumes. The inefficiencies that follow a real estate bubble are so large that a dedicated bus lane won’t change their minds.
There’s a second-order effect too. Transit-adjacent homes still command a relative premium, having the best locations. However, the demographic that can now afford those homes have a different TVM problem—a lot more money than time.
The higher the wage, the higher the opportunity cost of not using door-to-door transportation. Add 20 minutes to a commute and you lose 174 hours a year—equivalent to $6,300 in labor at the average wage in Canada, though that wage would be too low to support ownership in these regions. This demographic may use public transit, but they aren’t a core user of the services. If their time is worth $1,000/hr, they may choose to take transit—but that’s a choice, not a necessity.
Declining Transit Ridership Signals A Deeper Cycle Risk
Policymakers, developers, and investors are viewing reduced transit ridership as a cyclical problem that resolves soon. What many may not realize is there are three cycles: cyclical, secular, and structural (long-wave).
Cyclical cycles are the classic business cycles—roughly 10 years long, driven by credit. The housing market follows this pattern: expansion, peak, recession, recovery. Cooling credit growth, rising insolvencies, stubborn inflation, and fading discretionary demand—these are signs this cycle is just past its peak.
Secular cycles span 20-30 years, shaped by generational forces like tech adoption and demographic peaks. As the dominant cohort ages, family size shrinks, household formation slows, and downsizing begins. These are sometimes called infrastructure cycles, since they reflect how a generation builds and uses housing, transit, and public services.
Structural (long-wave) cycles play out over 40 to 60 years, driven by a major technological shift—think steam engines, cars, or computers. These eras bring long booms, sharp inflation, and the claim that shortages—not demand—drive price growth. Policymakers respond with huge investment, but it arrives just in time for the technological shift. What’s left is overinvestment in the wrong places during a boom, and policy support during a downturn to lock in those mistakes.
Canadian Real Estate Is Facing The End of All 3 Economic Cycles
So what does any of this have to do with real estate and public transit? Simple: cyclical peaks stretch valuations, especially for transit-adjacent properties. Normally, prices correct, it resets, and returns to efficient use. However, something bigger is happening here.
We’re also in the middle of a secular shift—Millennials, the core demographic that drove transit demand, are aging out. Their needs are changing. Behaviour is shifting on a generational timeline, making real estate premiums tied to old patterns harder to justify.
At the same time, we’re in a structural cycle, where decades of overinvestment collide with new technology that reshapes how cities function. The risk isn’t just that demand is fading—it’s that we’ve locked in spending based on how the larger and older voter base thinks Millennials live.
When behaviour, policy, and capital diverge this far from reality, the correction isn’t gradual. It snaps.
Great read (as usual). Furthered my thinking about a purpose-built rental right beside a popular subway station in Toronto built around 6 years ago.
They send updates on availability and pricing, and this place is way too expensive for the market and never more than half vacant. I asked someone at the development firm and they said the price is what the project was priced at. Any insight into how the unfilled unit is better than a filled one? Makes no sense by traditional real estate investment logic.
This is a weird problem that highlights the disconnect from a credit bubble.
Asset values are based on the ideal cashflow, not current. By keeping the higher, unfilled units, the underlying value of the asset securing the development will be higher than establishing a newer, lower value. They also get to write off the loss as operating, rather than inflated cashflows.
This can be critical for refinancing, especially since we tend to do 5-year terms in Canada. We effectively made it so vacant homes—even with the improperly applied vacancy tax—are more profitable than reality.
Don’t forget the CMHC program to transfer these risks for multi-family PBR to the taxpayer. That’s going to be the fun part, but when no one cares how much money is being spent—what’s a few billion rolled into our kids’ debt?
That’s real only for large corps , as a mom and pops landlord I can’t write off empty units. Difference between corporate and personal taxes
I used to buss/subway when I got this Plex ($125k in ’81) also was bussing when I got my second one ($360k in 05) , now both are worth well over a mil , transit union is striking and I seriously didn’t mind dropping $60k cash on a brand new car. If they want me to use public transport it’s something real easy to do : provide a quality service I can depend on , if they can’t do that I can do better on my own.
The landlord has 3 potential revenue streams. Rent (- costs), fees for parking, garbqge, etc, and capital gains. Remeber very few larger scale landlords own their properties outright, so they hope to keep making a little money on rent and service for fees, then make abig payput on the capital gains.
Sonce the govt, banks, and so on are actively subsidizing rentals with cheap mortgages, and subsidies, as long as you are breaking even on rent, ypu are ok to wait for cgs.
The problem is,does the developer have a good understanding of the market?
Many landlords and realtora seem to vekieve that 2023 prices were fmx, ans the current correction is temporary? All accross canada today we see there is an oversupply of rentals. The labdlords often holding out for what they consider fmv rents rather than take on a lease that is ‘below’ market.
Now if the market continues to collapse, that will be dumb, but such us investing …
Not sure if the “transit is the risk sign” really interprets the data properly. Commercial leasing has still not completely recovered from where it was 5 years ago. A lot of people negotiated hybrid work from home deals – including my wife. Many places took a hard line but it quickly changed when they realized how many companies could pick up good talent just by letting them work from home 2-3 days per week – at their expense. Transit has had a tough run with safety lately, even when it is safe it is perceived as risky. AI has already reduced call center headcounts with more interactive IVRs, look at the cohort being affected by layoffs. The labour market overall is the driver of these changes….
Nah. Commercial retail vacancy was actually worse in regions like Queen W back in 2017. I’m starting to think this is because Millennials are “older,” and not owning a home or having kids makes them highly mobile.
Think about it this way: 3.5 million people were added to the population, primarily in large cities with at least 2/3 being the age of a core transit user.
They’re masking the decline of usual users. The pandemic’s primary contribution is behavioral advancement. People who otherwise wouldn’t have experienced driving in the city got licenses (ON saw a surge), and these older Millennials have more disposable income and want bigger housing. Plain and simple.
We need to build more housing around transit corridors, but this mortgage market-interest rate manipulation is undermining any real progress.
So commercial leases tend to be lagging residential data. Commercial leases tend to be 5y or more, and dont have protection to break the lease.
So unless tge business is insolvent, they tend to stay.
The recent gdp numbers paint a bad picture for sept 25 where it was the contraction in consumer and vusiness spend that made the gdp go up. So expect retailand wholesale trade to continue to be under pressure, forcing many snall busoness out of business in 2026.
Transit,as outline here is speaking about the properties in the 416 or urban areas generating a large premium over suburbs because you dont need a car. If people arent using transit, the price of the houses will suffer because peopke dont need to pay as much to access the train or bus.
Remember, the real issue is that real wages and srandard of livi g is off 40% since 2014. This is causing all kinds of issues not only with housing.
At the same time transit fares keep increasing, while wages dont. So sonething has to give here.
Commercial leases are leading since inefficient land makes them extra vulnerable to a pullback in consumer spending.
It gets worse along the way, but that’s where the stress shows up first: people stop going to the store, eating out, etc.
On the note of generational shift, ask any property rental company—no parking, the odds of renting a property becomes slim and the turnover rate is much higher.
Re-renting may not be a problem for large purpose-built rental complexes as they get to charge a premium if possible and have staff on site, but smaller, more affordable rentals tend to prefer stable, older renters with assets as they reduce eviction, damage, and turnover risks.
Economists that are out of touch with income inequality, in addition to folks that leave comments, make fundamental mistakes in their assumptions.
Proximity to transit correlates with higher ridership, that’s the only relationship that matters in this think piece, so if ridership is down it must mean that the transit program is fundamentally flawed and needs to be scrapped. The conclusion of the piece was well masked, but that’s what I came away with.
Let’s take another factor into consideration. Since housing costs have risen so dramatically, who can afford to live within walking distance of main transit routes? More and more, these homes are priced outside the means of working class folks, therefore, the potential ridership has a significantly greater amount of disposable income to spend on a personal vehicle / Uber. This income bracket is also much more likely to work remotely at least part time. Both of these factors were touched on in the piece, but the pushing out of working class folks was not. Have you ridden a train or a bus, the vast majority of those folks are working class, bussing in the gears to keep the machine working, then bussing them out to distant borroughs that are more affordable.
In my mind, this is clearly a result of mass gentrification, inflated houses prices / housing costs, and increasing income inequality in a secular cycle, in your terms.
(Gen Y would ride transit more if they had jobs)
I did appreciate the breakdown of cyclical, secular and structural cycles, provided interesting points to chew on.