Imagine if Rosedale had a few hundred units of TCHC housing. It would be a very different place. Even a few hundred such residents would necessitate better transit, more social services, and shops geared to lower income consumers. It would also add an activist base pushing for all of these things.
These new services would in turn make the neighbourhood more appealing to middle class residents. Once you have a library branch, good bus service, and an affordable grocery store, the neighbourhood becomes much more appealing to middle class residents. Rather than building a $2 million home on every large lot, developers might sometimes start to put in four $600,000 townhouses.
TCHC buildings are certainly not the only reason that the Annex and Cabbagetown are vibrant urban places, but they certainly help push the neighbourhoods in that direction. I know in my own neighbourhood of the Beaches, the increase in house prices has been killing off some of the vibrancy.