Until 1954, there used to be people living in the Don Valley despite occasional flooding. Hurricane Hazel was the deadliest (1,000 – 1,200 killed) and costliest ($420 Million USD in 1954 dollars) hurricane of the 1954 Atlantic hurricane season.
It was also notable due to it travelling so far inland and causing damage in the Greater Toronto Area which was not accustomed to dealing with severe hurricane weather.
The Humber River Valley was especially hard hit, and is where most of the local deaths occurred. The Don Valley was also affected dramatically as recounted by a number of local people at the time.
After the hurricane, houses in the valley were expropriated and no further housing development was permitted in the flood plain.
Stories of people in the Don Valley affected by the flood (Environment Canada)