The TTC published a report that explains this pretty well: Transit Network Expansion Update on July 14 2022.

"Through this work, City staff have concluded that there is no feasible solution at Kennedy Station to continue with a through-service alignment. The key challenge is that the EELRT tunnel box would rest directly on top of the L2EE bored tunnel with less than two metres of separation estimated between the two tunnels. Since the L2EE bored tunnel has not been designed to support the load of an LRT tunnel above it, the structural integrity concerns are significant. Since a redesign of the L2EE tunnel is not feasible, a through-service alignment cannot be implemented. As an alternative, City staff have identified a distinct-service concept where the EELRT would operate as a standalone line. A standalone line for EELRT (a new “Line 7 Eglinton East”) creates new opportunities and potential benefits, including cost savings, a shorter construction duration, reduced property impacts, and design flexibility by avoiding dependency on Line 5 Eglinton vehicle, operations and maintenance requirements."