Housing industry members are advocating for simplified zoning and development charge reductions as crucial steps to increase housing supply and meet surging demand in Canada.
A panel discussion hosted by the MacDonald-Laurier Institute looked at various avenues to decrease the level of red tape keeping Canada’s housing supply bogged down as prices stay out of reach for many Canadians.
The panel took issue with the fact that while there can be a case for some of the development and impact fees in place, they are also often abused and viewed as a source of revenue by governments.
Professor of economics at Harvard University Ed Glaeser’s research has found that in both Canada and the U.S., as much as 50 per cent of housing prices can be attributed to land use regulations, which increase in tandem with the number of regulations.
This has resulted in Canada being a place with “extraordinary scarcity of affordable housing,” despite being a country with “an astounding abundance of land.”
“There are an infinite number of ways to say ‘no,’ when localities don’t want to build,” said Glaeser. “Among the most salient and visible are things like minimum acreage requirements such as suburban communities that require one acre, two acres to build and floor-area ratio requirements, which limit how much you can add to buildings.”
Another roadblock Glaeser cited is dealing with the “hangover of so-called euclidean zoning” which separates land uses by residential, commercial, retail, and industrial into their own zones or areas within a given city.
It was introduced at a time when cities were populated with many massively polluting industries “but makes little sense in a world with sleek high-rises carrying knowledge workers.”
Senior vice-president for strategy firm One Persuasion David Murray said its unfortunate that “we keep seeing non-market solutions being proposed.”
“If we had a more functioning market in terms of the ability for more things to come online, that would actually solve a lot of this friction and decrease the demand and the necessity for non-market housing.”
Murray, who served as Conservative Leader Pierre Poilievre’s director of policy in 2022, noted that developers only need to make a simple profit-risk calculation in today’s market to be scared off from taking on new projects.
Increased council regulation and decision points regarding zoning and permitting reduce the likelihood of developers undertaking projects due to increased risk.
Additionally, Murray said there is the issue of “competing asset classes.”
“For example. The actual residential housing sector is one of the largest asset classes by investment dollars in the entire country. So when you have more and more people spending more on housing than they do on other investment vehicles, that limits access to capital for a lot of these organizations and speaks to the productivity crisis at the same time,” he said.
“If you have other vehicles competing for that capital, it becomes a chicken or the egg. As we become more productive as a society, you have more sources of revenue. It’s not all on the backs of the citizens. You have more business revenue to tax. You have more export capacity and all these other things that need to be part of that conversation.”
However, the market currently rests almost exclusively on the backs of the everyday home owners, which only further increases the price of that asset class.
Canada Mortgage and Housing Corporation’s deputy chief economist Aled ab Iorwerth said it’s time “for a fundamental change in governance.”
“In this area, there’s no silver bullets, there may be silver buckshot but we need all sorts of new policies,” he said. “There are so many individual policies that are mucking up the system that it’s difficult to know really where to start.”
According to Aled ab Iorwerth, the push to build more social housing isn’t the right path to take. While he acknowledged the problems faced by low-income Canadians, he said it won’t mitigate the affordability crisis.
However, he was in support of U.S. and European models which provide certain incentives and tax credits for the private sector to create social and affordable housing.
“In Canada, it seems to be an exclusively government approach,” he said. “We need a fundamental rethink on these policies and the federal, provincial and municipal relationships as part of a package to increase housing supply.”