A leading policy expert says the best way to reduce housing costs is for government to get out of the way by speeding up the approval process through hard and fast deadlines.
Aristotle Foundation for Public Policy executive director Mark Milke recently created a policy brief for think-tank SecondStreet.org where he examined how governments can reduce housing costs in Canada.
Key to accelerating construction and creating more housing supply, Milke said, is to put the onus for approvals on the government.
“What I propose in the paper is that there’s an onus on city bureaucracies to approve a project within a certain time frame. If they don’t approve it, it’s approved automatically for good or bad, and that would put some pressure on to make sure projects move through the system quite quickly,” Milke said.
“You need to check out building code infractions and the rest of it but nonetheless if you have a hard deadline that says this project will be approved, and then perhaps you as the bureaucracy will be on the hook if things go awry, maybe it’ll help focus civil servants within cities across the country to make sure projects are attuned to and attended to in a speedier time frame.”
There is also a correlation in terms of the most expensive housing in Canada, Milke said, and the obstacles to building.
“Some cities are easier to do business in and others are not. It’s not just on the regulation side, (it’s also) the cost per hectare to develop. The cost to build new homes in Calgary is twice that of surrounding communities,” he said.
He added while Vancouver in particular is a difficult place to build due to regulatory hurdles, the fact it consists of a series of smaller independent cities is an advantage as opposed to Toronto’s “megacity” approach.
“Where’s competition going to come from? It’s one megacity and has been since the late 1990s and the Mike Harris days, and that was a mistake. What Vancouver, Victoria and Edmonton show is that when you have competing communities there is some pressure to perform,” he said.
Milke said current efforts such as Vancouver’s push towards densification and accommodation in Canadian cities for laneway residences is helping to an extent to alleviate housing pressures but pointed to other factors such as immigration as another pressure point.
“The big picture is with 400,000 people coming in via immigration every year, you’ve got a huge demand side issue here. Fundamentally, I’m pretty pro-immigration, but I think it shows the disconnect between a federal government that just has these artificial targets or numbers that they want to have in terms of immigration and doesn’t seem like they’ve ever asked the provinces or the cities whether their housing could be built fast enough,” he said.
The recent rise in interest rates has done more to lower housing prices than government policy, he added, just as lower interest rates over the last two decades contributed to their rise.
“That’s done more to dampen the craziness on the demand side for housing in Vancouver and the price escalation. The problem is that we’ve had 20 years of price escalation in Canada and the supply hasn’t been there. Ultimately, I think a remedy here (is that) you’re probably never going to see affordable housing in Toronto or Vancouver but maybe we’ll see a moderation over time if interest rates stay higher than they have been for the last 20 years,” Milke said.
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