Canada has a serious shortage of housing that is affordable, defined as 30 per cent or less of a family’s annual income.
The Canada Mortgage and Housing Corporation estimates the country needs to add 3.5 million homes by 2030 to restore housing affordability.
To make housing more affordable, Economics 101 says you need to increase supply.
Not only is this supposed to make more housing available, it will also cause its price to go down.
“To get more housing, we must reduce the barriers to supply and increase housing density,” says Gabriel Giguere, senior policy analyst at the Montreal Economic Institute. “Municipal governments have the most important part to play, because they can make zoning less restrictive.”
Giguere says there are too many delays in getting development and building permits approved.
“And development fees should be lower, because they reduce affordability,” he says.
Jack Mintz, economist and president’s fellow at the University of Calgary’s School of Public Policy, says most of the population growth in Canada has been to immigration, which has greatly increased the demand for housing and therefore its price.
“Cutting back on immigration will help make housing more affordable,” says Mintz. “And supply needs to be encouraged. A good incentive is to remove restrictive zoning requirements, for example.”
Not everyone who studies housing in Canada agrees building more houses and putting them on the market will make them more affordable.
Cameron Gray, who, before he retired, was in charge of the city’s affordable housing initiatives, says increasing supply is a necessary but insufficient condition for increasing affordability.
“The cost of new housing produced by the market is unaffordable to those who need it, due to the cost of construction and high land prices,” says Gray.
“To put it another way, housing unaffordability is due to both the high cost of new production and the insufficient incomes of those looking to rent or buy. It is therefore both an income and a cost problem.”
The market can’t solve the problem on its own.
“Without a multi-decade federal-provincial non-profit housing program that will create a supply of housing that is insulated from market pressures, the challenge of unaffordability will just get worse,” says Gray.
All three levels of government need to be involved, but the feds and the provinces need to provide the bulk of the funding, because they raise almost all the taxes in Canada.
“Ideally, the federal and provincial governments would fund, the provinces would deliver and oversee operations, and municipalities would provide sites or capital grants and property tax breaks,” says Gray. “And all levels of government need to reduce regulatory costs and risks as much as possible.”
Vancouver architect Brian Palmquist says there hasn’t been enough supply of the right kinds of housing in Canada.
“Until the early 1980s, there was a robust supply of housing co-ops and rental subsidies,” he says. “Thousands of units of affordable housing were built, but the government canceled the programs.”
Increasing supply “does not work,” Palmquist says.
“All the evidence is to the contrary. Land has become so expensive that the only way to create new affordable housing in Vancouver is for government to play a leading role, in the form of incentives and subsidies to create long-term leased land.”
Patrick Condon, the James Taylor Chair in Landscape and Liveable Environments at the University of British Columbia, also says increasing the housing supply in Vancouver hasn’t made it more affordable.
“Over the past 60 years, the city has increased its housing stock by nearly 200 per cent, almost tripling the number of homes,” says Condon. “No other North American city has matched this.”
In comparison, New York and San Francisco increased housing supply by about only 35 per cent, and many American cities lost housing and population during the same 60-year period.
Although that might seem like success, Vancouver is the least affordable city in North America.
“The problem is land price inflation,” says Condon. “In Vancouver, land is often worth 10 times more than the building on it.”
He says the city’s drive to build luxury towers has produced “a tsunami” of unearned income for land speculators, while failing to deliver affordability for renters or owners.
The solution, says Condon, is to require at least 50 per cent of housing in major developments to be non-market housing, such as co-ops or non-profits.
“This reduces land speculation by cutting the price developers can pay for land,” says Condon. “The solution isn’t just building more housing, it’s building the right kind of housing and tackling land price inflation head-on.”
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