Municipalities largely do not want new homes, at least not in the form that would be necessary to build them at significantly lower prices than our current stock of housing.
An excellent and needed article, and let me throw in a backpat for the writer and The Line in publishing: I'm happy to see a fellow engineer writing, and from a engineer's ("technocrat") perspective where you talk about the underlying problem, not about the politicians. This isn't really a right/left issue, or at least has equal right/left aspects. (Renters, left: Landlords, right)
I just have some data to show about Calgary, where I was a municipal engineer for over 25 years. I left with a bunch of public data and the ability to show it as maps (my job required a million-dollar software package from ESRI in the 90s, now it can be done with free software). At my web site, an image:
...which shows 2018 data on residential-only water services pipes, restricted to installs after Y2K. You plainly see all the 90,000 single-family detached new houses around the edge of the city, with some red dots for streets with duplexes and triplexes.
But you also see something in Calgary you don't in Vancouver: as our housing prices rose, tens of thousands of infills were done, creating thousands of blue and red dots in the middle of town. You can see over half are red, for duplexes/triplexes. (Also, many blue ones are still half-lot-wide infills, just having their own separate water service, an extra $10K).
I gather Vancouver just forbids this. No town should. The "inner city" of Calgary has whole blocks that have doubled the population, because they're mostly infills. Pretty hard to resist a guy offering $600K for your 1940s 800 sf knock-down, who outbid the prospective monster-home builder because he can sell both infills for $600K each.
The ability to endlessly grow outward (which is still most of Calgary's new construction, to be sure) isn't the only reason that Calgary prices are, relatively, sane.
Thanks, Roy, for sharing your insights about Calgary. You're right - Vancouver and Toronto both make infill largely impossible by requiring zoning variances (i.e. a veto for local NIMBYs). Large swathes of those cities actually have declining populations as housing stock remains frozen while average family size decreases.
Infill (or what some call "gentle density") is an obvious way to accommodate population growth without sprawl and while making use of existing urban transport and utility infrastructure. But we've made it mostly illegal in many of our largest cities.
I thought the recent MacPhail Report on housing in BC was excellent. It diagnoses the main problem as being "supply responsiveness" - that is, we're much slower at adding housing than we are at adding jobs.
It sounds like the main actor here needs to be the provincial government stepping in to override local-government bottlenecks, e.g. setting time limits on approvals.
Would public opinion support this kind of intervention? In Vancouver it seems like the large majority favour more housing, with only about 20% opposed to six-storey apartment buildings in their neighbourhoods. Even people who are homeowners are worried about where their kids are going to live.
One area where more federal money would help: the MacPhail Report also recommends having the federal government provide more funding for non-profit housing.
A particularly interesting observation from the report is that incentives for local governments are backwards, because they benefit directly from high land prices: whenever they rezone land for a project, they negotiate to take about 75% of the increase in land value. So if the City of Vancouver were to do a mass rezoning - say allowing six-storey apartment buildings within 1 km of SkyTrain stations - they'd be giving away a huge source of funding.
One suggestion to tackle this incentive problem, from Thomas Davidoff and Tsur Somerville, is to have the city auction off density rights separately. This would be faster, simpler, and more transparent than the current slow, project-by-project negotiation process.
I agree, the Canada-BC Expert Panel on Housing Supply & Affordability was a tremendous piece of work. The problem remains squaring the circle of needed policy interventions that have a small but loud minority in opposition.
The issue you highlight about how dependent municipalities are on the policies we call "growth pays for growth" (actually forcing new residents to pay for low property taxes for incumbent homeowners) is also a big one. There are so many perverse incentives for municipal politicians, and provinces can step up with new revenue streams for cities that don't rely on enacting restrictions on development then trading them away for cash.
A deeper problem than dollars, though, is how municipal governance often privileges the views of that loud minority - the people who can queue up to attend "public consultations" at 2 pm on a weekday. They may be only 20%, but many municipal politicians feel dependent on them and have largely been captured by people already comfortably housed in their communities. And while the majority may not directly oppose new housing, they don't mind the fact that their houses have gone up more in value in 10 years than you could save from a lifetime of work.
Policy can only reflect public opinion, and I'm not convinced that there actually is public opinion in favour of the changes we need to see to reverse direction on affordability. 2/3rds of Canadians own their home, and many are addicted to the annual price increases that allow them to finance a higher quality of life and help their kids with housing purchases.
Ottawa may offer cash for better housing policies, but cities will be very tempted to simply say no if we don't persuade the average homeowning Canadian that unaffordability will ultimately harm everyone. And that's why I think we need a social and cultural shift before serious policy reform can take place. Simply put, most people are benefiting from the status quo.
"And that's why I think we need a social and cultural shift before serious policy reform can take place. Simply put, most people are benefiting from the status quo."
I agree that incentives matter. You can't expect people to willingly act against their own self-interest. This is one reason why I'm so intrigued by the Davidoff/Somerville proposal to auction density rights separately. It means that local governments still get the money without having to maintain super-tight land-use restrictions.
Of course it's still true that homeowners will be nervous about neighbourhood change, and that mass rezoning will be politically difficult. There's an upcoming vote in the city of Vancouver on legalizing six-storey apartment buildings in C-2 zones (basically on main roads with local shopping areas) - we'll see if council passes it or not. https://russilwvong.com/blog/apartments/
The other thing I'm worried about is that we all saw what happened in the US with the pre-2008 housing crash. It hasn't happened in Canada yet, and I worry that the higher prices go, the more likely it becomes. (In Vancouver, market rents have gone up 20% because of the shortage of housing, but price-to-rent ratios are crazy-high on top of that.) If high prices are being driven by people's unrealistic expectations of future price growth, and those expectations reverse, we could see a similar crash here. https://russilwvong.com/blog/house-prices/
Thank you! Everyone's focused on the federal election right now (including me, I'm volunteering with a Liberal campaign trying to unseat a NIMBY NDP MP), but I think this upcoming city council vote is critically important. We've got a dire shortage of housing in Vancouver, and making it easier to build rental housing would be a big step forward.
This is where representative democracy fails. Those who are incentivized to keep density down and not have more homes built are who have the political power.
Most Canadians move to where there is work and education. We've done a good job distributing education across the country, perhaps like the Americans, we spread work opportunities across Canada. Is there a reason why most federal jobs need to be in Ottawa?
You raise a good point. The public sector can do more to increase opportunities outside of major metro areas and therefore take a bit of pressure off of housing demand in those areas. However, it doesn't solve the underlying problem, which is that in both rural and urban communities, we aren't building enough new housing to support population growth.
Until recently, a lot of rural communities had avoided housing price escalation because they were suffering from population decline. Once we reverse that trend, which in some communities happened with a pandemic-induced influx of remote workers, we're right back to where we started with lots of people bidding on very few homes. In fact, it's almost worse in small communities because while cities aren't building enough, small towns generally aren't building at all. It doesn't take much to cause prices to shoot up in a town where there might be 10-20 homes for sale at a given time.
Fully agree with your conclusion - Housing solutions cannot come from the federal level. This country is so incredibly diverse, and that is especially true for its housing markets.
Every single article I read about Canadian housing focuses on markets like Toronto and Vancouver. Those are sexy stories to follow, runaway multiple offers, prices through the roof, etc. The problem... there are so many other markets that aren't experiencing this at all.
Calgary, Edmonton, Winnipeg, etc have had great signs of growth over the last year or two, but far from anything that needs to be regulated. Any federal intervention will hurt these markets that are performing well on their own.
A problem here is that not only does zoning restrict increasing density, it seems that people themselves prefer single family homes. A condo or a townhome is typically regarded as an entry into the home market, not an endpoint. You can’t make more real estate in then middle of existing cities, so the alternative is sprawl. Sprawl leads to infrastructure and transportation problems, and doesn’t even provide a long term solution in geographically constrained areas like the Lower Mainland. Yes, you could remove the restrictions of the Agricultural Land Reserve, turn it into tracts of single family homes, but then that’s it - the land has been used, people who got in are satisfied, and the next generation of wannabe homeowners is stuck.
Changing zoning in cities to encourage density would help, but it needs to be accompanied by a change in expectations for what type of home is achievable. The single family lots filled with dense developments simply restricts supply of those desirable homes further, and further increases prices.
I agree, and that's one of the reasons that senior government policies to "build more" have largely flopped: they've failed to challenge the exclusive use of much of our core urban land for single-family homes.
Ontario's current growth plan is a perfect example of this: cities need to hit growth targets, and they're doing it by rezoning more agricultural land, permanently locking in sprawl at tremendous environmental and social cost. And in the Lower Mainland, the BC government has invested billions in new transport links like the Port Mann and Massey tunnel expansion that only serve to make farther-flung regions more commutable.
As long as the "neighbourhood character" of existing single-family homes in urban cores is held sacrosanct, we will make only marginal progress.
The problem is still that even if we rezoned all of west side Vancouver and built condos and townhouses to replace the single family homes, there’s still going to be a large constituency of people complaining that they can’t afford to own the single family home that they want. Shifting expectations and desires towards a denser, Jane Jacobs urban lifestyle isn’t easy and suffered a huge setback when people were shut in at home during COVID. Adoption of public transit is informative: there’s a class of people who use it because that’s all they can afford. There’s a wealthier, more educated class that uses it because it fits their environmental sensibilities and is compatible with their lifestyle. Then there’s the biggest segment, which can afford private transportation, and prefers the convenience and social distinction of doing so. There’s no way they’re going to want to use public transit. You can build the public denser and plentiful housing options in urban cores, but you can’t make them like it.
How about an open, transparent beneficial ownership property registry? How about much more severe penalties for realtors etc. who fail to report suspicious transactions? How about a tax on residential properties (10-20% of the value of the property annually) for those who do not wish to disclose beneficial ownership? How does someone making 16,430.00/yr. afford the taxes on a property they bought with cash for over 2 million?
An excellent and needed article, and let me throw in a backpat for the writer and The Line in publishing: I'm happy to see a fellow engineer writing, and from a engineer's ("technocrat") perspective where you talk about the underlying problem, not about the politicians. This isn't really a right/left issue, or at least has equal right/left aspects. (Renters, left: Landlords, right)
I just have some data to show about Calgary, where I was a municipal engineer for over 25 years. I left with a bunch of public data and the ability to show it as maps (my job required a million-dollar software package from ESRI in the 90s, now it can be done with free software). At my web site, an image:
http://brander.ca/CalgaryC21.png
...which shows 2018 data on residential-only water services pipes, restricted to installs after Y2K. You plainly see all the 90,000 single-family detached new houses around the edge of the city, with some red dots for streets with duplexes and triplexes.
But you also see something in Calgary you don't in Vancouver: as our housing prices rose, tens of thousands of infills were done, creating thousands of blue and red dots in the middle of town. You can see over half are red, for duplexes/triplexes. (Also, many blue ones are still half-lot-wide infills, just having their own separate water service, an extra $10K).
I gather Vancouver just forbids this. No town should. The "inner city" of Calgary has whole blocks that have doubled the population, because they're mostly infills. Pretty hard to resist a guy offering $600K for your 1940s 800 sf knock-down, who outbid the prospective monster-home builder because he can sell both infills for $600K each.
The ability to endlessly grow outward (which is still most of Calgary's new construction, to be sure) isn't the only reason that Calgary prices are, relatively, sane.
Thanks, Roy, for sharing your insights about Calgary. You're right - Vancouver and Toronto both make infill largely impossible by requiring zoning variances (i.e. a veto for local NIMBYs). Large swathes of those cities actually have declining populations as housing stock remains frozen while average family size decreases.
Infill (or what some call "gentle density") is an obvious way to accommodate population growth without sprawl and while making use of existing urban transport and utility infrastructure. But we've made it mostly illegal in many of our largest cities.
I thought the recent MacPhail Report on housing in BC was excellent. It diagnoses the main problem as being "supply responsiveness" - that is, we're much slower at adding housing than we are at adding jobs.
https://engage.gov.bc.ca/housingaffordability/
It sounds like the main actor here needs to be the provincial government stepping in to override local-government bottlenecks, e.g. setting time limits on approvals.
Would public opinion support this kind of intervention? In Vancouver it seems like the large majority favour more housing, with only about 20% opposed to six-storey apartment buildings in their neighbourhoods. Even people who are homeowners are worried about where their kids are going to live.
https://researchco.ca/wp-content/uploads/2019/06/Release_HousingVAN_21Jun2019.pdf
One area where more federal money would help: the MacPhail Report also recommends having the federal government provide more funding for non-profit housing.
A particularly interesting observation from the report is that incentives for local governments are backwards, because they benefit directly from high land prices: whenever they rezone land for a project, they negotiate to take about 75% of the increase in land value. So if the City of Vancouver were to do a mass rezoning - say allowing six-storey apartment buildings within 1 km of SkyTrain stations - they'd be giving away a huge source of funding.
https://twitter.com/thenatehawkins/status/1411832869559799808
One suggestion to tackle this incentive problem, from Thomas Davidoff and Tsur Somerville, is to have the city auction off density rights separately. This would be faster, simpler, and more transparent than the current slow, project-by-project negotiation process.
https://engage.gov.bc.ca/app/uploads/sites/121/2021/06/Economics-of-CACs.pdf
Hi Russil,
I agree, the Canada-BC Expert Panel on Housing Supply & Affordability was a tremendous piece of work. The problem remains squaring the circle of needed policy interventions that have a small but loud minority in opposition.
The issue you highlight about how dependent municipalities are on the policies we call "growth pays for growth" (actually forcing new residents to pay for low property taxes for incumbent homeowners) is also a big one. There are so many perverse incentives for municipal politicians, and provinces can step up with new revenue streams for cities that don't rely on enacting restrictions on development then trading them away for cash.
A deeper problem than dollars, though, is how municipal governance often privileges the views of that loud minority - the people who can queue up to attend "public consultations" at 2 pm on a weekday. They may be only 20%, but many municipal politicians feel dependent on them and have largely been captured by people already comfortably housed in their communities. And while the majority may not directly oppose new housing, they don't mind the fact that their houses have gone up more in value in 10 years than you could save from a lifetime of work.
Policy can only reflect public opinion, and I'm not convinced that there actually is public opinion in favour of the changes we need to see to reverse direction on affordability. 2/3rds of Canadians own their home, and many are addicted to the annual price increases that allow them to finance a higher quality of life and help their kids with housing purchases.
Ottawa may offer cash for better housing policies, but cities will be very tempted to simply say no if we don't persuade the average homeowning Canadian that unaffordability will ultimately harm everyone. And that's why I think we need a social and cultural shift before serious policy reform can take place. Simply put, most people are benefiting from the status quo.
"And that's why I think we need a social and cultural shift before serious policy reform can take place. Simply put, most people are benefiting from the status quo."
I agree that incentives matter. You can't expect people to willingly act against their own self-interest. This is one reason why I'm so intrigued by the Davidoff/Somerville proposal to auction density rights separately. It means that local governments still get the money without having to maintain super-tight land-use restrictions.
Of course it's still true that homeowners will be nervous about neighbourhood change, and that mass rezoning will be politically difficult. There's an upcoming vote in the city of Vancouver on legalizing six-storey apartment buildings in C-2 zones (basically on main roads with local shopping areas) - we'll see if council passes it or not. https://russilwvong.com/blog/apartments/
The other thing I'm worried about is that we all saw what happened in the US with the pre-2008 housing crash. It hasn't happened in Canada yet, and I worry that the higher prices go, the more likely it becomes. (In Vancouver, market rents have gone up 20% because of the shortage of housing, but price-to-rent ratios are crazy-high on top of that.) If high prices are being driven by people's unrealistic expectations of future price growth, and those expectations reverse, we could see a similar crash here. https://russilwvong.com/blog/house-prices/
Excellent blog post - thanks for looking up those 'empirical studies', especially.
Thank you! Everyone's focused on the federal election right now (including me, I'm volunteering with a Liberal campaign trying to unseat a NIMBY NDP MP), but I think this upcoming city council vote is critically important. We've got a dire shortage of housing in Vancouver, and making it easier to build rental housing would be a big step forward.
So true. I have found this in my own experience. Some small town administrators are buttheads.
This is where representative democracy fails. Those who are incentivized to keep density down and not have more homes built are who have the political power.
Most Canadians move to where there is work and education. We've done a good job distributing education across the country, perhaps like the Americans, we spread work opportunities across Canada. Is there a reason why most federal jobs need to be in Ottawa?
Hi Milo,
You raise a good point. The public sector can do more to increase opportunities outside of major metro areas and therefore take a bit of pressure off of housing demand in those areas. However, it doesn't solve the underlying problem, which is that in both rural and urban communities, we aren't building enough new housing to support population growth.
Until recently, a lot of rural communities had avoided housing price escalation because they were suffering from population decline. Once we reverse that trend, which in some communities happened with a pandemic-induced influx of remote workers, we're right back to where we started with lots of people bidding on very few homes. In fact, it's almost worse in small communities because while cities aren't building enough, small towns generally aren't building at all. It doesn't take much to cause prices to shoot up in a town where there might be 10-20 homes for sale at a given time.
What do you think the likelihood is that smaller towns in BC will start building more houses? Do they have the land, labour, and materials to do so?
Mike Moffatt has a good explanation of what's been happening in the housing market in Ontario. One interesting aspect is that there's new housing going up in small towns because there's much less resistance to new housing there. https://www.tvo.org/article/the-quick-fix-part-1-how-ontario-can-improve-its-housing-situation-now
Fully agree with your conclusion - Housing solutions cannot come from the federal level. This country is so incredibly diverse, and that is especially true for its housing markets.
Every single article I read about Canadian housing focuses on markets like Toronto and Vancouver. Those are sexy stories to follow, runaway multiple offers, prices through the roof, etc. The problem... there are so many other markets that aren't experiencing this at all.
Calgary, Edmonton, Winnipeg, etc have had great signs of growth over the last year or two, but far from anything that needs to be regulated. Any federal intervention will hurt these markets that are performing well on their own.
A problem here is that not only does zoning restrict increasing density, it seems that people themselves prefer single family homes. A condo or a townhome is typically regarded as an entry into the home market, not an endpoint. You can’t make more real estate in then middle of existing cities, so the alternative is sprawl. Sprawl leads to infrastructure and transportation problems, and doesn’t even provide a long term solution in geographically constrained areas like the Lower Mainland. Yes, you could remove the restrictions of the Agricultural Land Reserve, turn it into tracts of single family homes, but then that’s it - the land has been used, people who got in are satisfied, and the next generation of wannabe homeowners is stuck.
Changing zoning in cities to encourage density would help, but it needs to be accompanied by a change in expectations for what type of home is achievable. The single family lots filled with dense developments simply restricts supply of those desirable homes further, and further increases prices.
I agree, and that's one of the reasons that senior government policies to "build more" have largely flopped: they've failed to challenge the exclusive use of much of our core urban land for single-family homes.
Ontario's current growth plan is a perfect example of this: cities need to hit growth targets, and they're doing it by rezoning more agricultural land, permanently locking in sprawl at tremendous environmental and social cost. And in the Lower Mainland, the BC government has invested billions in new transport links like the Port Mann and Massey tunnel expansion that only serve to make farther-flung regions more commutable.
As long as the "neighbourhood character" of existing single-family homes in urban cores is held sacrosanct, we will make only marginal progress.
The problem is still that even if we rezoned all of west side Vancouver and built condos and townhouses to replace the single family homes, there’s still going to be a large constituency of people complaining that they can’t afford to own the single family home that they want. Shifting expectations and desires towards a denser, Jane Jacobs urban lifestyle isn’t easy and suffered a huge setback when people were shut in at home during COVID. Adoption of public transit is informative: there’s a class of people who use it because that’s all they can afford. There’s a wealthier, more educated class that uses it because it fits their environmental sensibilities and is compatible with their lifestyle. Then there’s the biggest segment, which can afford private transportation, and prefers the convenience and social distinction of doing so. There’s no way they’re going to want to use public transit. You can build the public denser and plentiful housing options in urban cores, but you can’t make them like it.
How about an open, transparent beneficial ownership property registry? How about much more severe penalties for realtors etc. who fail to report suspicious transactions? How about a tax on residential properties (10-20% of the value of the property annually) for those who do not wish to disclose beneficial ownership? How does someone making 16,430.00/yr. afford the taxes on a property they bought with cash for over 2 million?