More regulation might be good for appeasing residents agitating for action on runaway real estate prices, but it’s not so good for resolving that issue and others facing Canadian municipalities.
The Fraser Institute’s Impact of Land-Use Regulation on Housing Supply in Canada underscores that reality.
For example, the recently released report, which included 68 Canadian municipalities, estimated that adding six months to the time it takes a builder to secure a construction permit reduces the growth of new housing by 56%. It also noted that more regulation “is associated with lower growth in an average neighbourhood even after accounting for differences in labour-market conditions, access to transportation, key demographics and the availability of land.”
Housing markets in all major Metro Vancouver municipalities would benefit from regulatory cost and complication reduction. NAIOP’s annual regional industrial development cost survey provides a valuable snapshot of how the regulatory battle is progressing for builders in 20 Lower Mainland municipalities. It uses a standard 100,000-square-foot industrial warehouse proposal as a baseline to measure processing time and costs to secure a building permit in each municipality. The good news in the 2015 survey included four municipalities reducing approval times by 33% compared with 2013 and three cutting costs to achieve that approval by 8%. The bad news: three municipalities increased costs 44%, and permit approval times in another three were 25% slower than in 2013.
The 75% increase in approval time in Surrey, where the number of days to approve the NAIOP development jumped to 210 in 2015 from 120 in 2013, is doubtless due in part to the high number of permits handled in the city compared with other Metro Vancouver municipalities. But unless local government has an in-built flexibility to respond efficiently to demand spikes in real estate and other sectors, more regulatory remedies will worsen system dysfunction to the detriment of parties on both sides of the supply and demand table.
