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Government must do more, faster to fix our dysfunctional housing system

Current supply- and demand-side measures across levels of government don’t do enough to secure affordable housing for Canadians
B.C.’s bold supply-side legislation could achieve a possible six-per-cent to 12-per-cent decrease in prices in five years relative to a theoretical ‘do nothing’ scenario, write John Rose and Ari Goelman | Times Colonist

After years of hand waving and half measures, it seems like every level of government in Canada has decided to go all in with deregulation and densification of market supply as the solution to our housing affordability crisis. 

Unfortunately, if we want Canadians to have housing that meets their needs and is truly accessible and affordable, this approach won’t work on its own. Rather, there are concrete steps all level of governments can and should take to reduce unsustainable demand and increase the supply of non-profit and public housing.

In September, federal Conserative party leader Pierre Poilievre unveiled his “Building Homes, Not Bureaucracy” plan, while Justin Trudeau’s Liberals stepped up the allocation of the feds’ $4 billion Housing Accelerator Fund to municipalities, with monies conditional on cities liberalizing their housing regulations. In September and October, the municipal governments of Calgary and Vancouver decided to eliminate detached-home zoning altogether. 

Then, at the end of November, B.C. passed Bills 44, 46, and 47 – sweeping legislation that includes mandated up-zoning of all B.C. municipalities of 5,000 people or more, with especially expansive permissions for development around public transit hubs, sharply curtailing municipal planning authority and meaningful public input into land-use decisions. 

The argument is that local governments, planning departments and homeowners have limited the private sector’s willingness and ability to supply affordable housing. Remove these obstacles and the development industry will deliver to Canadians, in the form of abundant quantities of denser dwellings and housing with affordable prices in line with Canadian household incomes.   

We are skeptical. Yes, it is indisputable that detached homes areas such as Metro Vancouver have become deeply unaffordable over the past 20-plus years. This is a logical consequence (assuming significant increases in housing demand) of provincial legislation inhibiting outward growth and promoting densification of these urban areas. Detached homes are becoming comparatively scarce and increasingly valuable.   

Growing numbers of denser dwellings in such urban areas, though, while providing more affordable housing options than detached homes, have not produced truly affordable housing.  Instead, the prices of denser dwellings have ratcheted up in tandem with detached homes and become costly themselves. In 2001, for instance, the price of an average detached home in Metro Vancouver was around seven to eight times the typical household income. By 2021, it took seven to eight times household income to buy an average apartment. Residential shrinkflation. 

Proponents of supply deregulation have not provided direct evidence correlating the unprecedented rises in prices for denser dwellings over the past 20-plus years with changes in, or changes in the effects of municipal regulations (e.g. on the supply of economically developable land for denser housing). Instead, it is claimed that these rising prices – or, alternatively, gaps between construction costs and sales prices – are proof themselves that local ‘gatekeepers’ have been holding developers back from providing affordable housing.

Interesting, in this context, to contemplate Urban Development Institute president and CEO Anne McMullin’s Nov. 29 statement in the Vancouver Sun that “land only accounts for about 15 per cent of (housing) costs now – from about 50 per cent only a few years ago.”  Also provocative: Comments on social media from Kelowna-Mission BC United MLA (and real estate developer) Renee Merrifield about coordination among members of the Urban Development Institute: “We work well together. We talk to each other. We figure out, you know, who’s who in the zoo.  We’re careful not to oversupply certain markets.” 

But perhaps we’re wrong, and the proponents of deregulation are right. Perhaps. 

Even if this is the case, however, they caution us that deregulation won’t deliver truly affordable housing any time soon. The modelled benefit of B.C.’s bold supply-side legislation: In five years, a possible six-per-cent to 12-per-cent decrease in prices relative to a theoretical ‘do nothing’ scenario. So, we’re not likely to get affordable housing, as pointed out by Vancouver Sun columnist Vaughn Palmer in an incisive take on this legislation, just housing that may be less unaffordable than it otherwise may have been.               

There is no reason, however, why the alternative scenario must be a ‘do nothing’ one. It is convenient for senior levels of government in Canada to scapegoat municipalities and locals for our housing crisis, but they themselves bear overwhelming responsibility for this by juicing housing markets with unsustainable demand and enabling the commodification of housing, through their actions and inaction on various fronts. Physician, heal thyself.   

The B.C. provincial government’s recent steps to regulate short-term rentals more stringently and to curb illicit money from distorting housing markets are good, but peripheral, moves. So too are government’s earlier (and recently, geographically expanded) speculation and vacancy taxes

However, we need more substantive action, like that being considered in the United States, to prohibit corporate investors from scooping up needed housing and driving up prices for prospective owners and renters. Foreign buyers? The municipal deregulators are fond of citing Auckland as a signature example, so why not also follow New Zealand’s lead with its comprehensive ban on foreign ownership? Much better than the timid and loophole-ridden policies – moderate taxation and limited prohibitions – implemented by our provincial and federal governments on this front in recent years. 

And while we’re on the topic of real estate investors, let’s look ‘inside the house’, so to speak.  Statistics Canada data shows that in 2020, individual domestic investors (in- and out-of-province) owned 11.5 per cent of the total housing stock and 20.7 per cent of condominium apartments in B.C. Comparably high percentages of domestic-investor ownership are present across the country, in addition to foreign and corporate investors. Though policies to limit such real estate investment may not be popular with politicians – 38 per cent of Canada’s MPs are real estate financiers or landlords, while 47% of BC MLAs own more than one residential property (and 15 per cent own three or more) – surely measures must be taken to ensure that domestic investors aren’t diverting housing supply from, and raising prices for, prospective owner-occupiers. 

Then there is the thorny factor of immigration. Between 2000 and 2020, Canada welcomed between 250,000 and 300,000 immigrants per year. In 2021-22, that number jumped to nearly 500,000 people. Adding in a similarly record-setting intake of non-permanent residents – some 600,000 people – international migration brought over a million people to the country in 2021-22. People who need homes to live in. Looking at these figures in relation to the supply-side argument about housing affordability, Bank of Montreal economist Robert Kavcic recently stated, “in no version of reality can housing supply respond to an almost overnight tripling in the run-rate of new bodies. This is the case of the demand curve running loose.”                  

This said, and even if strong demand-management policies are implemented, we urgently need government to step up and directly supply accessible and affordable housing. The federal government used to partner with provinces and cities to do this. There’s no reason they can’t do it again.  In recent months, the B.C. and federal governments have finally proposed allocating slightly more resources to directly building affordable housing, but after decades of inaction they need to spend more, faster. This includes the construction of student housing; we note, for instance, that while there are nearly 5,700 international students and more than 14,000 domestic students attending KPU, we have no student housing whatsoever to accommodate their needs for living space.    

Between 1979 and 1991, the federal government helped create an average of 4,000 units of non-profit cooperative housing every year. If they had continued at that pace (instead of essentially stopping entirely as of 1994) there would be an additional 122,000 units of cooperative housing in Canada. If you include non-profit housing corporations and social housing, that number would be over half a million units. Massive expansions of non-market housing will not come overnight, and they will not replace market housing as the main form of housing supply in Canada anytime soon, but one thing is for sure: This form of housing – unlike market housing – is guaranteed to be accessible and affordable to everyday people. 

In embracing deregulation and densification of market supply as the solution to our housing crisis, governments are trading local democracy for a handful of (not so magic) beans. Our housing problems clearly go beyond zoning regulations, planning approvals and so-called ‘NIMBY’ residents. Canadians should expect more of their municipal, provincial and federal governments: That they go ‘all in’ with demand- and supply-side policies that will directly address our distorted and dysfunctional housing system.   

John Rose is an urban geography instructor in the Department of Geography and the Environment at Kwantlen Polytechnic University.  He has a research interest in homelessness, housing affordability and land-use policy. Ari Goelman is an instructor at Kwantlen Polytechnic University who teaches research methods at the Melville School of Business as well as in the Criminology Department. His research interests include housing, city planning and the spatial construction of work.