Easing regulations could help correct housing imbalance, report suggests
Governments across the country should ease up regulations to level out a housing supply and demand imbalance across the nation, according to a new study.(THE CANADIAN PRESS/Jonathan Hayward)
Published Tuesday, May 15, 2018 8:20PM EDT
Governments across the country should ease up regulations to level out a housing supply and demand imbalance across the nation, according to a new study.
The report from the C.D. Howe Institute comes after the Canadian Real Estate Association released numbers on housing sales across Canada. Home sales dipped to the lowest level in five years last month, underscoring an increasing disparity between supply and demand.
“The cost of housing has been going through the roof in many parts of Canada,” the C.D. Howe Institute report reads. “Most government policies have focused on curtailing the demand for housing, but they have not taken meaningful steps to increase housing supply.”
While some analysts suggest higher mortgage rates and stress tests for buyers are contributing to the imbalance, C.D. Howe’s associate director of research Ben Dachis told CTV’s Power Play on Tuesday that government policies need to change. Areas most in need of attention are those like Toronto and Vancouver, where supply is not catching up with demand.
“We’ve seen single family house prices pretty much double or more in some cities,” namely Toronto and Vancouver, said Dachis. “But if you’re a resident of places like Ottawa or Montreal you haven’t seen a major increase in housing prices.”
Dachis pointed to a controversial announcement by Ontario Progressive Conservative Leader Doug Ford in April. Ford said that he would partly open up the province’s Greenbelt to developers if elected premier in June. But after facing criticism, Ford reversed his pledge and said he would instead leave the Greenbelt untouched.
While the opening of that space would certainly address some supply issues, Dachis said the Greenbelt itself is not necessarily the land that developers would be looking for. “It’s not really the Greenbelt that they care about in terms of getting access to new land. It’s that land that’s between the existing urban growth boundary and the Greenbelt. There’s lots of land available in that area,” he said.
But the problems that arise are with strict zoning laws, such as those in Toronto, which require a lengthy approval process.
“Provincial policies and municipal policies in terms of zoning it for agricultural use and not for residential use make it very difficult for developers to get access to that land,” he said. “And that means higher prices for housing.”
Another potential solution popularly offered for the housing crisis is a foreign buyers tax to curtail investment from outside the country, but Dachis discredited that as a necessary measure. Regulations are driving up prices, not necessarily foreign buyers, he said.
“Foreign buyers only increase the cost of housing if there is a major restriction in the ability for developers to build new homes to cater to this foreign buyer or speculator demand,” he said. “If you have that ability for developers to come in with new product, guess what? You can have all the foreign buyer demand you want -- it’s not going to lead to significantly increased house prices.”
The extra costs associated with what C.D. Howe has identified as excessive regulation range from an average of $229,000 per new single-detached house, to as much as $600,000 in Vancouver.