CBI BLOG

Why we can’t sprawl our way to affordability

By December 6, 2016 No Comments

The price of real estate in the Toronto region, in particular the cost of a single-family house, continues to be a daily preoccupation. But this price fixation misses the bigger economic, environmental and housing affordability picture.

We know that a number of interacting factors are driving up housing prices in Toronto and elsewhere. On the demand side, factors such as low borrowing rates, higher incomes, and the bank of mom and dad have contributed to strong buying-power. Changing demographics, especially from the emergence of home-buying-aged millennials, is filling the demand gap that kept prices down over the previous two decades.

While data on foreign investment in Toronto has not been studied as it has in Vancouver to assess its impact, domestic investment is understood to be significant; average Canadians buying a second property that’s not their primary home are estimated to comprise 25 per cent of Toronto’s investor market and constitute another key force driving up prices.

Maclean’s reported that the real estate sector is propping up the Canadian economy; the large majority of Canadians don’t want government intervention to cool housing prices because their homes represent their retirement savings, while new buyers are taking on record levels of debt to get into the market. There continues to be disagreement on how soon a price correction is on the way due to new mortgage rules or eventual rising of interest rates.

A convenient cause

Despite these realities, in recent months a lot of fingers have pointed at Ontario’s land use legislation as the main culprit for housing price increases in the GTA – namely the Greenbelt, which protects farmland from development, and its sister policy, the “Growth Plan”, which directs growth outside the greenbelt. Proponents of this argument claim that these policies restrict land on which to build ground-related houses, and this lack of housing supply is driving up prices.

While this legislation does influence where and what the region builds, it is not the primary cause of high housing prices. This argument disregards the multitude of factors influencing the real estate market and paints an unhelpful picture that we are running out of land and bumping up against the greenbelt which has shown to be false.

The greenbelt and growth plan are in their final stages of review and revision, a comprehensive expert-driven process that resulted in proposed upgrades to the decade-old legislation, namely new targets to increase intensification and decrease outward low-density development.

Opposition has emerged to these proposed changes, including from municipalities who worry the targets are too difficult to achieve. Skyrocketing GTA home prices provide a convenient opportunity to blame provincial land use policy while building support for weakening proposed tougher intensification targets.

With a narrative this simplistic and politically seductive, how do we encourage policy-makers and the media to focus on the more complex solutions and barriers impacting housing supply and affordability?

It’s about housing supply, not land supply

Mapping by the Neptis Foundation provides evidence that there is no shortage of land on which to build ground-related houses to 2031 (date of first growth plan forecasts) and beyond. Rather, housing starts are being delayed due to costs and approvals and other barriers to servicing this greenfield land such as building and connecting the water, sewage and other infrastructure.

Add to this the lack of re-sale supply as boomers remain in their big houses instead of downsizing. This has resulted in a lack of single family homes in more proximate locations for younger generations, including the echo-boomer kids, many of whom ironically still live with their baby boomer parents.

But even if every farmers’ field from here to the Canadian Shield was adequately serviced to build houses, it’s doubtful we can sprawl our way out of the housing price crisis. With 100,000 people joining the GTA every year, accommodating them mostly with single-family houses in the frontier would require perpetual sprawl and transform our landscape into car-dependent post-suburb “exurbs” prevalent in American cities, which we don’t have yet, thanks to better policy and development.

Such a “sprawltopia” would precipitate more congested highways, higher transportation costs, longer and longer commutes and more greenhouse gasses.

Solving the rubik’s cube of affordability

Last week, the Toronto Association of Business Economics, the Urban Land Institute and Ryerson City Building Institute convened an expert panel of economists and planners to help diagnose the broader conditions of housing affordability. As one panelist explained, there are bigger consequences that come from solving only one side of a rubik’s cube.[i]

If the rubik’s cube represents the broader multi-dimensionality of urban affordability and livability – the ability to agglomerate industries, attract skilled labour, move goods efficiently, reduce congestion, and provide affordable market and rental housing close to transit, jobs and services, while protecting drinking water, climate, farmland and future food security – addressing only the price of a detached house is sure to keep the other sides of the cube in disarray and prevent the puzzle from being solved.

It also distracts us from the broader and tougher solutions. It’s easier to roll back regulation than untangle the snarls in policy barriers that deter good intensification and the building of affordable “missing middle” urban and suburban housing close to good jobs and transit.

Renovating the rules

As the panel explained at the housing forum, we need to fix outdated rules, zoning bylaws, parking policies, pricing systems, and local opposition to density that makes intensification cost-prohibitive for both developers and municipalities. These barriers prevent us from adding good density to our transit-connected urban and suburban centres, be it midrise on main streets or townhouses and laneway houses and secondary suites in established neighbourhoods, and building more rental housing.

A strong growth plan is necessary to guide intensification to our already urbanized footprint in order to build a variety of housing where it’s needed, but municipalities clearly need more support from the province to make this happen. The province could assist by funding the costs of rezoning, intensification planning and undertaking thoughtful community development permit system processes that engage residents in the planning and design of streets, buildings and the public realm, helping to facilitate YIMBY.

Municipalities also need resources for costly upgrades to infrastructure to accommodate intensification, correct the cost distortions that currently favour and subsidize sprawl and level the playing field for developers to make intensification the cost-effective and affordable choice. The province has already invested in an award-winning greenbelt and ten years of growth planning; surely these necessary renovations are a worthy investment to maintain the integrity of forward-looking policy.

[i] Specific attribution for this quote to panelist Paul Smetanin, CEO, Canadian Centre for Economic Analysis

A video of the housing panel will be on our website soon.