For years, builders have been very vocal about Canada’s lack of housing supply causing high prices.
Several years ago, pre-pandemic, I wrote an article in Canadian Contractor called, “Recipe for a Housing Crisis? Just Add Government”. I wrote: “governments can’t choke housing with taxes, regulations, greenbelts, and abominably slow processes without creating housing shortages and sending prices spiraling upwards. Add huge numbers of millennials and downsizing boomers, and you have a recipe for a housing crisis. Just add government.”
In another article called, “Fast-Growing Canada Needs Housing; Public Policy Needs To Keep Pace,” I continued with “to understand rising home prices, it’s important to appreciate that Canada is undergoing some of the fastest population growth in our history, due largely to permanent and temporary immigration (Statistics Canada). This growth is also part of the reason for our strong economy – people bringing their skills and expertise to the country. In welcoming these new Canadians, we have an obligation to ensure there is sufficient housing. A big part of the issue is local municipalities out of sync with national policies. Canada is growing significantly yet many municipalities’ zoning policies don’t recognize this.”
At the time, governments at all levels continued to be in denial about short supply. They claimed it was purely a demand issue to be solved by more taxes on housing like foreign buyers tax, speculation tax, land (school) tax.
Even major national media bought into the solution of more taxes, some advocating a tax on principal homes.
Of course, housing prices continued rising and it became clear taxes were not the solution. The emperor (government) had no clothes. Average home prices topped over one million dollars in B.C. and Ontario.
Thus began the great housing reckoning. Government lost credibility and a fed-up public demanded more supply.
Senior levels of government had to shift to what builders have been saying for years – housing supply must increase. This government shift to advocating supply was most noticeable by politicians during the federal election in 2021. However, housing approvals are the domain of municipalities, presenting an embarrassing conundrum.
The federal government has no direct authority over municipalities. Provincial governments, such as B.C., have spent decades proudly supporting municipal councils’ right to self-determination, including zoning.
Many municipal councils obstruct rezonings due to the influence of small community associations. Studies show this obstruction results in astronomically high prices.
A C.D. Howe Institute study revealed zoning regulations, development charges, etc. added $168,000 to the price of single-family homes in Greater Toronto, and $644,000 to prices in Vancouver. Prices in Victoria increased by $264,000, Calgary was up $152,000, and Ottawa-Gatineau by $112,000.
It’s not just a Canadian phenomenon. An Australian report says, “Zoning regulations provide benefits, but they also restrict housing supply and hence raise prices.” Zoning regulations raised prices by 73 per cent in Sydney, 69 per cent in Melbourne and 42 per cent in Brisbane.
Add B.C.’s costly Property Transfer Tax and myriad of municipal fees, and it only gets worse for new homebuyers.
Ottawa is equally embarrassed by the great housing reckoning. Deputy Prime Minister Chrystia Freeland recently said, “one of the things that I am most concerned about as someone who — it shocks me to say this — is 53 years old, is the intergenerational injustice. We had a better shot at buying a home and starting a family than young people today, and we cannot have a Canada where the rising generation is shut out of the dream of home ownership.”
Freeland had “a better shot at buying a home” thirty years ago because three levels of government, including her own, had yet to discover homebuyers’ mortgages as a big source of revenue.
GST was launched in 1991 and today adds about $50,000 to the cost of an average new home in B.C. Freeland could help reduce this cost but has declined to index the GST New Home Rebate to inflation and today’s prices, as promised when it was introduced.
Freeland and other governments collect billions of dollars from housing, driving up prices, and now scramble in search of supply.
Now to expedite rezonings, Ontario and B.C. are announcing measures to override municipal authority, when necessary. Of course, obstructive councils will focus on the least they can do to both appease their NIMBY’s and avoid being in the provinces’ crosshairs.
Ottawa, as usual, promises thousands of new homes without identifying any practical way to achieve it. They continue to have an eye on taxing the sale of homeowners’ principal residences if the opportunity arises. That’s why the property declaration is in Canadians’ tax forms.
At the end of the day, builders can take some satisfaction in being right about supply, proving again that people building and selling homes are better at housing policy than politicians and academics.
As usual, many politicians have jumped to the front of the parade and now act as if the supply solution was their idea all along.
Which is what emperors with no clothes are wont to do.
Next will be a Royal Commission into the high cost of housing.
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Casey Edge is executive director of the Victoria Residential Builders Association.
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