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HOUSING AFFORDABILITY SHOULD BE A MUNICIPAL CONCERN, NOT JUST A NATIONAL ONE

Posted in Affordable Housing, Housing, Industry Trends, Newsworthy

HOUSING AFFORDABILITY SHOULD BE A MUNICIPAL CONCERN, NOT JUST A NATIONAL ONE
Discontented would-be homebuyers often take out their frustrations with housing markets on federal or provincial governments instead of municipal governments, but the dynamics of real property markets are inherently local, in that prices might rise in one part of the country, but remain steady or decline in other regions.

Nevertheless, the rapid escalation of housing prices emerged as a hot national issue during the federal elections held in September. Critics of the incumbent Liberals were quick to point out the average housing price had risen by almost 70 per cent since 2015 when Justin Trudeau first assumed power in Ottawa.

Housing affordability is also likely to surface as a critical concern in provincial elections, and incumbents will face similar criticism for not being able to cool off the market. Realizing this, the Ontario government recently announced an expert panel to identify ways and means to address the issue.

Both the federal and provincial governments are at least embarking on initiatives to address housing prices, albeit with limited success, but municipal governments are not acting with a similar urgency.

The demand for housing has continued to increase, but supply has not kept pace. Even where residential construction took off, it was narrowly concentrated on apartment (condominiums) construction. A direct consequence has been an even scarcer supply of new ground-oriented housing, which is more suitable for small families.

In Canada, local or municipal governments exercise control over local land-use planning. What gets built where and to what density is essentially the purview of local governments. Thus, by virtue of their powers to regulate land use, they can be the enablers or disablers of new residential construction.

Research has shown strict land-use regulations restrict the supply of new housing and contribute to higher housing prices, prompting community resentment.

But if voters’ anger on housing remains targeted at higher tiers of government, municipal leaders can continue with their business-as-usual models that have failed to rein in housing prices. Instead of measuring how much housing prices have inflated under the Liberal government, perhaps we should be looking at a more local level.

Consider the Greater Toronto Area, where housing prices are skyrocketing . The two most populous municipalities in the region are the cities of Mississauga and Toronto. Interestingly, the tenures of the incumbent mayors, Bonnie Crombie in Mississauga and John Tory in Toronto, began in December 2014, roughly coinciding with the beginning of Trudeau’s reign.

The average housing price in the City of Toronto rose 68 per cent between November 2015 and November 2021, according to Toronto Regional Real Estate Board data. In Mississauga, housing prices rose even faster (83 per cent) and faster still in nearby Brampton (130 per cent).

Housing prices have risen faster in suburban, less populous municipalities that became more attractive during the pandemic because demand jumped for relatively spacious homes with backyards. Hence, the suburban municipalities comprising Durham Region, east of Toronto, reported an increase of 119 per cent, and more remote municipalities such as Innisfil and New Tecumseth, both north of Toronto, had increases of more than 150 per cent.

The uneven geography of this price escalation is influenced to some extent by the pace of new housing construction. Notably, housing prices in Toronto grew more slowly than in suburban municipalities, partly because of the growth in new housing construction.

Housing completions in Toronto have been growing at a slow rate since 2001, whereas they have declined in Brampton, Durham Region and Mississauga.

Even with steady construction growth, efforts in Toronto have mainly focused on building new apartment condominiums, which account for 91 per cent of housing completions since 2015. A lack of new affordable, family-friendly and ground-oriented housing in Toronto forces young families to gravitate to the suburbs, where such dwellings are plentiful and available at comparably affordable prices.

The forces preventing sufficient new housing construction are essentially local. The drivers could be stringent local planning bylaws or stubborn NIMBY neighbours. As a result, local movements aimed at forcing local governments and stakeholders to address housing supply shortages could be more effective than targeting anger at higher tiers of government.

 

Story by: Financial Post

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