How B.C. can escape its painful housing trap

Instead of targeting affordable housing, B.C. government should be targeting housing affordability

By Josef Filipowicz
and Steve Lafleur
The Fraser Institute

The B.C. government’s recent budget included a 30-point plan aimed at the province’s housing woes. The aim was off the mark.

Most of the plan’s points fit into two broad categories: reducing demand by raising property transfer taxes, for non-residents and on homes over $3 million, for example; and increased spending on social housing – sometimes called affordable housing – for disadvantaged groups.

Josef Filipowicz

In both of these categories, the government targets specific niches of the housing spectrum – non-residents and the most vulnerable – but ignores the fundamental drivers of housing markets (and prices) for the vast majority of British Columbians.

British Columbia gained almost 250,000 new residents between 2011 and 2016 – more than the entire population of Burnaby. A growing population and growing average incomes and historically low mortgage interest rates mean that homes in B.C. – particularly in Vancouver – remain in high demand.

Typically, when faced with strong demand, homebuilders respond by building new homes. However, if the supply of new homes doesn’t meet that demand, prices increase. That’s precisely what has happened in B.C.

The provincial government’s new housing plan partially recognizes this ongoing supply conundrum by repeating the need to accelerate new home construction. However, its solution to this conundrum is to spend at least $6.6 billion over 10 years to construct thousands of new social housing units.

Steve Lafleur
Steve Lafleur

While some British Columbians will benefit from this new raft of social housing, the province’s plan almost completely ignores the many more market-rate homes (houses, townhomes, apartments) required to satisfy demand and eventually help temper prices. Without addressing this chronic shortage, renters and buyers alike will see their ability to climb the housing ladder reduced, and the billions of taxpayer dollars spent on “homes and housing supports that people need” will have been in vain.

For all the talk of affordable housing, the vast majority of British Columbians need affordable market-rate housing. Why? Because most people don’t qualify for subsidized housing and expanding eligibility would mean needing to build even more social housing. The majority of British Columbians just need the market to accommodate their housing needs.

So what’s holding back the supply of new homes in B.C.’s most desirable metropolitan areas?

Of course, there’s geography – the ocean, mountains and U.S. border all make it more difficult to build new neighbourhoods at the urban fringe of Metro Vancouver. But there’s also red tape at city halls across the region that slows or halts homebuilders from getting much-needed housing on the market.

It takes 21 months (on average) for homebuilders to obtain building permits in Vancouver and more than a year across the Lower Mainland. There’s also an ad-hoc process of fees levied on builders, making it difficult for them to know how long a project will take and/or how much it will cost. This uncertainty reduces the likelihood of new homebuilding, aggravating existing supply constraints.

These regulatory barriers impact affordability. The previous provincial government commissioned a report on the homebuilding process. It found that hundreds of thousands of units were tied up in the approvals process across several Metro Vancouver municipalities.

And yet, rather than addressing the causes of a severely constrained housing market, the government of Premier John Horgan has opted to tinker by targeting two relatively small groups at either extreme of the housing market. This is a lost opportunity and indicates a fundamental mischaracterization of B.C.’s housing woes.

Rather than focusing on affordable housing for some and freeing up homes at the margins, the government should ensure that the housing market can accommodate the needs of all British Columbians.

Josef Filipowicz and Steve Lafleur are analysts at the Fraser Institute.


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