By Kenneth P. Green
and Josef Filipowicz
The Fraser Institute
Through good times and bad, the cost of housing in Alberta’s biggest cities remains a concern.
Consider this. Despite the economic slowdown, compared to 15 years ago average house prices are up almost 140 percent in Calgary and more than 160 percent in Edmonton. And with more newcomers arriving than people leaving the province, there’s clear demand for more housing.
If the supply of new homes does not keep up with demand, prices inevitably increase over time. And while that might not be of grave concern during a downturn, not allowing for a sufficient supply of new housing may help make Alberta’s major metropolitan areas less affordable in years to come.
So what can government do to help increase affordability in the province?
Cut red tape. Municipal regulation increases the cost and timeliness of housing construction. When regulations are overly burdensome and the permitting process is long, costly and uncertain, costs can be passed on to homebuyers and renters.
A new study by the Fraser Institute surveys housing industry professionals to understand how regulations impact the homebuilding in the Calgary-Edmonton Corridor, where three-quarters of Albertans live. The key metrics examined are: timeline length and uncertainty, prevalence of rezoning requirements, the costs and fees associated with acquiring building permits, and community and council opposition to housing development.
According to the survey, timelines for building permit approval (by city staff) average more than 11 months across the corridor, with a high of 18 months in Strathcona County, just outside Edmonton, and A low of less than six months in the Municipal District of Foothills No. 31, south of Calgary. Long waits for permits, especially where rezoning is required, can slow the supply of new homes.
Building permits also cost money. According to the survey, the costs and fees of the application itself, and the costs of complying with regulatory requirements, average almost $30,000 (per housing unit) in Calgary while nearby Airdrie, Strathmore and Foothills No. 31 all average below $20,000. These costs eclipse $32,000 in Edmonton and $34,000 in Red Deer.
When all measures of residential land-use regulation are combined, the Calgary suburbs of Strathmore, Foothills No. 31 and Cochrane are the best municipalities in the corridor for builders. Strathcona and Rocky View Counties, and the City of Calgary, are the most regulated. Edmonton ranks near the middle (sixth out of the 12 communities ranked).
Perhaps surprisingly, according to the survey, local council and community groups represent the strongest deterrent to new homebuilding in Calgary and Rocky View County, yet typically present no deterrent in the Calgary suburbs of Okotoks, Cochrane and Strathmore. Unfortunately, council and community opposition to new homebuilding tends to be strongest in cities where housing values are highest, raising questions about the motivation of local homeowners to maintain or increase property values by opposing new construction.
As the province and municipalities prepare for major changes to local government in Alberta – from the review of the 21-year old Municipal Government Act, to city charters for Calgary and Edmonton – they should not lose sight of their role in influencing housing affordability for Albertans. Governments can encourage a healthy supply of new homes by reducing the red tape on new homebuilding. For shorter building permit approval timelines and lower compliance costs and fees, look to Airdrie, Strathmore and Foothills No. 31. To minimize the impact of rezoning, look to Red Deer. Seeking out and sharing best practices can help remove barriers to needed housing.
Alberta always was, and continues to be, a place of opportunity and enterprise. Encouraging a healthy supply of new homes where they are most needed will help ensure future generations can continue to prosper in Alberta and its cities.
Ken Green is the senior director of energy, natural resources and municipal studies; Steve Lafleur and Josef Filipowicz are analysts, all at the Fraser Institute.