Red tape plays a role in Vancouver housing price inflation

Why Vancouver housing is so unaffordable

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VANCOUVER OUT

By Kenneth P. Green
Ian Herzog
and Josef Filipowicz
The Fraser Institute

VANCOUVER, BC July 21, 2015/ Troy Media/ – As rising housing costs in Metro Vancouver make headlines, municipal policy-makers, including Vancouver’s mayor, are struggling to find ways to slow the rise.

Some blame absentee owners and home-flippers for the increases – people who buy and promptly resell property for short-term returns. In a recent letter to B.C.’s premier, Mayor Gregor Robertson called on the provincial and federal governments to help fund housing investments, and allow municipalities to track property ownership and vacancy more closely.

Developers across the Lower Mainland must overcome too many hurdles to build new homes, which affects Vancouver housing prices

It is difficult to say if any of these proposed policies can control housing costs, which rely on a number of factors. However, Metro Vancouver faces unavoidable physical limits to growth and the regulatory burden cities place on new Vancouver housing development can exacerbate the problem.

City planners play a critical role in our growing urban landscape, preventing nuisance and ensuring that growth is supported by appropriate infrastructure. But a recent study by the Fraser Institute finds stark differences in the hurdles developers across the Lower Mainland must overcome to build new homes. Before turning to potentially costly interventions into local housing markets, municipal policy-makers should look in their own back yards for simpler solutions to rising costs.

If it takes too long to get city hall’s approval for housing developments, the supply of new homes will lag behind demand. This can make new housing scarce, and drive up prices across the region by creating a perpetual seller’s market. The study estimates that typical approval timelines range from five months in Pitt Meadows and 8.5 months in New Westminster to 16.1 months in the District of North Vancouver and 17.7 months in West Vancouver.

Prohibitive compliance costs, such as development charges and legal fees, are another factor that can make the economics of more affordable housing options turn sour. They add at least $14,357 per new home built in Abbotsford and a maximum of $40,000 per home in the District of North Vancouver.

Responsibly set fees, reflecting new infrastructure costs, can lift the fiscal burden of new development from the existing property tax base, making it easier to accommodate – especially at the urban fringe where new roads and sewers are often necessary. One would expect cities with the densest growth to feature the lowest fees.

However, a closer look at fees and compliance costs across Canada finds no evidence of this trend. Instead, the data suggest that intensifying cities – those building up instead of out – often have regulatory frameworks that are more costly to navigate. Burnaby is a rare exception, growing compactly while maintaining low compliance costs relative to neighbouring Vancouver.

Persistent rezoning in a city raises questions about the plans and bylaws it has in place, and can add to administrative burdens. Survey evidence suggests that zoning bylaws need to be amended to accommodate more than 80 per cent of new residential development in eight of 19 Lower Mainland cities. Estimates of rezoning’s effect on approval timelines range from 2.8 additional months in Port Coquitlam to 13 additional months in the District of North Vancouver.

Council and community groups are often a force for good, but they can undervalue the needs of newcomers as Canadians continue to converge on urban centres. A survey of industry professionals revealed that opposition to residential development from council and community groups tends to be strongest in cities where dwelling values are highest (the North Shore, Vancouver) and less of a deterrent to building in places like Surrey, where people have amassed less equity in their homes.

While one should be careful attributing a specific cause to this correlation, it is unsettling to find that voices against new housing are amplified where it is most valuable.

Cities such as Vancouver and the District of North Vancouver, where survey evidence suggests red tape is the thickest, can turn to their neighbours in Abbotsford and Burnaby for examples of effective land-use regulations, which impose less of a burden on building. Smoothing out the kinks in the process that gets new homes built can pay dividends to anyone looking for a new home in the Lower Mainland.

Kenneth P. Green is Senior Director, Natural Resource Studies, Ian Herzog an economist and Josef Filipowicz a Researcher at the Fraser Institute.

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One Response to "Red tape plays a role in Vancouver housing price inflation"

  1. Avatar
    KryHird   July 21, 2015 at 11:16 am

    As is standard practice for communications from the development PR machine, absolutely no mention is ever made about the impact of overseas investment, which (of course) is the primary driver behind Vancouver’s high housing prices.  Lower development fees only mean that the current residents will get even realize benefits from the mass sell off our city’s limited landmass to facilitate overseas money laundering.

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