Existing barriers to development only amplify current problems, report says
Major drivers of soaring home prices include the existing barriers to construction in Canadian cities, according to a new report by the C.D. Howe Institute.
These barriers – which include upfront development charges, scarcity of developable land, the lack of transportation options to new sites, and other factors that restrict competition among developers and builders – serve to amplify the current “dysfunction” in the housing market, the report noted.
Report author Benjamin Dachis urged governments at all levels to pare down the “excessive” regulations governing new housing development projects, as well as lower the upfront costs that home buyers will have to shoulder.
“Evidence from around the world shows that government policies limiting the supply of housing are among the key causes of higher house prices,” Dachis said. “Existing home owners often support local government policies such as zoning regulations that restricts new development.”
Bringing prices down to levels more in line with the actual cost of construction would need several interventions from provincial authorities, Dachis said.
Most important of these would be enacting mandated minimum targets for municipal residential construction, “and delegate enforcement of these targets to neutral, adjudicative bodies with the power to impose fines on laggard cities.”
Dachis also called for reforms on the upfront charges on new developments “by changing them to utility-based user fees for services like water and wastewater once the infrastructure is in place.”
“Along with cities, [provincial authorities should] set a broad province- or city-wide target for increased density, say 50%, rather than impose a minimum level on locations regardless of their existing densities, which vary greatly,” Dachis suggested. “This would allow for a gradual increase in densities across the province.”