So where are we on housing policy, anyway?

ANALYSIS: Some U.S. states may strip cities of powers to improve housing affordability, while Ontario has gone a completely different direction. John Michael McGrath asks whose approach will work
By John Michael McGrath - Published on June 29, 2017
Economist Paul Smetanin says building more 'gentle density' like this block of Markham townhomes could lower housing costs. (Loozrboy/Creative Commons)

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When the Liberal government announced it would make major changes to the Ontario Municipal Board — the tribunal urbanites love to hate when it overrules city planners’ and councillors’ decisions — the move was seen as a boon for local control, and an additional bane for developers. The jury’s still out as to what the actual result will be, but the intent, per the government, is to increase local power over community planning.

What if that’s the wrong strategy entirely?

This month two U.S. states are contemplating bills that would compel municipalities to streamline development processes for any new building that included at least some affordable housing: California is debating a bill to grease the skids for any new project that includes 10 per cent of units priced below market rates (the move follows warnings from the non-partisan Legislative Analyst Office that high housing prices are harming the state's economy — sound familiar?); Oregon is considering a bill featuring measures to clear the thicket of procedures that hamper the construction of new homes, including an affordable housing requirement.

These bills might fail, as others before them have. Mobilized voters have a history of beating back measures that impinge on local control. But Ontario should pay close attention, if the bills do pass, to whether they do a better job of delivering affordable housing than what we’ve seen in the province so far.

It’s fair to say the Liberals haven’t been entirely asleep at the switch on the housing file; they passed a number of measures last fall and this spring, and more are coming in the fall. But it’s also clear the government is primarily focused on the double-digit price increases the GTHA housing market saw this year and last.

Going back further than 12 months, the impact of Liberal policies on the province’s housing markets is much more of a mixed bag. Many of the policies have gone in the exact opposite direction of the U.S. states aforementioned: instead of removing burdens from developers’ backs, Ontario has added new ones.

A short list of policies the Liberals have passed since the 2014 election (to use one reasonable milestone) would have to include inclusionary zoning, expanded use of development charges, and more protections for cities looking to constrain sprawl. (Inclusionary zoning allows a city to require that some proportion of new housing be sold or rented below market prices; development charges are levied on new housing units to help pay for infrastructure the city needs; and who doesn’t love more protected green space?) In this context, the government’s OMB-neutering announcement was less a revolution and more part of a trend: cities have gotten a lot of new powers over development from the Liberals in the past three years.

These measures all have arguments in their favour (many of which come down to the fact that the government would rather give cities land-use powers than money), but the problem as far as housing policy is concerned is that they all turn the dial one way: they make homes harder to build, or more expensive to build, or both.

The argument that city planning powers obstruct new homebuilding enrages city councillors and planners, who correctly note that Toronto, for example, is seeing a construction boom. The problem, however, isn’t what we’re building a lot of: the prices of single-bedroom condos had been nearly flat before the rapid appreciation of homes in the last 18 months or so. The problem is what we’re not building enough of, and where we’re not building it.


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Paul Smetanin, an economist and the president of the Canadian Centre for Economic Analysis, made this point at a conference of mayors, councillors, and other housing industry types in Toronto last month: “If you were to release more land into the current process, you’d actually increase the cost of housing to society as a whole, because you’re building a lot of really small stuff, and a lot of really big stuff. If you build more gentle density, duplexes, townhomes, and things of that nature you’d have a lower cost of housing.”

Smetanin argues that what the market needs is the “missing middle” between the detached homes that make up most of Toronto by area, and towers that have concentrated population growth in a few small areas. Townhomes and low-rise apartments can match the neighbourhoods baby boomers (who own more bedrooms than they need) already live in, so those boomers can downsize without upending their lives entirely.

Here’s where, notwithstanding Toronto’s building boom, the obstructions to development really bite: the cost of getting even a small project through the city’s planning process can easily be tens of thousands of dollars after the lawyers and planners are paid, and timelines of two or more years are common. It’s only worth doing if the home can be resold for well above market prices — exactly the opposite of an affordable housing strategy.

Sometimes a bit of honesty on this issue creeps into view: a recent report to the city on the obstacles to laneway homes (another small-scale form of density the city nominally supports) recommended such homes be allowed “as of right” across the city — which would bypass much of the planning process in the name of creating a “streamlined, straightforward, affordable planning approvals process.” But this gives the game away: if a streamlined process is needed to make laneway homes affordable, it’s very nearly as necessary for the “missing middle” homes Smetanin says we need.

The city could choose to get out of the way, if it wanted, by amending its own zoning bylaws. But historically, councils have done the opposite, tightening rules instead of loosening them, and the province’s policies to encourage density have seen only limited success so far — and might be undone with the recent changes to the OMB. As some U.S. states go in a different direction from Ontario — removing municipal powers instead of buttressing them — it will be fascinating to see which jurisdictions get better results. 

Photo courtesy of Loozrboy and licensed for commercial use under a Creative Commons licence. (See the uncropped version.)

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