Winnipeg: Streamline Housing Approvals

Commentary, Housing Affordability, Local Government, Manitoba, Poverty, Uncategorized, Wendell Cox (historic), Winnipeg (historic)

Last year, our international housing affordability survey found Winnipeg to be one of the three most affordable housing markets out of 100 in the six nations surveyed (Canada, the United States, the United Kingdom, Australia, Ireland and New Zealand). The Second Annual Demographia International Housing Affordability Survey found that the median house price in Winnipeg was 2.4 times the median household income.
By contrast, the median house price was 6.6 times the median household income in Vancouver and 4.4 times in Toronto.
This was good news, and the Winnipeg Free Press gave the story front-page coverage.

What is not good news is the recent Statistics Canada report that house prices rose 12 per cent in the last year. The bulk of the cost increase was in the price of land, which shot up 25 per cent. Free Press reporter Mary Agnes Welch reports that delays in project approvals have created a land shortage. Under normal circumstances, there is no reason for the price of land to rise inordinately. The Winnipeg area has plenty of land. The problem is that the public approval process has slowed down and is not allowing construction to keep up with demand.

The City of Winnipeg has long claimed to have a policy that encourages development within the Perimeter Highway and within the city’s borders rather than in the outer suburbs. Regrettably, this policy seems to be mere lip service. The message from the City to developers seems to be that they should take their projects and build outside the city. Moreover, indeed they should, if the City cannot get its house in order.

Home ownership is a critical element of economic growth and wealth creation. Statistics Canada data indicate that the median net worth of a homeowner is approximately 20 times that of a renter. A recent study in the United States indicates that this is not just a matter of low income. The Joint Center for Housing Studies of Harvard University reports that the average home-owning household with an income above $50,000 has a net worth that is nearly 10 times that of a renting household making the same income.

The crucial role home ownership has played in the democratization of prosperity is not well understood, especially in city planning departments around the nation. As late as 1940, the average household income was approximately the same as the present low-income cutoff for a household of three. In the intervening 66 years, household incomes have risen 2.5 times adjusted for inflation. This unprecedented increase in incomes is driven by the home ownership that suburbanization has permitted and by labour market efficiencies that are attributed to the automobile.

Failure to recognize this fact has led to the adoption of disastrous urban planning policies in many of the high-income world’s large urban areas. Vancouver is one of the world’s most unaffordable urban areas, principally because its urban planning policies have created a shortage of land for development. Toronto has blindly followed the example of Vancouver and other housing affordability disaster stories, such as Portland, Oregon, Sydney, Australia, and San Francisco.

This is more than a theoretical problem. Each year, the U.S. Census Bureau reports domestic migration data—information on movements by people within the nation. Over the past five years, as land prices have skyrocketed in the urban areas with more stringent land regulation, people have begun moving from west to east for perhaps the first time in U.S. history. In those five years, more than 2.5-million people have moved from the highly unaffordable, regulated markets that are principally in the west and in Washington, D.C., New York, NY, and Boston, Mass., to more affordable urban areas. It would not be surprising to find that young Vancouver households are increasingly opting for the lower-cost markets of the Prairies where, although they do not have cool ocean breezes, they can own their own houses rather than spend their lives in crowded rentals.

The pity is that Winnipeg seems mindlessly headed toward the same disaster without realizing it. Winnipeg has not been among the nation’s faster-growing urban areas in decades. However, Winnipeg could see far stronger growth in the future, as Vancouver and Toronto repel households and businesses with policies that place the esthetics of the elite above the quality of life. Winnipeg would do well to streamline its bureaucracy and not fumble away its improving competitiveness.