Two Solutions to Revive Canada’s Housing Market

Innovative reforms that will transform Canada’s unaffordable housing landscape
Published on November 23, 2023

The Vancouver and Toronto markets (CMAs), where population centres are geographically confined by virtual urban growth boundaries (UGBs), are at the epicentre of Canada’s housing crisis. Originally established to protect agricultural land from urban expansion, these UGBs have, paradoxically, led to skyrocketing land and housing prices, intensifying the cost-of-living crisis for the middle class.

As demonstrated in international research, limiting urban expansion comes at a considerable cost, driving up land (and house) prices. Most of the cost of a house in Vancouver and Toronto is attributed to the value of the land rather than the construction expenses, a contrast to more competitive land markets such as Edmonton or Winnipeg.

The decline of agricultural land in Canada, driven by rising farm productivity, has been ongoing for decades. According to Statistics Canada data from 2001 to 2021, agricultural land shrank by nearly 33,000 square kilometres, a reduction nearly double the extent of urbanization that has occurred over centuries of European settlement.

Even in areas grappling with the most severe cost-of-living challenges, the agricultural land lost over the past two decades surpasses the land currently occupied by urban development since European urbanization. In British Columbia, the agricultural land loss between 2001 and 2021 was nearly three times the land area occupied by present urbanization. During this same period, agricultural land loss exceeded all urbanization in 2021 in Ontario. In other words, increasing farm productivity freed much more land than has been needed for new housing development.

To address this issue and rejuvenate a competitive land market, the Frontier Centre for Public Policy proposes two key reforms:

1: Designating Housing Opportunity Enclaves (HOEs):

Our first reform centres on making sufficient land available for development in regions like British Columbia, southern Ontario, and the Montreal to Ottawa-Gatineau corridor in Quebec. We propose creating Housing Opportunity Enclaves (HOEs) in which traditional housing regulations, along with essential environmental and safety regulations, would apply. Provincial and/or local governments would designate these HOEs with the aim of providing middle-income housing at price-to-income ratios typical of pre-urban containment regulations.

A competitive process would be established to administer and develop each HOE under the jurisdiction of provincial and local governments. Market-driven development would be ensured by relying on the private sector in HOEs to provide housing, land, and all infrastructure that would otherwise require public expenditures. This model has been successful in Colorado and Texas, where the organizations are called Municipal Utility Districts. Existing residents would maintain their property rights, while private parties and First Nations could seek to purchase land for development from current owners.

HOEs would be situated far enough outside major population centres to take advantage of low-priced land, largely exempt from the artificially inflated land prices that typify the markets with UGBs. Priority for designation should be given to areas with the largest agricultural land reductions.

The emerging urban forms would likely resemble that of communities such as Waverly West in Winnipeg or The Woodlands in Houston, accommodating the preference for housing space and yards for households with children, as well as multi-family developments.

These new communities would be attractive to households working full-time or part-time from home. Jobs would naturally follow, creating self-contained communities where most physical commutes occur within the HOEs.

To ensure a competitive market and prevent land cost escalation associated with urban containment, HOEs would need to have sufficient land available to keep land values from escalating as they have in urban containment markets.

2: Designating sufficient suburban land

Our second reform entails public authorities designating sufficient suburban land to preserve affordable land values in the Prairie and Atlantic provinces, as well as western Quebec. CMAs like Quebec City, Calgary, Edmonton, Winnipeg, Moncton, and Halifax would be positioned, over the long run, to accommodate interprovincial migrants from overly expensive BC, Ontario, and western Quebec without compromising their affordability.

Under both reforms, provincial and local governments would monitor housing affordability multiples on a five-year cycle. Legislative directives would be established to increase the amount of suburban land to maintain affordable price-to-income stability.

The success of these strategies would lie in preserving a competitive supply of land. Competitive land supply is not merely the existence of enough building lots to meet projected demand but, more importantly, ensuring a sufficient number of building lots available for builders to provide housing at prices affordable to middle-income households. Affordable land values are essential for significantly improving housing affordability and mitigating the cost-of-living crisis.

 

 

Wendell Cox is a Senior Fellow at the Frontier Centre for Public Policy and author of the 2023 Edition of Demographia Housing Affordability in Canada.

 

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