Housing supply

RESCON: Blaming slow approval process for lack of housing supply

Content of the article

There are an abundance of zoning regulations in this country that limit the supply of homes and too many agencies involved in the approval process.

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Content of the article

Famous theoretical physicist Albert Einstein is credited with saying that the definition of insanity is doing the same thing over and over again and expecting different results.
He was right. If we’re going to get the current housing crisis in Ontario under control, we need to think outside the box and find new ways to stimulate supply.

The current way is not working. We have the lowest number of housing units per capita of any G7 country. To reach the average ratio of the G7, it would be necessary to build 1.8 million dwellings. That’s not going to happen, because we’ve averaged 188,000 home completions a year over the last decade.

The shortage has contributed to the rising cost of housing. Prices for new construction and existing homes have surged. The Toronto Regional Real Estate Board reports that in July, average selling prices for a single-detached home in the GTA rose 21.7%. Prices for semi-detached homes and townhouses also increased. Lack of inventory has also led to bidding wars for existing homes and rentals.

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A recent RBC poll found that more than a third of Canadians aged 18 to 40 no longer believe they will ever be able to own a home. It is therefore obvious that minor adjustments will not get us where we should be. We cannot continue to do the same things in housing policy and expect different results.

The situation has economic consequences. With more than 400,000 new immigrants expected to enter Canada in 2021 and 2022, the situation will only get worse. It is estimated that the shortage of affordable housing is already costing the GTA up to $7.9 billion a year. Over a five-year period, these cumulative losses could amount to approximately $29.4 billion to $37.9 billion.
So that’s the picture. What is the solution?

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The heart of the problem is the dysfunctional nature of the system. There are an abundance of zoning regulations in this country that limit the supply of homes and too many agencies involved in the approval process.

To start, we need a standardized e-permitting system in Ontario to expedite routine approvals for projects that will provide housing. Another idea would be to have a planning coordinator at the local level who would be responsible for working with a developer’s team of consultants to help coordinate approvals between municipalities and conservation and transportation authorities. This is done in Texas and Denmark for larger projects. Delays increase risk, which reduces supply and increases prices.

Japan is perhaps the world’s best example of a democracy with an abundance of affordable housing in compact, low-carbon neighborhoods. Key to Japan’s success is its unusual degree of national control over zoning and building regulations. Centralized authority trumps local obstructionism in housing.

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Japan’s national government controls land use and buildings to a greater extent than national authorities in other wealthy democracies. Equally important, the national government of Japan also controls building codes.

Germany, Austria and Switzerland have also consistently performed well. These countries typically use rule-based permit systems for building: if your plans tick the boxes, the building authorities have no choice but to sign off.

Countries like Canada, Australia, the UK and the US lag behind because their permit systems are more often discretionary, giving municipal authorities the power to approve or reject applications.

Currently, there is no agency in Canada or Ontario responsible for ensuring that there is an adequate supply of housing. Therefore, we have a crisis.

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A provincial housing summit would be a good idea to determine what steps need to be taken for the province to meet the demand. Maybe we should revisit the More Homes More Choice Act. What the legislation achieved was a step in the right direction, but more fixes may be needed.

We need a system that recognizes that housing is essential to our quality of life, our economic growth and our competitiveness. Lack of housing will hamper our recovery from the pandemic. We must act as soon as possible.

Richard Lyall, President of RESCON, has represented the construction industry in Ontario since 1991. Contact him at media@rescon.com.

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